<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1999
REGISTRATION NOS. 2-95973 AND 811-4236
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 50 |X|
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
AMENDMENT NO. 51 |X|
ONE GROUP(R) MUTUAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(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, 5TH FL.
1301 K STREET, N.W., SUITE 800E COLUMBUS, OHIO 43271-0152
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)
____ on (Date) pursuant to paragraph(b)
__X_ 60 days after filing pursuant to paragraph(a)(1)
____ on (Date) pursuant to paragraph(a)(1)
____ 75 days after filing pursuant to paragraph(a)(2)
____ 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.
<PAGE> 2
ONE GROUP MUTUAL FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
- --------------------- ------------------
<S> <C>
1. Front and Back Cover Page Cover Page
2. Risk/Return Summary: Investments, Risks & Performance Fund Summaries: Investments, Risk &
Performance
3. Risk/Return Summary: Fee Table Fund Summaries: Investments, Risk &
Performance
4. Investment Objectives, Principal Investment Strategies Fund Summaries: Investments, Risk &
Performance, More About the Funds, Appendix
A
5. Management's Discussion of Fund Performance Annual Report
6. Management, Organization, and Capital Structure Management of One Group Mutual Funds
7. Shareholder Information How To Do Business with One Group Mutual
Funds, Shareholder Information
8. Distribution Arrangements How To Do Business with
One Group Mutual Funds
9. Financial Highlights Financial Highlights
COMBINED STATEMENT OF
ADDITIONAL INFORMATION
FORM N-1A PART B ITEM CAPTION
- --------------------- -------
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History The Trust
12. Description of Fund and its Investments and Risk The Trust; Investment Objectives and Policies,
Additional Information - Description of Shares
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Additional Information -
Holders of Securities Miscellaneous
15. Investment Advisory and Other
Services Management of the Trust
16. Brokerage Allocation and Other Practices Management of the Trust -
Portfolio Transactions
17. Capital Stock and Other Securities Valuation; Additional
Information Regarding the
Calculation of Per Share Net
Asset Value;
Additional Purchase
and Redemption Information;
Additional Information
18. Purchase, Redemption and Pricing of The Trust, Valuation; Additional
Shares Information Regarding the
Calculation Per Share Net Asset
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Value; Additional Purchase and
Redemption Information;
Management of the Trust
19. Taxation of the Fund Investment Objectives and
Policies - Additional Tax
Information Concerning the Fund
20. Underwriters Management of the Trust -
Distributor
21. Calculation of Performance Data Additional Information -
Calculation of Performance Data
22. Financial Statements Financial Statements
</TABLE>
<PAGE> 4
ONE GROUP(R) MUTUAL FUNDS
EQUITY FUNDS COMBINED PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) SMALL CAP GROWTH FUND
ONE GROUP(R) SMALL CAP VALUE FUND
ONE GROUP(R) MID CAP GROWTH FUND
ONE GROUP(R) MID CAP VALUE FUND
ONE GROUP(R) DIVERSIFIED MID CAP FUND
ONE GROUP(R) LARGE CAP GROWTH FUND
ONE GROUP(R) LARGE CAP VALUE FUND
ONE GROUP(R) EQUITY INCOME FUND
ONE GROUP(R) DIVERSIFIED EQUITY FUND
ONE GROUP(R) BALANCED FUND
ONE GROUP(R) EQUITY INDEX FUND
ONE GROUP(R) MARKET EXPANSION INDEX FUND
ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
ONE GROUP(R) DIVERSIFIED INTERNATIONAL FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 5
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISKS AND PERFORMANCE
One Group Small Cap Growth Fund
One Group Small Cap Value Fund
One Group Mid Cap Growth Fund
One Group Mid Cap Value Fund
One Group Diversified Mid Cap Fund
One Group Large Cap Growth Fund
One Group Large Cap Value Fund
One Group Equity Income Fund
One Group Diversified Equity Fund
One Group Balanced Fund
One Group Equity Index Fund
One Group Market Expansion Index Fund
One Group International Equity Index Fund
One Group Diversified International Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Risks of the Index Funds
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
<PAGE> 6
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP SMALL CAP GROWTH FUND
WHAT IS THE GOAL OF THE SMALL CAP GROWTH FUND?
The Fund seeks long-term capital growth primarily by investing in a portfolio of
equity securities of small capitalization and emerging growth companies.
WHAT ARE THE SMALL CAP GROWTH FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in common stock, debt securities, preferred stocks,
convertible securities, warrants, and other equity securities of small
capitalization companies. Generally, the Fund invests in mid cap companies with
market capitalization ranging from $100 million to $3 billion. For more
information about the Small Cap Growth Fund's investment strategies, please read
"More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE SMALL CAP GROWTH FUND?
The main risks of investing in the Small Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Small Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Small Cap Growth Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or small cap stocks in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Smaller Companies. The Fund's primary investment strategy is to invest
in smaller, growth companies. These investments may be riskier than
investments in larger, more established companies. Securities of
smaller, growth companies tend to be less liquid and more volatile than
stocks of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE SMALL CAP GROWTH FUND PERFORMED?
By showing the variability of the Small Cap Growth Fund performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE SMALL CAP GROWTH FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from
year to year. Total returns assume reinvestment of dividends and distributions.
The returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- ----------------
(1) "S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
-3-
<PAGE> 7
ONE GROUP SMALL CAP GROWTH FUND
[GRAPH]
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS A SHARES
1992 1993 1994 1995 1996 1997 1998
16.42% 7.85% -7.73% 22.06% 15.70% 28.78% -4.04%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 9.94%. The above-quoted performance data includes the performance of
the Paragon Gulf South Growth Fund for the period prior to the commencement of
the One Group Small Cap Growth Fund on March 26, 1996.
BEST QUARTER: 21.57% 3Q 1997; WORST QUARTER: -22.13% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)1
- -----------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 7/1/91)
--------------
<S> <C> <C> <C>
One Group Small Cap Growth Fund -5.78% 12.27% 13.90%
S&P 600 Small Cap Index(3) -2.31% 16.59%
S&P/Barra Small Cap Growth Index(4)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------- ---------------- ------------------- ------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 9/2/94)
--------------
<S> <C> <C> <C>
One Group Small Cap Growth Fund -6.05% 11.70%
S&P 600 Small Cap Index(3) -2.31%
S&P/Barra Small Cap Growth Index(4)
</TABLE>
-4-
<PAGE> 8
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
--------------
<S> <C> <C> <C>
One Group Small Cap Growth Fund -2.62% .77%
S&P 600 Small Cap Index(3) -2.31%
S&P/Barra Small Cap Growth Index(4)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS (SINCE 7/1/91)
- ------- ------ ------- --------------
<S> <C> <C> <C>
One Group Small Cap Growth Fund -.72% 13.57% 14.71%
S&P 600 Small Cap Index(3) -2.31% 16.59%
S&P/Barra Small Cap Growth Index(4)
- -----------------------------------------------------------------------------------------------
</TABLE>
1. The above-quoted performance data includes the performance of the Paragon
Gulf South Growth Fund for the period prior to the commencement of the One Group
Small Cap Growth Fund on March 26, 1996.
2. Performance for Class I Shares is based on Class A Share performance adjusted
to reflect the absence of sales charges.
3. The S&P Small Cap 600 is an unmanaged index generally representative of the
performance of small companies in the US stock market. The benchmark for the
Small Cap Growth Index has changed from the S&P Small Cap Index to the S&P/Barra
Small Cap Growth Index in order to better represent the investment policies of
the Fund for comparison purposes.
4. The S&P/Barra Small Cap Growth Index is an unmanaged index generally
representative of the performance of 600 small capitalization domestic stocks
with a higher price to book ratio. Investors are unable to purchase the index
directly, although they can invest in the underlying securities. The performance
of the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management. By contrast, the performance of the Fund
reflects the deduction of these value-added services as well as the deduction of
sales charges on Class A Shares and applicable contingent deferred sales charges
on Class B and Class C Shares.
-5-
<PAGE> 9
FEES AND EXPENSES OF THE SMALL CAP GROWTH FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .35% .35% .35% .35%
Total Annual Fund Operating
Expenses 1.44% 2.09% 1.44% 1.09%
Fee Waiver and/or Expense
Reimbursement(4) (.14%) (.04%) (.04%) (.04%)
Net Expenses 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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.30% for Class A shares, 2.05% for Class B shares, 2.05%
for Class C shares, and 1.05% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-6-
<PAGE> 10
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $650 $208 $708 $208 $308 $107
3 Years $944 $651 $951 $651 $651 $343
5 Years $1,258 $1,120 $1,320 $1,120 $1,120 $597
10 Years $2,147 $2,252 $2,252 $2,418 $2,418 $1,325
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $664
Class B (no redemption) $212
Class B (with redemption) $712
Class C (no redemption) $212
Class C (with redemption) $312
Class I $111
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-7-
<PAGE> 11
ONE GROUP SMALL CAP VALUE FUND
WHAT IS THE GOAL OF THE SMALL CAP VALUE FUND?
The Fund seeks long-term capital growth primarily by investing in equity
securities of companies with small capitalizations.
WHAT ARE THE SMALL CAP VALUE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in equity securities of small domestic companies with
market capitalizations of $100 million to $2.6 billion. In reviewing investment
opportunities, Banc One Investment Advisors looks for high quality management, a
dominant position in a major product line, significant equity ownership
positions by management, a sound financial position, and a relatively high rate
of return on invested capital. The Fund also will invest in companies that
demonstrate a potential for earnings growth due to management changes, new
products, or a changing marketplace. For more information about the Small Cap
Value Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE SMALL CAP VALUE FUND?
The main risks of investing in the Small Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Small Cap Value Fund will change every day in response to market
conditions. You may lose money if you invest in the Small Cap Value Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or small cap stocks in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Smaller Companies. The Fund's primary investment strategy is to invest
in smaller, newer companies. These investments may be riskier than
investments in larger, more established companies. Securities of
smaller companies tend to be less liquid and more volatile than stocks
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE SMALL CAP VALUE FUND PERFORMED?
By showing the variability of the Small Cap Value Fund performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE SMALL CAP VALUE FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
-8-
<PAGE> 12
ONE GROUP SMALL CAP VALUE FUND
[BAR GRAPH]
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
22.47% -7.34% 58.42% 17.00% 12.29% -5.04% 25.33% 25.63% 30.57% -4.09%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -4.48%. The Small Cap Value Fund commenced operations on January 27,
1995 subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust fund
had been registered, its return may have been lower. The above quoted
performance data includes the performance of the Pegasus Small Cap Opportunity
Fund for the period prior to the commencement of operations of the One Group
Small Cap Value Fund on March 22, 1999.
BEST QUARTER: 23.56% 1Q 1991; WORST QUARTER: -24.07% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(through June 30, 1999)(1)
- -------------------- ----------------- -------------- --------------- ---------------- ---------------------
LIFE
CLASS A 1 YEAR 5 YEARS 10 YEARS (SINCE 6/30/72)(3)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -17.96% 12.70% 12.58% 8.96%
Russell 2000(2) 1.50% 15.40% 12.39%
S&P Small Cap 600 Index(3) -2.31% 16.59% 12.40%
- -------------------------------------- ------------- ----------------- -------------------- ----------------
LIFE
CLASS B 1 YEAR 5 YEARS 10 YEARS(3) (SINCE 6/30/72)(3)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -18.17% 13.04% 12.88% 9.08%
Russell 2000(2) 1.50% 15.40% 12.39%
S&P Small Cap 600 Index(3) -2.31% 6.59% 12.40%
</TABLE>
-9-
<PAGE> 13
<TABLE>
<CAPTION>
- -------------------- ----------------- ---------- ----------------- ------------------ ---------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 6/30/72)(4)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -13.26% 14.38% 13.71% 9.76%
Russell 2000(2) 1.50% 15.40% 12.39%
S&P Small Cap 600 Index(3) -2.31% 16.59% 12.40%
- -------------------------------------- ---------------------------- ----------------------------------------
</TABLE>
1. The above quoted performance data includes the performance of the Pegasus
Small Cap Opportunity Fund for the period prior to the commencement of
operations of the One Group Small Cap Value Fund on March 22, 1999.
2. The Russell 2000 Index is an unmanaged index generally representative of the
small-cap equity markets. Investors are unable to purchase the index directly,
although they can invest in the underlying securities. The performance of the
index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management. By contrast, the performance of the Fund reflects
the deduction of these value-added services as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges on
Class B Shares.
3. The S&P Small Cap 600 Index is an unmanaged index generally representative of
the performance of small companies in the US stock market. Investors are unable
to purchase the index directly, although they can invest in the underlying
securities. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management. By
contrast, the performance of the Fund reflects the deduction of these
value-added services as well as the deduction of sales charges on Class A Shares
and applicable contingent deferred sales charges on Class B Shares. The
benchmark index for the Small Cap Value Fund has been changed from the Russell
2000 to the S&P Small Cap 600 Index in order to better represent the investment
policies for comparison purposes.
4. The Small Cap Value Fund commenced operations on January 27, 1995 subsequent
to the transfer of assets from a common trust fund with materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the performance of the common trust fund
for periods prior to the Fund's commencement of operations as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations, and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may have
been lower.
-10-
<PAGE> 14
FEES AND EXPENSES OF THE SMALL CAP VALUE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .37% .37% .37% .37%
1.46% 2.11% 2.11% 1.11%
Total Annual Fund Operating
Expenses
Fee Waiver and/or Expense (.27%) (.17%) (.17%) (.17%)
Reimbursement(4)
Net Expenses 1.19% 1.94% 1.94% .94%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.19% for Class A shares, 1.94% for Class B shares, 1.94%
for Class C shares, and .94% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-11-
<PAGE> 15
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $640 $197 $697 $197 $297 $96
3 Years $937 $645 $945 $645 $645 $336
5 Years $1,256 $1,118 $1,318 $1,118 $1,118 $595
10 Years $2,158 $2,262 $2,262 $2,428 $2,428 $1,336
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $666
Class B (no redemption) $214
Class B (with redemption) $714
Class C (no redemption) $214
Class C (with redemption) $314
Class I $113
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-12-
<PAGE> 16
ONE GROUP MID CAP GROWTH FUND
WHAT IS THE GOAL OF THE MID CAP GROWTH FUND?
The Fund seeks growth of capital and secondarily, current income by investing
primarily in equity securities.
WHAT ARE THE MID CAP GROWTH FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in securities that have the potential to produce above-average
earnings growth per share over a one-to-three year period. The Fund typically
invests in mid-cap companies with a market capitalizations of $800 million to $8
billion. 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. For more information about the Mid Cap Growth Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MID CAP GROWTH FUND?
The main risks of investing in the Mid Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Mid Cap Growth Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or mid cap growth stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
-13-
<PAGE> 17
HOW HAS THE MID CAP GROWTH FUND PERFORMED?
By showing the variability of the Mid Cap Growth Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP GROWTH FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from
year to year. Total returns assume reinvestment of dividends and distributions.
The returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP MID CAP GROWTH FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1990 1991 1992 1993 1994 1995 1996 1997 1998
1.37% 42.92% 9.54% 12.74% -3.72% 27.88% 20.29% 30.07% 37.34%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.25%.
BEST QUARTER: 39.91% 4Q 1998; WORST QUARTER: -17.05% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/18/92)
- ------- ------ ------- ------------------
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 21.15% 23.63% 16.57%
30.31% 24.80%
S&P/BARRA Midcap 400 Growth Index(1)
- -------------------- ------------------ ------------ ------------------ -------------------
LIFE
CLASS B 1 YEAR 5 YEARS (SINCE 1/14/94)
- ------- ------ ------- ------------------
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 21.96% 23.82% 19.59%
S&P/BARRA Midcap 400 Growth Index(1) 30.31% 24.80%
</TABLE>
-14-
<PAGE> 18
<TABLE>
<CAPTION>
- --------------------------------------- ------------ ------------------ -------------------
LIFE
CLASS C 1 YEAR (SINCE 11/4/97)
- ------- ------ ---------------
<S> <C> <C> <C> <C>
One Group Mid Cap Growth Fund 26.57% 25.63%
S&P/BARRA Midcap 400 Growth Index(1) 30.31%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------- ------------ ------------------ -------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 3/2/89)
- ------- ------ ------- -------- ----------------
<S> <C> <C> <C> <C>
One Group Mid Cap Growth Fund 28.39% 25.26% 19.04% 19.29%
S&P/BARRA Midcap 400 Growth Index(1) 30.31% 24.80% NA
--------------------------------------- ------------ ---------- ---------------------------
</TABLE>
(1) The S&P/BARRA Midcap 400 Growth Index, an unmanaged index, represents the
performance of the highest price to book securities in the S&P MidCap 400 Index.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction of
these value-added services as well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales charges on Class B and Class C
Shares. The S&P/BARRA MidCap 400 Growth Index for Class I Shares consists of the
average monthly returns of the Russell 2000 Index for periods prior to June,
1991. Thereafter, data is from the S&P/BARRA MidCap 400 Growth Index which
corresponds with the initiation of the S&P/BARRA MidCap 400 Growth Index on June
30, 1991.
-15-
<PAGE> 19
FEES AND EXPENSES OF THE MID CAP GROWTH FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating 1.35% 2.00% 2.00% 1.00%
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.25% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-16-
<PAGE> 20
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM FOR THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $646 $203 $703 $203 $303 $102
3 Years $921 $627 $927 $627 $627 $318
5 Years $1,217 $1,078 $1,278 $1,078 $1,078 $552
10 Years $2,055 $2,160 $2,160 $2,327 $2,327 $1,225
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A shares would be
$655.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-17-
<PAGE> 21
ONE GROUP MID CAP VALUE FUND
WHAT IS THE GOAL OF THE MID CAP VALUE FUND?
The Fund seeks capital appreciation with the secondary goal of achieving current
income by investing primarily in equity securities.
WHAT ARE THE MID CAP VALUE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in equity securities of companies with below-market
average price-to-earnings and price-to-book value ratios and with market
capitalizations of $500 million to $6.7 billion. In choosing investments, the
Fund considers the issuer's soundness and earnings prospects. If Banc One
Investment Advisors thinks that a company's fundamentals are declining or that a
company's ability to pay dividends has been impaired, it may eliminate the
Fund's holding of the company's stock. For more information about the Mid Cap
Value Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MID CAP VALUE FUND?
The main risks of investing in the Mid Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Mid Cap Value Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Mid Cap Value Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or mid cap value stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Securities of small companies tend to be less liquid than securities of
larger companies. In addition, small companies may be more vulnerable
to economic, market, and industry changes. Because economic events have
a greater impact on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause unexpected and
frequent decreases in the value of your investment in the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE MID CAP VALUE FUND PERFORMED?
By showing the variability of the Mid Cap Value Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP VALUE FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
-18-
<PAGE> 22
ONE GROUP MID CAP VALUE FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1990 1991 1992 1993 1994 1995 1996 1997 1998
- -14.47% 27.18% 12.92% 13.20% -0.71% 26.03% 16.50% 35.10% 5.67%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 3.65%.
BEST QUARTER: 15.97% 4Q 1998; WORST QUARTER: -17.70% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)(1)
- ---------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/18/92)
- ------- ------ ------- ------------------
<S> <C> <C> <C>
One Group Mid Cap Value Fund -1.76% 15.88% 13.23%
S&P/BARRA Midcap 400 Value Index(2) 5.06% 19.50%
- -------------------- ------------------ ---------------------- -------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE
CLASS B 1 YEAR 5 YEARS (SINCE 1/14/94)
- ------- ------ ------- ------------------
<S> <C> <C> <C>
One Group Mid Cap Value Fund -1.63% 16.07% 13.65%
S&P/BARRA Midcap 400 Value Index(2) 5.06% 19.50%
- --------------------------------------- ---------------------- -------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 3/2/89)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Mid Cap Value Fund 3.82% 17.47% 12.46% 13.07%
S&P/BARRA Midcap 400 Value Index(2) 5.06% 19.50% NA
- --------------------------------------- ---------------------- -------------- ---------------------
</TABLE>
1. The Fund also offers Class C Shares. Class C Shares commenced operations on
March 22, 1999 and do not have a full calendar year of investment returns as of
the date of this Prospectus.
-19-
<PAGE> 23
2. The S&P/BARRA Midcap 400 Value Index is an unmanaged index representing the
performance of the lowest price to book securities in the S&P Midcap 400 Index.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management fees. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A Shares and applicable contingent deferred sales charges on Class B and Class C
Shares. The S&P/BARRA MidCap 400 Value Index consists of the average monthly
returns of the S&P 500 Index for periods prior to June 1991. Thereafter, data is
from the S&P/BARRA Midcap 400 Value Index which corresponds with the initiation
of the S&P BARRA Midcap 400 Value Index on June 30, 1991.
-20-
<PAGE> 24
FEES AND EXPENSES OF THE MID CAP VALUE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or 0.35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .22% .22% .22% .22%
Total Annual Fund Operating 1.31% 1.96% 1.96% .96%
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 1.21% 1.96% 1.96% .96%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.21% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-21-
<PAGE> 25
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $642 $199 $699 $199 $299 $98
3 Years $909 $615 $915 $615 $615 $306
5 Years $1,196 $1,057 $1,257 $1,057 $1,057 $531
10 Years $2,013 $2,117 $2,117 $2,285 $2,285 $1,178
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A Shares would be
$651.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-22-
<PAGE> 26
ONE GROUP DIVERSIFIED MID CAP FUND
WHAT IS THE GOAL OF THE DIVERSIFIED MID CAP FUND?
The Fund seeks long-term capital growth by investing primarily in equity
securities of companies with intermediate capitalizations.
WHAT ARE THE DIVERSIFIED MID CAP FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in equity securities of mid cap companies. Generally,
the Fund invests in companies with market capitalizations of $500 million to $8
billion. The Fund looks for mid cap companies of this size with strong
potential, stable market share, and an ability to quickly respond to new
business opportunities. In choosing securities, the Fund invests in mid cap and
other companies across different 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. For more
information about the Diversified Mid Cap Fund's investment strategies, please
read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE DIVERSIFIED MID CAP FUND?
The main risks of investing in the Diversified Mid Cap Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified Mid Cap Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified Mid Cap Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities also are subject to "stock market risk"
meaning that stock prices in general (or mid cap stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE DIVERSIFIED MID CAP FUND PERFORMED?
By showing the variability of the Diversified Mid Cap Fund performance from year
to year, the chart and the table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE DIVERSIFIED MID CAP FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
-23-
<PAGE> 27
ONE GROUP DIVERSIFIED MID CAP FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS A SHARES
[BAR GRAPH]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
16.26% 8.58% 35.20% 24.57% 24.04% -3.26% 19.74% 25.05% 27.89% 4.62%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.32%. The Diversified Mid Cap Fund commenced operations on June 1,
1991 subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust fund
had been registered, its return may have been lower. The above-quoted
performance data includes the performance of the Pegasus Mid Cap Opportunity
Fund for the period prior to the commencement of operations of the One Group
Diversified Mid Cap Fund on March 22, 1999.
BEST QUARTER: 22.78% 4Q 1998; WORST QUARTER: -20.69% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS 10 YEARS (SINCE 12/31/83)(3)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund -.32% 15.71% 14.49% 14.23%
Russell 2500 Index(2) 1.50% 17.88% 14.10%
- --------------------------------------- -------------- ----------------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE
CLASS B 1 YEAR 5 YEARS 10 YEARS (SINCE 12/31/83)(3)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund -.63% 16.44% 14.98% 14.54%
Russell 2500 Index(2) 1.50% 17.88% 14.10%
</TABLE>
-24-
<PAGE> 28
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------ ------------ --------------- ---------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 12/31/83)(3)
- ------- ------ ------- -------- ------------------
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund 5.47% 17.14% 15.20% 14.69%
Russell 2500 Index(2) 1.50% 17.88% 14.10%
- --------------------------------------- ------------ ------------ -------------------------------
</TABLE>
1. The above-quoted performance data includes the performance of the Pegasus Mid
Cap Opportunity Fund for the period prior to the commencement of operations of
the One Group Diversified Mid Cap Fund on March 22, 1999. The Fund also offers
Class C Shares. Class C Shares commenced operations on March 22, 1999 and do not
have a full calendar year of investment returns as of the date of this
Prospectus.
2. The Russell 2500 Index is an unmanaged index generally representative of the
small-to-medium-small stock market. Investors are unable to purchase the index
directly, although they can invest in the underlying securities. The performance
of the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management fees. By contrast, the performance of the
Fund reflects the deduction of these value-added services as well as the
deduction of sales charges on Class A Shares and applicable contingent deferred
sales charges on Class B and Class C Shares.
3. The Diversified Mid Cap Fund commenced operations on June 1, 1991 subsequent
to the transfer of assets from a common trust fund with materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the performance of the common trust fund
for periods prior to the Fund's commencement of operations as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations, and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may have
been lower.
-25-
<PAGE> 29
FEES AND EXPENSES OF THE DIVERSIFIED MID CAP FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating 1.35% 2.00% 2.00% 1.00%
Expenses
Fee Waiver and/or Expense (.24%) (.14%) (.14%) (.14%)
Reimbursement(4)
Net Expenses 1.11% 1.86% 1.86% .86%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.11% for Class A shares, 1.86% for Class B shares, 1.86%
for Class C shares, and .86% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-26-
<PAGE> 30
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $632 $189 $689 $189 $289 $88
3 Years $908 $614 $914 $614 $614 $304
5 Years $1,204 $1,065 $1,265 $1,065 $1,065 $539
10 Years $2,044 $2,148 $2,148 $2,316 $2,316 $1,212
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-27-
<PAGE> 31
ONE GROUP LARGE CAP GROWTH FUND
WHAT IS THE GOAL OF THE LARGE CAP GROWTH FUND?
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in equity securities.
WHAT ARE THE LARGE CAP GROWTH FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly 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 Index").(1) For more
information about the Large Cap Growth Fund's investment strategies, please
read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE LARGE CAP GROWTH FUND?
The main risks of investing in the Large Cap Growth Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Large Cap Growth Fund will change every day in response to market
conditions. You may lose money if you invest in the Large Cap Growth Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or large cap growth stock prices
in particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE LARGE CAP GROWTH FUND PERFORMED?
By showing the variability of the Large Cap Growth Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE CAP GROWTH FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- -----------------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
-28-
<PAGE> 32
ONE GROUP LARGE CAP GROWTH FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1993 1994 1995 1996 1997 1998
13.95% 5.56% 27.04% 17.25% 32.84% 44.71%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 10.81%.
BEST QUARTER: 24.51% 4Q 1998; WORST QUARTER: - 6.66% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ------------------------------------ -- ------------------- ------------------ ------------------ -------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ------------------------------------ -- ------------------- ------------------ ------------------ -------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/22/94)
- ------- ------ ------- --------------
<S> <C> <C> <C>
One Group Large Cap Growth Fund 21.70% 25.42% 23.33%
S&P/BARRA 500 Growth Index(1) 28.19% 31.81%
- ------------------------------------ -- ------------------- ------------------ ------------------ -------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE
CLASS B 1 YEAR 5 YEARS (SINCE 1/14/94)
- ------- ------ ------- --------------
<S> <C> <C> <C>
One Group Large Cap Growth Fund 22.54% 25.80% 23.33%
S&P/BARRA 500 Growth Index(1) 28.19% 31.81%
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
LIFE
CLASS C 1 YEAR 5 YEARS (SINCE 11/4/97)
- ------- ------ ------- --------------
</TABLE>
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund. 1 The S&P/BARRA 500
Growth Index, an unmanaged index, represents the highest price to book
securities in the S&P 500 Index. Investors are unable to purchase the index
directly, although they can invest in the underlying securities. The performance
of the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management. By contrast, the performance of the Fund
reflects the deduction of these value-added services as well as the deduction of
sales charges on Class A Shares and applicable contingent deferred sales charges
on Class B and Class C Shares.
-29-
<PAGE> 33
<TABLE>
<S> <C> <C> <C>
One Group Large Cap Growth Fund 26.52% 34.29%
S&P/BARRA 500 Growth Index(1) 28.19%
- ----------------------------------------------------------- ------------------ ------------------ -------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE
CLASS I 1 YEAR 5 YEAR (2/28/92)
- ------- ------ ------- --------------
<S> <C> <C> <C>
One Group Large Cap Growth Fund 28.78% 27.18% 21.06%
S&P/BARRA 500 Growth Index(1) 28.19% 31.81%
- ----------------------------------------------------------- ------------------ ------------------ -------------------
</TABLE>
-30-
<PAGE> 34
FEES AND EXPENSES OF THE LARGE CAP GROWTH FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .69% .69% .69% .69%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .25% .25% .25% .25%
1.29% 1.94% 1.94% .94%
Total Annual Fund Operating
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 1.19% 1.94% 1.94% .94%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.19% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-31-
<PAGE> 35
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $640 $197 $697 $197 $297 $96
3 Years $903 $609 $909 $609 $609 $300
5 Years $1,186 $1,047 $1,247 $1,047 $1,047 $520
10 Years $1,991 $2,096 $2,096 $2,264 $2,264 $1,155
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A shares would be
$649.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-32-
<PAGE> 36
ONE GROUP LARGE CAP VALUE FUND
WHAT IS THE GOAL OF THE LARGE CAP VALUE FUND?
The Fund seeks capital appreciation with the incidental goal of achieving
current income by investing primarily in equity securities.
WHAT ARE THE LARGE CAP VALUE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly 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 Index").(1) 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. For more
information about the Large Cap Value Fund's investment strategies, please read
"More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE LARGE CAP VALUE FUND?
The main risks of investing in the Large Cap Value Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Large Cap Value Fund will change every day in response to market
conditions. You may lose money if you invest in the Large Cap Value Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or large cap value stock prices
in particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE LARGE CAP VALUE FUND PERFORMED?
By showing the variability of the Large Cap Value Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE CAP VALUE FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- -----------------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
-33-
<PAGE> 37
ONE GROUP LARGE CAP VALUE FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1992 1993 1994 1995 1996 1997 1998
9.19% 4.65% 0.78% 24.88% 19.94% 26.32% 13.89%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 13.88%.
BEST QUARTER: 15.50% 4Q 1998; WORST QUARTER: - 10.86% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
One Group Large Cap Value Fund 11.22% 18.71% 13.62%
S&P/BARRA 500 Value Index(1) 16.54% 23.64%
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
One Group Large Cap Value Fund 11.30% 19.02% 16.62%
S&P/BARRA 500 Value Index(1) 16.54% 23.64%
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEAR LIFE
- ------- ------ ------ (SINCE 3/1/91)
--------------
One Group Large Cap Value Fund 17.26% 20.29% 14.99%
S&P/BARRA 500 Value Index(1) 16.54% 23.64%
- -------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
1 The S&P/BARRA 500 Value Index is an unmanaged index representing the
performance of the lowest price to book securities in the S&P 500 Index.
Investors are unable to purchase the index directly, although they can invest
in the underlying securities. The performance of the index does not reflect the
-34-
<PAGE> 38
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A Shares and applicable contingent deferred sales charges on Class B Shares and
and Class C Shares.
-35-
<PAGE> 39
FEES AND EXPENSES OF THE LARGE CAP VALUE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating 1.35% 2.00% 2.00% 1.00%
Expenses
Fee Waiver and/or Expense (.12)% (.02)% (.02)% (.02)%
Reimbursement(4)
Net Expenses 1.23% 1.98% 1.98% .98%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.23% for Class A shares, 1.98% for Class B shares, 1.98%
for Class C shares, and .98% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
-36-
<PAGE> 40
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $644 $201 $701 $201 $301 $100
3 Years $919 $626 $926 $626 $626 $316
5 Years $1,215 $1,076 $1,276 $1,076 $1,076 $551
10 Years $2,054 $2,158 $2,158 $2,326 $2,326 $1,223
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-37-
<PAGE> 41
ONE GROUP EQUITY INCOME FUND
WHAT IS THE GOAL OF THE EQUITY INCOME FUND?
The Fund seeks current income through regular payment of dividends with the
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
WHAT ARE THE EQUITY INCOME FUND'S MAIN INVESTMENT STRATEGIES?
The Fund attempts to keep its yield above the Standard & Poor's 500 Composite
Price Index ("S&P 500 Index")(1) by investing in common stock of corporations
which regularly pay dividends, as well as stocks with favorable long-term
fundamental characteristics. As part of its main investment strategy, the Fund
may invest in convertible bonds and REITs. Because yield is the main
consideration in selecting securities, the Fund may purchase stocks of companies
that are out of favor in the financial community. For more information about the
Equity Income Fund's investment strategies, please read "More About The Funds"
and "Principal Investment Strategies."
WHAT IS A REIT?
A REIT or a real estate investment trust is a pooled investment vehicle which
invests in income producing real estate or real estate loans. REITs are
classified as equity REITs, mortgage REITs, or a combination of equity and
mortgage REITs. Equity REITs mainly invest directly in real estate and obtain
income from the collecting rent. Mortgage REITs invest in mortgages and obtain
income from collecting interest payments on the mortgages. REITs are not taxed
on income distributed to shareholders if they comply with several requirements
of the Internal Revenue Code.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INCOME FUND?
The main risks of investing in the Equity Income Fund and the circumstances
likely to adversely affect your investment are described below. The share price
and yield of the Equity Income Fund will change every day in response to market
conditions. You may lose money if you invest in the Equity Income Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general may decline over short or extended
periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Yield. Because of the Fund's emphasis on yield, the Fund may purchase
stocks of companies that are out of favor with the financial community.
These stocks may have less of a chance for capital appreciation than
securities of companies that are considered to be more attractive
investments. In addition, there can be no assurance that a company will
continue to pay dividends.
Real Estate Securities: The Fund's investments in real estate
securities are subject to the same risks as direct investments in real
estate. Real estate values rise and fall in response to many factors,
including local, regional and national economic conditions, the demand
for rental property, and interest rates. When economic growth is
slowing, demand for property decreases and prices may fall. Rising
interest rates, which drive up mortgage and financing costs, can
inhibit construction, purchases, and sales of property. Property values
could decrease because of overbuilding, extended vacancies, increase in
property taxes and operating expenses, zoning laws, environmental
regulations, clean-up of and liability for environmental hazards,
uninsured casualty or condemnation losses, or a general decline in
neighborhood values. The Fund's investments and your investment may
decline in response to declines in property values or other adverse
changes to the real estate market.
-38-
<PAGE> 42
REIT Risk. In addition to the risks facing real estate securities, the
Fund's investments in REITs involve unique risks. REITs may have
limited financial resources, may trade less frequently and in limited
volume and may be more volatile than other securities.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE EQUITY INCOME FUND PERFORMED?
By showing the variability of the Equity Income Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INCOME FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP EQUITY INCOME FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
26.24% -3.14% 23.66% 6.81% 11.40% 0.98% 34.94% 16.70% 32.52% 17.18%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 7.02%.
BEST QUARTER: 16.77% 2Q 1997; WORST QUARTER: -9.67% 3Q 1990.
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. 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 for more than one year tend to smooth out variations in the Fund's total
returns and are not the same as actual year-by-year results. The average annual
returns shown on the Average Annual Total Return Table DO include applicable
sales charges.
-39-
<PAGE> 43
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
One Group Equity Income Fund 5.12% 20.39% 15.68%
S&P 500 Index(1) 22.76% 27.87%
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
<S> <C> <C> <C>
One Group Equity Income Fund 5.18% 20.64% 18.10%
S&P 500 Index(1) 22.76% 27.87%
- -------------------------------------------------------------------------------------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
---------------
<S> <C> <C> <C>
One Group Equity Income Fund 9.24% 16.39%
S&P 500 Index(1) 22.76%
- ---------------------------------------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 7/2/87)
- ------- ------ ------- -------- --------------
<S> <C> <C> <C> <C>
One Group Equity Income Fund 11.29% 22.02% 15.55% 13.76%
S&P 500 Index(1) 22.76% 27.87%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the US stock market. Investors are unable to
purchase the index directly, although they can invest in the underlying
securities. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management. By
contrast, the performance of the Funds reflects the deduction of these value-
added services as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B and Class C Shares.
-40-
<PAGE> 44
FEES AND EXPENSES OF THE EQUITY INCOME FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .24% .24% .24% .24%
Total Annual Fund Operating 1.33% 1.98% 1.98% .98%
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 1.23% 1.98% 1.98% .98%
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.23% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-41-
<PAGE> 45
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $644 $201 $701 $201 $301 $100
3 Years $915 $621 $921 $621 $621 $317
5 Years $1,206 $1,068 $1,268 $1,068 $1,068 $542
10 Years $2,034 $2,139 $2,139 $2,306 $2,306 $1,201
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A Shares would be
$653.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-42-
<PAGE> 46
ONE GROUP DIVERSIFIED EQUITY FUND
WHAT IS THE GOAL OF THE DIVERSIFIED EQUITY FUND?
The Fund seeks long term capital growth and growth of income with a secondary
objective of providing a moderate level of current income.
WHAT ARE THE DIVERSIFIED EQUITY FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly 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 different 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. For more information about the Diversified Equity Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE DIVERSIFIED EQUITY FUND?
The main risks of investing in the Diversified Equity Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Diversified Equity Fund will change every day in response to market
conditions. You may lose money if you invest in the Diversified Equity Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general may decline over short or extended
periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer companies may be
riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
-43-
<PAGE> 47
HOW HAS THE DIVERSIFIED EQUITY FUND PERFORMED?
By showing the variability of the Diversified Equity Fund performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE DIVERSIFIED EQUITY FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP DIVERSIFIED EQUITY FUND
- ------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS A SHARES
[BAR GRAPH]
1990 1991 1992 1993 1994 1995 1996 1997 1998
1.40% 38.13% 13.64% 7.33% -3.64% 27.54% 21.80% 34.84% 28.32%
- ------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 10.34%.
BEST QUARTER: 21.47% 4Q 1998; WORST QUARTER: - 11.31% 3Q 1990
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 12/29/89)
----------------
<S> <C> <C> <C>
One Group Diversified Equity Fund 14.02% 22.76% 17.47%
S&P 1500 Index(1) 21.35% NA
- -------------------------------------------------------------------------------------------------
</TABLE>
-44-
<PAGE> 48
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------ ------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 9//9/94)
---------------
<S> <C> <C> <C>
One Group Diversified Equity Fund 14.52% 22.29%
S&P 1500 Index(1) 21.35%
- -------------------- ------------------ ------------------- ------------------ ------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
---------------
<S> <C> <C> <C>
One Group Diversified Equity Fund 18.57% 24.97%
S&P 1500 Index(1) 21.35%
- --------------------------------------- ------------------- ------------------ ------------------
CLASS I(2) 1 YEAR 5 YEARS LIFE
- ---------- ------ ------- (SINCE 12/29/89)
---------------
<S> <C> <C> <C>
One Group Diversified Equity Fund 20.72% 24.33% 18.26%
S&P 1500 Index(1) 21.35%
- --------------------------------------- ------------------- ------------------ ------------------
</TABLE>
1. The S&P 1500 Index is an unmanaged index generally representative of the
performance of large and small companies in the US stock market. Investors
are unable to purchase the index directly, although they can invest in the
underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges
on Class A Shares and applicable contingent deferred sales charges
on Class B and Class C Shares. The S&P 1500 Index for all classes consists of
the average monthly returns of the S&P 500 Index from December 1989 through
December 1994, Thereafter data is from the S&P 1500 Index which corresponds with
the initiation of the S&P 1500 Index on January 1, 1995.
2. Performance for Class I shares is based on Class A share performance adjusted
to reflect the absence of sales charges.
-46-
<PAGE> 49
FEES AND EXPENSES OF THE DIVERSIFIED EQUITY FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .72% .72% .72% .72%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .24% .24% .24% .24%
Total Annual Fund Operating 1.31% 1.96% 1.96% .96%
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 1.21% 1.96% 1.96% .96%
- -----------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.21% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-47-
<PAGE> 50
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $642 $199 $699 $199 $299 $98
3 Years $909 $615 $915 $615 $615 $306
5 Years $1,196 $1,057 $1,257 $1,057 $1,057 $531
10 Years $2,013 $2,117 $2,117 $2,285 $2,285 $1,178
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A would be $651.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-48-
<PAGE> 51
ONE GROUP BALANCED FUND
WHAT IS THE GOAL OF THE BALANCED FUND?
The Fund seeks to provide total return while preserving capital.
WHAT ARE THE BALANCED FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in a combination of stocks (including both growth and value
securities), 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 that it believes 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 returns. 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. For more information about the Balanced Fund's investment strategies,
please read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE BALANCED FUND?
The main risks of investing in the Balanced Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Balanced Fund and its yield will change every day in response to interest rates
and other market conditions. You may lose money if you invest in the Balanced
Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general may decline over short or extended
periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Interest Rate Risk. In connection with the Fund's fixed income
strategy, the Fund invests in bonds and other debt securities. These
securities 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. Your investment will decline in value
if the value of the Fund's investments decrease. Securities with
greater interest rate sensitivity and longer maturities tend to produce
higher yields, but are subject to greater fluctuations in value.
Usually, changes in the value of fixed income securities will not
affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect liquidity and make it difficult
for the Fund to sell the security.
Prepayment and Call Risk. As part of its fixed income investment
strategy, the Fund invests in mortgage-backed and asset-backed
securities. The issuers of these securities and other callable
securities may be able to repay principal in advance, especially when
interest rates fall. Changes in pre-payment rates can affect the return
on investment and yield of mortgage and asset-backed securities. When
mortgage and other obligations are pre-paid and when securities are
called, the Fund may have to reinvest in securities with a lower yield.
The Fund may also fail to recover premiums paid for the securities,
resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives may be more
volatile and riskier in terms of both liquidity and value than
traditional investments.
-49-
<PAGE> 52
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE BALANCED FUND PERFORMED?
By showing the variability of the Balanced Fund's performance from year to year,
the chart and table below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BALANCED FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP BALANCED FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS A SHARES
[BAR GRAPH]
1994 1995 1996 1997 1998
- -3.23% 24.72% 12.40% 22.26% 19.46%
1. For the period from January 1, 1999 through June 30, 1999, the
Fund's total return was 4.50%.
BEST QUARTER: 12.36% 4Q 1998; WORST QUARTER: - 4.22% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-50-
<PAGE> 53
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 4/2/93)
--------------
<S> <C> <C> <C>
One Group Balanced Fund 6.51% 15.56% 12.28%
S&P 500 Index(2) 22.76% 27.87%
Lipper Balanced Funds Index(3)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEAR LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
One Group Balanced Fund 6.59% 15.75% 13.15%
S&P 500 Index(2) 22.76% 27.87%
Lipper Balanced Funds Index(3)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEAR LIFE
- ------- ------ ------- (SINCE 4/5/93)
--------------
One Group Balanced
Fund 12.74% 17.12% 13.56%
S&P 500 Index(2) 22.76% 27.87%
Lipper Balanced Funds Index(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
1 The table above compares the average annual return of the Fund, which holds a
mix of stocks, bonds and other debt securities to an unmanaged stock index and a
blended index for the period indicated.
2 The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the US stock market. Investors are unable
to purchase the index directly, although they can invest in the underlying
securities. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these
value-added services as well as the deduction of sales charges on Class A Shares
and applicable contingent deferred sales charges on Class B Shares.
3 The Lipper Balanced Funds Index is a blended index consisting of both stocks
and bonds with a typical stock to bond ratio of around 60% to 40%.
-51-
<PAGE> 54
FEES AND EXPENSES OF THE BALANCED FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .65% .65% .65% .65%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .35% .35% .35% .35%
Total Annual Fund Operating 1.35% 2.00% 2.00% 1.00%
Expenses
Fee Waiver and/or Expense (.20%) (.10%) (.10%) (.10%)
Reimbursement(4)
Net Expenses 1.15% 1.90% 1.90% .90%
- -----------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.15% for Class A shares, 1.90% for Class B shares, 1.90%
for Class C shares, and .90% for Class I Shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-52-
<PAGE> 55
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $636 $193 $693 $193 $293 $92
3 Years $912 $618 $918 $618 $618 $308
5 Years $1,207 $1,069 $1,269 $1,069 $1,069 $543
10 Years $2,047 $2,165 $2,165 $2,319 $2,319 $1,216
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-53-
<PAGE> 56
ONE GROUP EQUITY INDEX FUND
WHAT IS THE GOAL OF THE EQUITY INDEX FUND?
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").(1)
WHAT ARE THE EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures. Banc One Investment Advisors attempts to
track the performance of the S&P 500 Index to achieve a correlation of 0.95
between the performance of the Fund and that of the S&P 500 Index without taking
into account the Fund's expenses. For more information about the Equity Index
Fund's investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INDEX FUND?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market conditions.
You may lose money if you invest in the Equity Index Fund.
Index Investing. The Fund attempts to track the performance of the S&P
500 Index. Therefore, securities may be purchased, retained and sold by
the Fund at times when an actively managed fund would not do so. If the
value of securities that are heavily weighted in the index changes, you
can expect a greater risk of loss than would be the case if the Fund
were not fully invested in such securities
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or S&P 500 Index stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE EQUITY INDEX FUND PERFORMED?
By showing the variability of the Equity Index Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- --------------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
-54-
<PAGE> 57
ONE GROUP EQUITY INDEX FUND
- --------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1992 1993 1994 1995 1996 1997 1998
6.86% 9.37% 0.75% 37.07% 22.59% 33.00% 28.24%
- --------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 12.21%.
BEST QUARTER: 21.26% 4Q 1998; WORST QUARTER: - 9.96% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
One Group Equity Index Fund 15.82% 25.80% 18.94%
S&P 500 Index(1) 22.76% 27.87%
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
<S> <C> <C> <C>
One Group Equity Index Fund 16.32% 26.05% 22.40%
S&P 500 Index(1) 22.76% 27.87%
- -------------------------------------------------------------------------------------------------
</TABLE>
-55-
<PAGE> 58
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
---------------
<S> <C> <C> <C>
One Group Equity Index Fund 20.52% 26.33%
S&P 500 Index(1) 22.76%
- -----------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 7/2/91)
--------------
One Group Equity Index Fund 22.50% 27.50% 20.00%
S&P 500 Index(1) 22.76% 27.87%
- -----------------------------------------------------------------------------------------------
</TABLE>
1 The S&P 500 Index is an unmanaged index generally of common stocks of large
companies. Investors are unable to purchase the index directly, although they
can invest in the underlying securities. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management. By contrast, the performance of the Fund reflects the
deduction of these value-added services as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges on
Class B and Class C Shares.
-56-
<PAGE> 59
FEES AND EXPENSES OF THE EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .30% .30% .30% .30%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating .91% 1.56% 1.56% .56%
Expenses
Fee Waiver and/or Expense (.26%) (.16%) (.16%) (.16%)
Reimbursement(4)
Net Expenses .65% 1.40% 1.40% .40%
- -----------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .65% for Class A shares, 1.40% for Class B shares, 1.40%
for Class C shares, and .40% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
-57-
<PAGE> 60
<TABLE>
<Caption
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $564 $143 $543 $143 $243 $41
3 Years $698 $477 $777 $477 $477 $163
5 Years $845 $835 $1,035 $835 $835 $297
10 Years $1,270 $1,668 $1,668 $1,843 $1,843 $686
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $588
Class B (no redemption) $159
Class B (with redemption) $659
Class C (no redemption) $159
Class C (with redemption) $259
Class I $ 57
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-58-
<PAGE> 61
ONE GROUP MARKET EXPANSION INDEX FUND
WHAT IS THE GOAL OF THE MARKET EXPANSION INDEX FUND?
The Fund seeks to provide a return which substantially duplicates the price and
yield performance of domestically traded common stocks in the small and mid
capitalization equity markets, as represented by a market capitalization
weighted combination of the Standard & Poor's Small Cap 600 Index ("S&P Small
Cap 600") and the Standard & Poor's Mid Cap 400 Index ("S&P Mid Cap 400").(1)
WHAT ARE THE MARKET EXPANSION INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in a representative sampling of stocks of medium-sized and
small U.S. companies that are included in the S&P Small Cap 600 and S&P Mid Cap
400 and which trade on the New York and American Stock Exchanges as well as
over-the-counter stocks that are part of the National Market System. (Not all of
the stocks in the indices are included in the Fund). The Fund uses a sampling
methodology to determine which stocks to purchase or sell in order to closely
replicate the performance of the combined indices. The Fund seeks to achieve a
correlation between its portfolio and that of the indices of at least 0.95,
without taking into account expenses. For more information about the Market
Expansion Index Fund's investment strategies, please read "More About The Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MARKET EXPANSION INDEX FUND?
The main risks of investing in the Market Expansion Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Market Expansion Index Fund and its yield will change
every day in response to economic and other market conditions. You may lose
money if you invest in the Market Expansion Index Fund.
Index Investing. The Fund attempts to track the performance of the S&P
Small Cap 600 Index and the S&P Mid Cap 400 Index. Therefore,
securities may be purchased, retained and sold by the Fund at times
when an actively managed fund would not do so. If the value of
securities that are heavily weighted in the index changes, you can
expect a greater risk of loss than would be the case if the Fund were
not fully invested in such securities.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or small cap and mid cap stock
prices in particular) may decline over short or extended periods of
time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Securities of smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be more
vulnerable to economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there may be greater
and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
This Section would normally include a bar chart and average annual total return
table. The Market Expansion Index Fund began operations on July 31, 1998 and did
not have a full calendar year of investment returns as of the date of this
prospectus.
- --------------------
1 "S&P Small Cap 600" and "S&P Mid Cap 400" are registered service marks of
Standard & Poor's corporation, which does not sponsor and is in no way
affiliated with the Fund.
-59-
<PAGE> 62
FEES AND EXPENSES OF THE MARKET EXPANSION INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .73% .73% .73% .73%
Total Annual Fund Operating 1.43% 2.08% 2.08% 1.08%
Expenses
Fee Waiver and/or Expense (.61%) (.51%) (.51%) (.51%)
Reimbursement(4)
Net Expenses .82% 1.57% 1.57% .57%
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .82% for Class A shares, 1.57% for Class B shares, 1.57%
for Class C shares, and .57% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-60-
<PAGE> 63
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $604 $160 $660 $160 $260 $58
3 Years $897 $603 $903 $603 $603 $293
5 Years $1,211 $1,077 $1,272 $1,072 $1,072 $546
10 Years $2,098 $2,203 $2,203 $2,370 $2,370 $1,271
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $663
Class B (no redemption) $211
Class B (with redemption) $711
Class C (no redemption) $211
Class C (with redemption) $311
Class I $110
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-61-
<PAGE> 64
ONE GROUP INTERNATIONAL EQUITY INDEX FUND
WHAT IS THE GOAL OF THE INTERNATIONAL EQUITY INDEX FUND?
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.(1)
WHAT ARE THE INTERNATIONAL EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in foreign stocks included in the MSCI EAFE GDP Index.
The Fund may also invest in stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP Index to achieve a
correlation of 0.90 between the performance of the Fund and that of the MSCI
EAFE GDP Index, without taking into account the Fund's expenses. As part of
its investment strategy, the Fund may invest in securities of emerging
international markets such as Mexico, Chile and Brazil. The Sub-Advisor
selects securities of emerging markets that are included in the Morgan
Stanley Emerging Market Free Index based on size, risk and the ease of
investing in the country's market (e.g., reasonable settlement procedures).
Most of the Fund's assets will be denominated in foreign currencies. For more
information about the International Equity Index Fund's investment strategies,
please read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INTERNATIONAL EQUITY INDEX FUND?
The main risks of investing in the International Equity Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the International Equity Index Fund will change every day in
response to market conditions. You may lose money if you invest in the
International Equity Index Fund.
Index Investing. The Fund attempts to track the performance of the MSCI
EAFE GDP Index. Therefore, securities may be purchased, retained and
sold by the Fund at times when an actively managed fund would not do
so. If the value of securities that are heavily weighted in the index
changes, you can expect a greater risk of loss than would be the case
if the Fund were not fully invested in such securities.
Foreign Securities. Investments in foreign securities involve risks in
addition to those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and
disclosure standards of some foreign markets. These risks can make
foreign investments more volatile and potentially less liquid than U.S.
investments.
Emerging Market Risk. The Fund may invest up to 10% of its net assets
in securities of emerging international markets. The risks associated
with foreign securities are magnified in countries in "emerging
markets." These countries may have relatively unstable governments and
less established market economies than developed countries. Emerging
markets may face greater social, economic, regulatory, and political
uncertainties. These risks make emerging market securities more
volatile and less liquid than securities issued in more developed
countries.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or stocks comprising the MSCI
EAFE GDP Index in particular) may decline over short or extended
periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
- --------------------
(1) Gross Domestic Product Weighted Morgan Stanley Capital International Europe,
Australasia 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.
-62-
<PAGE> 65
HOW HAS THE INTERNATIONAL EQUITY INDEX FUND PERFORMED?
By showing the variability of the International Equity Index Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INTERNATIONAL EQUITY INDEX FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP INTERNATIONAL EQUITY INDEX FUND
- -------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1993 1994 1995 1996 1997 1998
29.60% 3.90% 10.20% 6.61% 5.68% 21.57%
- -------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.00%.
BEST QUARTER: 20.46% 4Q 1998; WORST QUARTER: -14.47% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-63-
<PAGE> 66
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 4/23/93)
---------------
<S> <C> <C> <C>
One Group International Equity Index 5.35% 9.93% 9.41%
Fund
Morgan Stanley EAFE GDP Index(1)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
One Group International Equity Index 5.15% 8.69% 8.70%
Fund
Morgan Stanley EAFE/GDP Index(1)
- -------------------------------------------------------------------------------------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
---------------
One Group International Equity Index 9.78% 16.60%
Fund
Morgan Stanley EAFE /GDP Index(1)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 10/28/92)
----------------
One Group International Equity Index 11.27% 10.12% 12.61%
Fund
Morgan Stanley EAFE/ GDP Index(1)
- -------------------------------------------------------------------------------------------------
</TABLE>
1 The Morgan Stanley Capital International EAFE/GDP Index is an unmanaged index
generally representative of the performance of international stock markets.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A Shares and applicable contingent deferred sales charges on Class B and Class C
Shares.
-64-
<PAGE> 67
FEES AND EXPENSES OF THE INTERNATIONAL EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .55% .55% .55% .55%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .40% .40% .40% .40%
Total Annual Fund Operating 1.30% 1.95% 1.95% .95%
Expenses
Fee Waiver and/or Expense (.10%) none none none
Reimbursement(4)
Net Expenses 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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.20% for Class A shares for the period beginning November
1, 1999 and ending on October 31, 2000.
-65-
<PAGE> 68
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 641 $ 198 $ 698 $ 198 $ 298 $ 97
3 Years $ 906 $ 612 $ 912 $ 612 $ 612 $ 303
5 Years $1,191 $1,052 $1,252 $1,052 $1,052 $ 525
10 Years $2,002 $2,107 $2,107 $2,275 $2,275 $1,166
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses for Class A Shares would be
$650.
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-66-
<PAGE> 69
ONE GROUP DIVERSIFIED INTERNATIONAL FUND
WHAT IS THE GOAL OF THE DIVERSIFIED INTERNATIONAL FUND?
The Fund seeks long-term capital growth by investing primarily in equity
securities of foreign issuers.
WHAT ARE THE DIVERSIFIED INTERNATIONAL FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in the securities of companies located in Europe, Asia,
and Latin America. The Fund also will invest in other regions and countries that
present attractive investment opportunities, including developing countries. In
selecting a country for investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the securities market of
selected countries. In selecting individual securities, Banc One Investment
Advisors selects a representative sampling of the companies comprising the
individual country's stock market index. For more information about the
Diversified International Fund's investment strategies, please read "More About
The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE DIVERSIFIED INTERNATIONAL FUND?
The main risks of investing in the Diversified International Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Diversified International Fund will change every day in
response to market conditions. You may lose money if you invest in the
Diversified International Fund.
Foreign Securities. Investments in foreign securities involve risks in
addition to those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher transaction costs,
delayed settlement, and less stringent investor protection and
disclosure standards of some foreign markets. These risks can make
foreign investments more volatile and potentially less liquid than U.S.
investments. Because the Fund may invest over 25% of its total assets
in a single country, political and economic developments in that
country will have a greater impact on the performance of the Fund than
would be the case if the Fund were more widely diversified.
Emerging Market Risk. The risks associated with foreign securities are
magnified in countries in "emerging markets." These countries may have
relatively unstable governments and less established market economies
than developed countries. Emerging markets may face greater social,
economic, regulatory, and political uncertainties. These risks make
emerging market securities more volatile and less liquid than
securities issued in more developed countries.
Market Risk. The Fund invests in equity securities (such as stocks)
that are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general may decline over short or extended
periods of time. When the value of the Fund's securities goes down,
your investment in the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE DIVERSIFIED INTERNATIONAL FUND PERFORMED?
By showing the variability of the Diversified International Fund performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE DIVERSIFIED INTERNATIONAL FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
-67-
<PAGE> 70
ONE GROUP DIVERSIFIED INTERNATIONAL FUND
- -------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
17.97% -14.35% 6.57% -6.65% 29.66% 0.00% 11.46% 7.74% 3.97% 16.44%
- -------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.61%. The Diversified International Fund commenced operations on
December 3, 1994 subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust fund
had been registered, its return may have been lower. The above quoted
performance data includes the performance of the Pegasus International Equity
Fund for the period prior to the commencement of operations of the One Group
Diversified International Fund on March 22, 1999.
BEST QUARTER: 20.72% 4Q 1998; WORST QUARTER: -22.67% 3Q 1990
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)(1)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/86)(2)
------------------
<S> <C> <C> <C> <C>
One Group Diversified International 5.19% 8.14% 6.77% 9.16%
Fund
MSCI EAFE + EMF Index(3)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/86)(2)
------------------
<S> <C> <C> <C> <C>
One Group Diversified International 5.33% 8.49% 7.08% 9.40%
Fund
MSCI EAFE + EMF Index(3)
</TABLE>
-68-
<PAGE> 71
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/86)(2)
------------------
<S> <C> <C> <C> <C>
One Group Diversified International 11.33% 9.52% 7.44% 9.68%
Fund
MSCI EAFE + EMF Index(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
1. The above quoted performance data includes the performance of the Pegasus
International Equity Fund for the period prior to the commencement of
operations of the One Group Diversified International Fund on March 22,1999.
The Fund also offers Class C Shares. Class C Shares commenced operations on
March 22, 1999 and do not have a full calendar year of investment returns as of
the date of this Prospectus.
2. The Diversified International Fund commenced operations on December 3, 1994
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes the performance of the common
trust fund for periods prior to the Fund's commencement of operations as
adjusted to reflect the expenses associated with the Fund. The common trust fund
was not registered with the SEC and was not subject to the investment
restrictions, limitations, and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower.
3. The Morgan Stanley Capital International EAFE/GDP + EMF Index is an
unmanaged index generally representative of the performance of international
stock markets and of emerging markets. Investors are unable to purchase the
index directly, although they can invest in the underlying securities. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management fees. By
contrast, the performance of the Fund reflects the deduction of these value-
added services as well as the deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on Class B Shares
-69-
<PAGE> 72
FEES AND EXPENSES OF THE DIVERSIFIED INTERNATIONAL FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .80% .80% .80% .80%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating 1.41% 2.06% 2.06% 1.06%
Expenses
Fee Waiver and/or Expense (.11%) (.01%) (.01%) (.01%)
Reimbursement(4)
Net Expenses 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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.30% for Class A shares, 2.05% for Class B shares, 2.05%
for Class C shares, and 1.05% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-70-
<PAGE> 73
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 650 $ 208 $ 708 $ 208 $ 308 $ 107
3 Years $ 938 $ 645 $ 945 $ 645 $ 645 $ 336
5 Years $1,246 $1,108 $1,308 $1,108 $1,108 $ 584
10 Years $2,118 $2,222 $2,222 $2,389 $2,389 $1,293
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $661
Class B (no redemption) $209
Class B (with redemption) $709
Class C (no redemption) $209
Class C (with redemption) $309
Class I $108
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-71-
<PAGE> 74
MORE ABOUT THE FUNDS
Each of the fourteen funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes fourteen mutual funds with a variety of investment
objectives, including total return, capital appreciation, current income, and
long-term capital growth. The principal investment strategies that are used to
meet each Fund's investment objective are described in Fund Summaries:
Investments, Risk, & Performance in the front of this prospectus. They are also
described below. There can be no assurance that the Funds will achieve their
investment objectives. Please note that each Fund may also use strategies that
are not described below, but which are described in the Statement of Additional
Information.
ONE GROUP SMALL CAP GROWTH FUND. The Fund may invest in common stocks,
debt securities, preferred stocks, convertible securities, warrants,
and other equity securities of small capitalization companies. The Fund
may occasionally hold securities of companies with large
capitalizations if doing so contributes to the Fund's investment
objective.
- The Fund invests at least 65% of its total assets in the
securities of small capitalization companies.
- Although the Fund may invest up to 35% of its total
assets in U.S. Government Securities, other investment
grade fixed income securities, cash, and cash equivalents,
the Fund's main investment strategy is to invest in equity
securities of small capitalization companies.
ONE GROUP SMALL CAP VALUE FUND. The Fund invests mainly in equity
securities of small domestic issuers with market capitalizations of
$100 million to $2 billion.
- The Fund invests at least 65% of its total assets in
common and preferred stocks, rights, warrants, convertible
securities, and other equity securities of small
capitalization companies.
- Although the Fund may invest up to 25% of the Fund's
total assets may be invested in foreign securities, the
Fund's main investment strategy is to invest in securities
of small capitalization companies.
- Up to 20% of the Fund's total assets may be invested in
U.S. government securities, other investment grade fixed
income securities, cash and cash equivalents.
ONE GROUP MID CAP GROWTH FUND. The Fund invests in securities of
companies that have the potential to produce above-average earnings
growth per share over a one-to-three year period.
- At least 80% of the Fund's total assets will be invested
in equity securities of mid cap companies, including
common stocks and debt securities and preferred stocks
that are convertible to common stocks.
- A portion of the Fund's assets will be held in cash
equivalents.
ONE GROUP MID CAP VALUE FUND. The Fund invests mainly in equity
securities of companies with below-market average price-to-earnings and
price-to-book value ratios and with market capitalizations of $500
million to $5 billion.
- At least 80% of the Fund's total assets will be invested
in equity securities, including common stock and debt
securities and preferred stocks that are convertible into
common stocks.
-72-
<PAGE> 75
- A portion of the Fund's assets will be held in cash
equivalents.
ONE GROUP DIVERSIFIED MID CAP FUND. The Fund invests mainly in equity
securities of mid capitalization companies.
- At least 65% of the Fund's total assets normally will be
invested in common and preferred stocks, rights, warrants,
convertible securities, and other equity securities of mid
capitalization companies.
- Up to 25% of the Fund's total assets may be invested in
foreign securities. Up to 20% of the Fund's total assets
may be invested in U.S. government securities, other
investment grade fixed income securities, cash and cash
equivalents. Although the Fund may use these strategies
more in the future, the Fund's main strategy is to invest
in equity securities of mid capitalization companies.
ONE GROUP LARGE CAP GROWTH FUND. The Fund invests mainly in equity
securities of large, well-established companies. The weighted average
capitalization of companies in which the Fund invests normally will
exceed the median market capitalization of the Standard & Poor's 500
Composite Stock Price Index.
- At least 65% of the Fund's total assets will be invested
in the equity securities of large, well-established
companies.
ONE GROUP LARGE CAP VALUE FUND. The Fund invests in equity securities
of large capitalization companies that are believed to be selling below
their long-term investment values, including:
- At least 65% of the Fund's total assets will be invested
in equity securities of companies described above,
including common stocks, and debt securities and preferred
stocks which are convertible to common stock.
- A portion of the Fund's assets will be held in cash
equivalents.
ONE GROUP EQUITY INCOME FUND. The Fund invests in the equity
securities of corporations which regularly pay dividends, as well as
stocks with favorable long-term fundamental characteristics:
- The Fund normally invests at least 65% of its total
assets in the equity securities of corporations described
above, including common stocks, and debt securities and
preferred stock convertible to common stock.
- A portion of the Fund's assets will be held in cash
equivalents.
ONE GROUP DIVERSIFIED EQUITY FUND. The Fund invests mainly in common
stocks of overlooked or undervalued companies that have the potential
for earnings growth over time.
- At least 65% of the Fund's total assets will be invested
in equity securities.
- Although the Fund may invest up to 35% of the Fund's
total assets may be invested in U.S. government
securities, other investment grade fixed income
securities, cash, and cash equivalents, the Fund's main
investment strategy is to invest in equity securities.
ONE GROUP BALANCED FUND. The Fund invests in a combination of stocks,
fixed income securities and money market instruments. Normally, the
Fund will invest:
- between 40% and 75% of its total assets in all types of
equity securities (including stock of both large and small
capitalization companies and growth and value securities).
Up to 20% of the equities may be foreign securities,
including American Depository Receipts.
-73-
<PAGE> 76
- between 25% and 60% of its total assets in mid to
long-term fixed income securities, including bonds, notes,
and other debt securities. The balance will be invested in
cash equivalents.
- --------------------------------------------------------------------------------
HOW DOES BANC ONE INVESTMENT ADVISORS SELECT
FIXED INCOME SECURITIES FOR THE BALANCED FUND?
Banc One Investment Advisors selects fixed income securities for the
Balanced Portfolio by analyzing both individual securities and
different industry sectors. Rather than attempting to time the market,
Banc One Investment Advisors looks for sectors and securities that it
believes will perform consistently well over time as measured by total
return. The fixed income portion of the Balanced Fund attempts to
enhance total return by selecting market sectors that offer risk/reward
advantages based on structural risks and credit trends. Individual
securities that are purchased by the Fund are subject to a disciplined
risk/reward analysis both at the time of purchase and on an ongoing
basis. This analysis includes an evaluation of interest rate risk,
credit risk, and risks associated with the structure of the investment
(e.g., asset-backed securities).
- --------------------------------------------------------------------------------
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the
S&P 500 Index. (The Fund also invests in stock index futures.) Banc One
Investment Advisors seeks to achieve a correlation of 0.95% between the
performance of the Fund and that of the S&P 500 Index. The Fund may
hold up to 10% of its net assets in cash or cash equivalents.
- --------------------------------------------------------------------------------
HOW DOES INDEX INVESTING WORK IN THE EQUITY INDEX FUND?
- The percentage of stock that the Fund holds will be approximately
the same percentage that the stock represents in the S&P 500
Index.
- Banc One Investment Advisors generally picks stock in the order
of their weightings in the S&P 500 Index, starting with the
heaviest weighted stock.
- The Fund attempts to achieve a correlation between the
performance of its Fund and that of the S&P 500 Index of at least
0.95, without taking into account Fund expenses. Perfect
correlation would be 1.00.
- --------------------------------------------------------------------------------
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests in stocks
included in the S&P Small Cap 600 Index and S&P Mid Cap 400 Index.
- The Fund may also invest up to 25% of its total assets in
foreign securities through Depository Receipts.
- Up to 5% of the Fund's total assets may be held in cash
and cash equivalents.
- Up to 5% of the Fund's total assets may be invested in
futures contracts and related options.
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund invests in stocks
included in the MSCI EAFE GDP Index. (The Fund also invests in stock
index futures.) Banc One Investment Advisors seeks to achieve a
correlation between the performance of the Fund and that of the MSCI
EAFE GDP Index of at least 0.90, without taking into account expenses.
Perfect correlation would be 1.00.
- At least 65% of the Fund's total assets will be invested
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.
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<PAGE> 77
- Up to 10% of the Fund's net assets may be invested in
securities of emerging international markets such as
Mexico, Chile and Brazil included in the Morgan Stanley
Market Free Index. These investments may made directly or
through local exchanges, through publicly traded
closed-end country funds, or through "passive foreign
investment companies."
- Up to 20% of the Fund's total assets may be invested in
debt securities issued or guaranteed by foreign govern-
ments or any of their political subdivisions, agencies,
or instrumentalities, or by supranational issuers rated
in one of the three highest rating categories.
- A substantial portion of the Fund's assets will be
denominated in foreign currencies.
ONE GROUP DIVERSIFIED INTERNATIONAL FUND. The Fund invests mainly in
the securities of companies located in Europe, Asia and Latin America.
- At least 65% of the Fund's total assets normally will be
invested in foreign equity securities, consisting of
common stock (including American Depository Receipts),
preferred stocks, rights, warrants, convertible
securities, foreign currencies and options on foreign
currency, and other equity securities.
- Up to 20% of the Fund's total assets may be invested in
U.S. government securities, other investment grade fixed
income securities, cash and cash equivalents.
INVESTMENT RISKS. The risks associated with investing in the Equity Funds are
described below and in Fund Summaries: Investments, Risk, & Performance at the
front of this prospectus.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
- --------------------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that
derive their value from the performance of underlying assets or
securities.
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION COMPANIES: Investments in smaller, younger companies may be
riskier and more volatile 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.
FOREIGN SECURITIES: Investments in foreign securities involve risks different
from investments in U.S. securities. Because of these risk factors, the share
price of the International Equity Index Fund and the Diversified International
Fund is expected to be volatile, and you should be able to sustain sudden, and
sometimes substantial, fluctuations in the value of your investment.
Europe. Europe includes countries with highly developed markets as well
as countries with emerging markets. Many developed countries in Western
Europe are members of the European Union and the EMU which requires
compliance with stringent fiscal and monetary controls. The markets of
Eastern European countries continue to remain relatively undeveloped
and are sensitive to political and economic developments.
Asia. Asia includes countries in all stages of economic development
from the highly developed market economy of Japan to the emerging
market economy of the People's Republic of China. Generally, Asian
economies face over-extension of credit, currency devaluation, rising
unemployment, decreased exports, and economic recessions. Currency
devaluation in any one country may have a negative affect on the entire
region. Recently, the markets in
-75-
<PAGE> 78
each Asian country suffered significant downturns and volatility.
Although the Asian market appears to be recovering, continued
volatility may persist.
Latin America. Latin America countries are considered to be emerging
market economies that are marked by high interest rates, inflation, and
unemployment. Currency devaluation in any one country may have an
adverse affect on the entire region. Recently, the markets in many
Latin American countries have experienced significant downturns as well
as significant volatility. Although the Latin American market appears
to be recovering, continued volatility may persist. A small number of
companies and industries, including the telecommunications sector,
represent a large portion of the market in many Latin America
countries.
For more information about risks associated with the types of investments that
the Equity Funds purchase, please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
-76-
<PAGE> 79
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.
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.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Funds' investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE FUNDS' SECURITIES
- - If a Fund invests 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 are usually riskier than
higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Funds
may invest their assets in cash and CASH EQUIVALENTS (see below) for temporary
defensive purposes. These investments may result in a lower yield than
lower-quality or longer term investments and may prevent the Funds from meeting
their investment objectives.
-77-
<PAGE> 80
- --------------------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its agencies
and instrumentalities, repurchase agreements (other than equity
repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, and bank money market
deposit accounts.
- --------------------------------------------------------------------------------
The percentage of total assets that each Fund may invest in cash and cash
equivalents is as follows:
Percentage of
Fund Total Assets
- ---- -------------
Small Cap Growth Fund 100%
Small Cap Value Fund 20%
Mid Cap Growth Fund 100%
Mid Cap Value Fund 100%
Diversified Mid Cap Fund 20%
Large Cap Growth Fund 100%
Large Cap Value Fund 100%
Equity Income Fund 100%
Diversified Equity Fund 100%
Balanced Fund 100%
Equity Index Fund 10%
Market Expansion Index Fund
International Equity Index Fund 10%
Diversified International Fund 20%
PORTFOLIO TURNOVER.
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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, 1999 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.
-78-
<PAGE> 81
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve, 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 if the Fund's Custodian, State Street
Bank and Trust Company, 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?
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."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. 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. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plan. These
plans allow participants to defer taxes while their retirement savings grow.
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.
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<PAGE> 82
- - 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 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual and endorsed to One Group
Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
8. 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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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 to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Balanced Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund, but
minimum automatic additions are only $25 per Fund. 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 five (5) calendar days.
- 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 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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- 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 One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 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 and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
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>
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<PAGE> 85
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.
- No CDSC is imposed on share appreciation, nor is a CDSC imposed on
shares acquired through reinvestment of dividends or capital gains
distributions.
- To keep your CDSC as low as possible, the Fund first 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 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 One Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds 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 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).
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
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.
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<PAGE> 86
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:
- 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 One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
- 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.
- Certain 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 One Group
Fund 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 One Group Fund, 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 One Group Fund.
8. Bought with assets of 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.
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<PAGE> 87
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group Fund.
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<PAGE> 88
- 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 One Group Fund, 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 One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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:
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<PAGE> 89
- To prevent disruptions in the management of the Funds, 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, 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:
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 participant in 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. 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?
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<PAGE> 90
Yes, if you selected this option on your Account Application Form.
- Call your Shareholder Servicing Agent or The One Group Service 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.
- 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, 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. Shares received from dividend and capital gains
reinvestment are included in calculating the 10%. The
applicable Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually. Withdrawals in
excess of 10% will subject the entire annual withdrawal to the
applicable sales load.
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
- Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
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<PAGE> 91
- Because of the high cost of handling small investments, 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 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- 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 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> 92
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
Except for the Balanced Fund, the Equity Income Fund, the International Equity
Index Fund, and the Diversified International Fund, the Funds declare dividends
on the last business day of each quarter. The Balanced Fund and the Equity
Income Fund declare dividends on the last business day of the month. The
International Equity Index Fund and the Diversified International Fund declare
dividends on the last business day of each year. Dividends for the Funds are
distributed on the first business day of the next month after they are declared.
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. You also may call The One Group Services Company
at 1-800-480-4111 to make this change.
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 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, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
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<PAGE> 93
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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<PAGE> 94
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
<TABLE>
<CAPTION>
ANNUAL RATE AS PERCENTAGE
FUND OF AVERAGE DAILY NET ASSETS
- ---- ---------------------------
<S> <C>
One Group Small Cap Growth Fund .74%
One Group Small Cap Value Fund(2) .64%
One Group Mid Cap Growth Fund .74%
One Group Mid Cap Value Fund .74%
One Group Diversified Mid Cap Fund(2) .60%
One Group Large Cap Growth Fund .72%
One Group Large Cap Value Fund .74%
One Group Equity Income Fund .69%
One Group Diversified Equity Fund .73%
One Group Balanced Fund .56%
One Group Equity Index Fund .14%
One Group International Equity Index Fund(1) .55%
One Group Diversified International Fund(2) .77%
</TABLE>
1. Includes fees paid by Banc One Investment Advisors to Independence
International the former sub-advisor to the International Equity Index Fund
2. In March 1999, the Pegasus Funds and One Group Mutual Funds merged. The
investment advisory fee includes fees paid to First Chicago NBD Investment
Management Company, an affiliate of Banc One Investment Advisors, as advisor
to the Pegasus Funds.
The Market Expansion Index Fund began operations on July 31, 1998 and does not
have a full fiscal year of advisory fees. Under the investment advisory
agreement with the Fund, Banc One Investment Advisors is entitled to a fee,
which is calculated daily and paid monthly, of __% of the average daily net
assets of the Market Expansion Index Fund.
-92-
<PAGE> 95
THE FUND MANAGERS
The Funds are managed by teams of Fund managers, research analysts, and other
investment management professionals. For all the Funds, except the International
Equity Index Fund, the Equity Index Fund, and the Market Expansion Index Fund,
each team member makes recommendations about the securities in the Funds. The
research analysts provide in-depth industry analysis and recommendations, while
the portfolio managers determine strategy, industry weightings, Fund holdings,
and cash positions.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
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<PAGE> 96
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are included in the Statement of Additional
Information.
ONE GROUP SMALL CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
JUNE 30, ENDED
---------- JUNE 30,
CLASS A 1999 1998 1997 1996(a) 1995
- ------- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.94 $ 10.73 $ 11.50 $ 9.36
Investment Activities:
Net investment income
(loss) (0.03) (0.04) (0.07) (0.04)
Net realized and
unrealized gains
(losses) from
investments 2.44 1.35 1.40 2.35
Total from Investment
Activities 2.41 1.31 1.33 2.31
Distributions:
From net investment
income -- -- -- --
From net realized
gains (1.33) (1.10) (2.10) (0.17)
Total Distributions (1.33) (1.10) (2.10) (0.17)
NET ASSET VALUE, END
OF PERIOD $12.02 $ 10.94 $ 10.73 $ 11.50
Total Return (Excludes
Sales Charge) 23.28% 13.52% 12.85%(b) 25.07%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000) $21,634 $17,299 $18,356 $95,467
Ratio of expenses
to average net assets 1.31% 1.27% 1.05%(c) 1.03%
Ratio of net
investment income
(loss) to average
net assets (0.31)% (0.41)% (0.33)%(c) (0.36)%
Ratio of expenses
to average net assets* 1.44% 1.45% 1.07%(c) 1.03%
Ratio of net investment
income (loss) to
average net assets* (0.44)% (0.59)% (0.35)%(c) (0.36)%
Portfolio turnover(d) 83.77% 92.01% 59.57% 65.00%
</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 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.
-94-
<PAGE> 97
ONE GROUP SMALL CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS YEAR
JUNE 30, ENDED ENDED
---------- JUNE 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(a) 1995
- ------- ---- ---- ---- ------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.84 $ 10.72 $ 11.56 $ 9.47
Investment Activities:
Net investment loss (0.03) (0.10) (0.06) (0.07)
Net realized and unrealized
gains (losses) from investments 2.31 1.32 1.35 2.33
Total from Investment Activities 2.28 1.22 1.29 2.26
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
Total Return (Excludes
Sales Charge) 22.24% 12.74% 12.47%(b) 24.21%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 8,567 $ 3,835 $ 2,545 $ 1,814
Ratio of expenses to
average net assets 2.06% 2.02% 1.87%(b) 1.78%
Ratio of net investment
income (loss) to average
net assets (1.02)% (1.16)% (1.10)%(c) (1.16)%
Ratio of expenses to
average net assets* 2.09% 2.12% 1.92%(c) 1.78%
Ratio of net investment
income (loss) to average
net assets* (1.05)% (1.26)% (1.15)%(c) (1.16)%
Portfolio turnover(d) 83.77% 92.01% 59.57% 65.00%
</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 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) Not annualized. (c) Annualized. (d) Portfolio turnover is calculated
on the basis of the Fund as a whole without distinguishing among the classes of
shares issued.
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<PAGE> 98
ONE GROUP SMALL CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 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:
From 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.
-96-
<PAGE> 99
ONE GROUP SMALL CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED MARCH 26,
JUNE 30, 1996 TO
---------- JUNE 30,
CLASS I 1999 1998 1997 1996(a)
- -------- ---- ---- ---- -------
<S> <C> <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 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.
-97-
<PAGE> 100
ONE GROUP SMALL CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS A JUNE 30, 1999 1998 1997 1996 1995(a)
- ------- ------------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.03 $ 13.70 $ 12.20 $ 10.00
Investment Activities:
Net investment income (0.10) (0.06) (0.02) 0.02
Net realized and unrealized
gains (losses) from
investments and futures (0.59) 4.16 3.02 2.45
Total from Investment Activities (0.69) 4.10 3.00 2.47
Distributions:
Net investment income -- -- -- (0.02)
In excess of net
investment income -- -- -- --
From net realized gain (0.46) (1.77) (1.50) (0.25)
In excess of net
realized gain (0.07) -- -- --
Total Distributions (0.53) (1.77) (1.50) (0.27)
NET ASSET VALUE, END OF PERIOD $ 14.81 $ 16.03 $ 13.70 $ 12.20
Total Return
[Excludes Sales load] (4.29)% 30.16% 24.59% 24.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $32,217 $ 21,836 $ 6,697 $ 672
Ratio of expenses
to average net assets 1.19% 1.18% 1.13% 1.25%(c)
Ratio of net investment
income to average
net assets (0.73)% (0.68)% (0.29)% 0.19%(c)
Ratio of expenses
to average net assets* -- -- 1.24% 2.56%(c)
Portfolio turnover 42.39% 58.29% 93.82% 38.89%(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) For
the period January 27, 1995 (commencement of operations) through December 31,
1995. (b) Not Annualized. (c) Annualized.
-98-
<PAGE> 101
ONE GROUP SMALL CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS B JUNE 30, 1999 1998 1997 1996 1995(a)
- ------- ------------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.74 $ 13.58 $ 12.12 $ 10.00
Investment Activities:
Net investment income (0.17) (0.07) (0.04) (0.03)
Net realized and
unrealized gains (losses)
from investments and futures (0.63) 4.00 3.00 2.40
Total from Investment Activities (0.80) 3.93 2.96 2.37
Distributions:
Net investment income -- -- -- --
In excess of net
investment income -- -- -- --
From net realized gain (0.46) (1.77) (1.50) (0.25)
In excess of net
realized gain (0.07) -- -- --
Total Distribution (0.53) (1.77) (1.50) (0.25)
NET ASSET VALUE, END
OF PERIOD $ 14.41 $ 15.74 $ 13.58 $ 12.12
Total Return
(Excludes sales load) (5.11)% 29.17% 24.42% 23.76%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 4,014 $ 1,799 $ 110 $ 15
Ratio of expenses to
average net assets 1.94% 1.93% 1.88% 2.00%(c)
Ratio of net investment
income to average
net assets (1.48)% (1.43)% (1.04)% (0.51)%(c)
Ratio of expenses to
average net assets* -- -- 3.04% 9.52%(c)
Portfolio Turnover 42.39% 58.29% 93.82% 38.89%(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) For
the period January 27, 1995 (commencement of operations) through December 31,
1995. (b) Not Annualized. (c) Annualized.
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<PAGE> 102
ONE GROUP SMALL CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED JUNE 30, -----------------------
CLASS I 1999 1998 1997 1996 1995(a)
- -------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.22 $ 13.80 $ 12.19 $ 10.00
Investment Activities:
Net investment income (0.07) (0.05) (0.01) 0.06
Net realized and unrealized
gains (losses) from
investments and futures (0.06) 4.24 3.13 2.44
Total from Investment Activities (0.67) 4.19 3.12 2.50
Distributions:
Net investment income -- -- -- (0.06)
In excess of net
investment income -- -- (0.01) --
From net realized gain (0.46) (1.77) (1.50) (0.25)
In excess of net realized gain (0.07) -- -- --
Total Distributions (0.53) (1.77) (1.51) (0.31)
Net Asset Value, End of Period $ 15.02 $ 16.22 $ 13.80 $ 12.19
Total Return (4.11)% 30.60% 25.63% 25.08%(b)
Ratios/Supplementary Data:
Net Assets at end
of period (000) $276,754 $217,908 $125,840 $92,926
Ratio of expenses to
average net assets 0.94% 0.93% 0.88% 0.85%(c)
Ratio of net investment
income to average
net assets (0.48)% (0.43)% (0.04)% 0.59%(c)
Ratio of expenses to
average net assets* -- -- 1.02% 1.09%(c)
Portfolio turnover 42.39% 58.29% 93.82% 38.89%(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) For
the period January 27, 1995 (commencement of operations) through December 31,
1995. (b) NOT ANNUALIZED. (c) ANNUALIZED.
-100-
<PAGE> 103
ONE GROUP MID CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 19.37 $18.76 $ 18.36 $ 15.93
Investment Activities:
Net investment income (0.08) 0.21 0.17 0.02
Net realized and unrealized
gains (losses) from investments 5.65 3.58 3.80 2.98
Total from Investment Activities 5.57 3.79 3.97 3.00
Distributions:
From net investment income -- (0.24) (0.15) (0.01)
In excess of net investment income -- (0.02) -- (0.02)
From net realized gains (2.58) (2.92) (3.42) (0.54)
Total Distributions (2.58) (3.18) (3.57) (0.57)
NET ASSET VALUE, END OF PERIOD $ 22.36 $19.37 $ 18.76 $ 18.36
Total Return (Excludes
Sales Charge) 30.95% 22.52% 24.32% 19.50%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 95,647 $43,370 $ 28,052 $ 11,178
Ratio of expenses to
average net assets 1.25% 1.25% 1.25% 1.23%
Ratio of net investment
income to average net assets (0.60)% 0.92% 0.90% 0.12%
Ratio of expenses to average
net assets* 1.35% 1.34% 1.36% 1.33%
Ratio of net investment
income (loss) to average
net assets* (0.70)% 0.83% 0.79% 0.02%
Portfolio turnover(a) 158.43% 301.35% 435.30% 132.63%
</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.
-101-
<PAGE> 104
ONE GROUP MID CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.82 $ 18.43 $ 18.14 $ 15.85
Investment Activities:
Net investment income (loss) (0.15) 0.11 0.09 (0.07)
Net realized and unrealized gains
(losses) from investments 5.35 3.44 3.69 2.90
Total from Investment Activities 5.20 3.55 3.78 2.83
Distributions:
From net investment income -- (0.22) (0.07) --
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)
NET ASSET VALUE, END OF PERIOD $ 21.44 $ 18.82 $ 18.43 $ 18.14
Total Return (Excludes Sales Charge) 29.79% 21.73% 23.53% 18.47%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $90,930 $ 37,409 $ 12,910 $ 2,787
Ratio of expenses to average net assets 2.00% 2.00% 2.00% 1.98%
Ratio of net investment income
(loss) to average net assets (1.35)% 0.01% 0.15% (0.63)%
Ratio of expenses to average net assets* 2.00% 2.00% 2.01% 1.98%
Ratio of net investment income
(loss) to average net assets* (1.35)% 0.01% 0.14% (0.63)%
Portfolio turnover(a) 158.43% 301.35% 435.30% 132.63%
</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.
-102-
<PAGE> 105
ONE GROUP MID CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 1998(a)
- ------- ---- -------
<S> <C> <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:
From 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.
-103-
<PAGE> 106
ONE GROUP MID CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
CLASS I 1999 1998 1997 1996 1995
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 19.46 $ 18.81 $ 18.40 $ 15.96
Investment Activities:
Net investment income (0.07) 0.25 0.20 0.06
Net realized and unrealized
gains (losses) from investments 5.70 3.59 3.83 2.98
Total from Investment Activities 5.63 3.84 4.03 3.04
Distributions:
From net investment income -- (0.25) (0.20) (0.06)
In excess of net investment -- (0.02) -- --
From net realized gains (2.58) (2.92) (3.42) (0.54)
Total Distributions (2.58) (3.19) (3.62) (0.60)
NET ASSET VALUE, END OF PERIOD $ 22.51 $ 19.46 $ 18.81 $ 18.40
Total Return 31.11% 22.75% 24.63% 19.75%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $868,901 $623,911 $532,525 $413,518
Ratio of expenses to
average net assets 1.00% 0.99% 1.00% 0.98%
Ratio of net investment
income to average net assets (0.36)% 1.32% 1.15% 0.38%
Ratio of expenses to average
net assets* 1.00% 0.99% 1.01% 0.98%
Ratio of net investment income
to average net assets* (0.36)% 1.32% 1.14% 0.38%
Portfolio turnover(a) 158.43% 301.35% 435.30% 132.63%
</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
-104-
<PAGE> 107
ONE GROUP MID CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.68 $ 14.72 $ 13.22 $ 11.91
Investment Activities:
Net INVESTMENT income 0.10 0.19 0.25 0.24
Net realized and unrealized
gains from investments 3.99 2.57 2.28 1.59
Total from Investment Activities 4.09 2.76 2.53 1.83
Distributions:
From net investment income (0.10) (0.19) (0.25) (0.24)
From net realized gains (2.74) (1.61) (0.78) (0.26)
In excess of net realized gains -- -- -- (0.02)
Total Distributions (2.84) (1.80) (1.03) (0.52)
Net Asset Value, End of Period $ 16.93 $ 15.68 $ 14.72 $ 13.22
Total Return (Excludes Sales Charge) 27.90% 20.21% 19.80% 15.43%
Ratios/Supplementary Data:
Net Assets at end of period (000) $29,443 $ 23,909 $20,838 $13,560
Ratio of expenses to average
net assets 1.21% 1.23% 1.24% 1.26%
Ratio of net investment income
to average net assets 0.60% 1.26% 1.79% 1.99%
Ratio of expenses to
average net assets* 1.31% 1.31% 1.35% 1.36%
Ratio of net investment
income to average net assets* 0.50% 1.18% 1.68% 1.89%
Portfolio turnover (a) 106.41% 92.66% 90.55% 176.66%
</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.
-105-
<PAGE> 108
ONE GROUP MID CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.64 $ 14.69 $ 13.19 $ 11.90
Investment Activities:
Net investment income (0.02) 0.08 0.15 0.15
Net realized and unrealized
gains (losses) from investments 3.98 2.55 2.27 1.58
Total from Investment Activities 3.96 2.63 2.42 1.73
Distributions:
From net investment income (0.01) (0.07) (0.14) (0.15)
In excess of net investment income -- -- -- (0.01)
From net realized gains (2.74) (1.61) (0.78) (0.28)
Total Distributions (2.75) (1.68) (0.92) (0.44)
NET ASSET VALUE, END OF PERIOD $ 16.85 $ 15.64 $ 14.69 $ 13.19
Total Return (Excludes Sales Charge) 26.97% 19.19% 18.93% 14.92%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $30,094 $20,499 $16,305 $11,222
Ratio of expenses to average net assets 1.96% 1.98% 1.99% 2.00%
Ratio of net investment income
to average net assets (0.15)% 0.51% 1.04% 1.26%
Ratio of expenses to average
net assets* 1.96% 1.98% 2.00% 2.01%
Ratio of net investment income
to average net assets* (0.15)% 0.51% 1.03% 1.25%
Portfolio turnover (a) 106.41% 92.66% 90.55% 176.66%
</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.
-106-
<PAGE> 109
ONE GROUP MID CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 15.65 $ 14.69 $ 13.20 $ 11.90
Investment Activities:
Net investment income 0.14 0.22 0.29 0.28
Net realized and unrealized
gains from investments 3.99 2.57 2.27 1.57
Total from Investment Activities 4.13 2.79 2.56 1.85
Distributions:
From net investment income (0.14) (0.22) (0.29) (0.27)
From net realized gains (2.74) (1.61) (0.78) (0.28)
Total Distributions (2.88) (1.83) (1.07) (0.55)
NET ASSET VALUE, END OF PERIOD $ 16.90 $ 15.65 $ 14.69 $ 13.20
Total Return 28.27% 20.56% 20.10% 16.03%
Net Assets at end
of period (000) $634,672 $562,302 $522,474 $448,530
Ratio of expenses to
average net assets 0.96% 0.98% 0.99% 1.00%
Ratio of net investment
income to average
net assets 0.85% 1.52% 2.04% 2.21%
average net assets* 0.96% 0.98% 1.00% 1.10%
Ratio of net investment
income to average net assets* 0.85% 1.52% 2.03% 2.11%
Portfolio turnover(a) 106.41% 92.66% 90.55% 176.66%
</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.
-107-
<PAGE> 110
ONE GROUP DIVERSIFIED MID CAP FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS A JUNE 30, 1999 1998 1997 1996 1995
- ------- --------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 20.89 $ 17.61 $ 15.15 $ 13.34
Investment Activities:
Net investment income (0.07) (0.03) 0.02 0.06
Net realized and
unrealized gains
(losses) from
investments and futures 0.92 4.87 3.74 2.57
Total from Investment
Activities 0.85 4.84 3.76 2.63
Distributions:
Net investment income -- -- (0.02) (0.06)
In excess of net
investment income -- -- -- --
From net realized gain (1.39) (1.56) (1.28) (0.76)
In excess of net
realized gain -- -- -- --
Return of capital -- -- -- --
Total Distributions (1.39) (1.56) (1.30) (0.82)
NET ASSET VALUE, END
OF PERIOD $ 20.35 $ 20.89 $ 17.61 $ 15.15
Sales Charge) 4.30% 27.56% 24.91% 19.88%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 278,279 $ 234,020 $ 91,516 $ 71,858
Ratio of expenses
to average net assets 1.15% 1.09% 0.93% 0.89%
Ratio of net investment
income to average
net assets (0.33)% (0.20)% 0.12% 0.37%
Ratio of expenses
to average net assets* -- -- -- --
Portfolio turnover 26.89% 37.54%(a) 34.87% 53.55%
</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) The
Portfolio Turnover Percentage was adjusted for Redemptions In-Kind for
shareholders that took place during 1997. The Fund's securities sales were
appropriately reduced by the fair market value of the Redemptions In-Kind. The
Redemptions In-Kind were approximately $4 million.
-108-
<PAGE> 111
ONE GROUP(R) DIVERSIFIED MID CAP FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS B JUNE 30, 1999 1998 1997 1996(a)
- -------- ------------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.58 $ 9.57 $ 10.00
Investment Activities:
Net investment income (0.09) (0.03) --
Net realized and unrealized
gains (losses) from investments
and futures 0.45 2.60 0.79
Total from Investment Activities 0.36 2.57 0.79
Distributions:
Net investment income -- -- (0.01)
In excess of net investment income -- -- --
From net realized gain (1.39) (1.56) (1.21)
In excess of net realized gain -- -- --
Return of capital -- -- --
Total Distributions (1.39) (1.56) (1.22)
NET ASSET VALUE, END OF PERIOD $ 9.55 $ 10.58 $ 9.57
Total Return (Excludes Sales Charge) 3.79% 27.10% 7.94%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 7,108 $ 3,965 $ 154
Ratio of expenses to average
net assets 1.90% 1.84% 1.81%(d)
Ratio of net investment
income to average net assets (1.08)% (0.95)% (0.59)%(d)
Ratio of expenses to average
net assets* -- -- --
Portfolio turnover 26.89% 37.54%(b) 34.87%
</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) For
the period September 23, 1996 (commencement of operations) through December 31,
1996. (b) The Portfolio Turnover Percentage was adjusted for Redemptions In-Kind
for shareholders that took place during 1997. The Fund's securities sales were
appropriately reduced by the fair market value of the Redemptions In-Kind. The
Redemptions In-Kind were approximately $4 million. (c) Not Annualized. (d)
Annualized.
-109-
<PAGE> 112
ONE GROUP DIVERSIFIED MID CAP FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS I JUNE 30, 1999 1998 1997 1996 1995
- -------- --------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 20.93 $ 17.61 $ 15.15 $ 13.34
Investment Activities:
Net investment income (0.01) 0.01 0.04 0.06
Net realized and
unrealized gains (losses)
from investments and futures 0.93 4.88 3.74 2.57
Total from Investment Activities 0.92 4.89 3.78 2.63
Distributions:
Net investment income -- (0.01) (0.04) (0.06)
In excess of net
investment income -- -- -- --
From net realized gain (1.39) (1.56) (1.28) (0.76)
In excess of net
realized gain -- -- -- --
Return of capital -- -- -- --
Total Distributions (1.39) (1.57) (1.32) (0.82)
NET ASSET VALUE, END OF PERIOD $ 20.46 $ 20.93 $ 17.61 $ 15.15
Total Return 4.61% 27.91% 25.03% 19.88%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $987,256 $803,670 $677,608 $579,094
Ratio of expenses
to average net assets 0.90% 0.84% 0.81% 0.89%
Ratio of net investment
income to average
net assets (0.08)% 0.05% 0.24% 0.37%
Ratio of expenses to
average net assets* -- -- -- --
Portfolio turnover 26.89% 37.54%(a) 34.87% 53.55%
</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) The
Portfolio Turnover Percentage was adjusted for Redemptions In-Kind for
shareholders that took place during 1997. The Fund's securities sales were
appropriately reduced by the fair market value of the Redemptions In-Kind. The
Redemptions In-Kind were approximately $4 million
-110-
<PAGE> 113
ONE GROUP LARGE CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 19.92 $ 15.83 $ 13.83 $ 11.62
Investment Activities:
Net investment income (0.01) 0.08 0.14 0.17
Net realized and
unrealized gains
(losses) from
investments 6.30 4.88 2.17 3.10
Total from Investment
Activities 4.96 2.31 3.27 (0.12)
Distributions:
From net investment
income -- (0.07) (0.14) (0.16)
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)
NET ASSET VALUE,
END OF PERIOD $ 23.32 $ 19.92 $ 15.83 $ 13.83
Total Return (Excludes
Sales Charge) 35.43% 32.57% 16.85% 21.52%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $199,052 $125,910 $ 75,114 $ 27,428
Ratio of expenses
to average
net assets 1.24% 1.24% 1.21% 1.26%
Ratio of net investment
income to average
net assets (0.04)% 0.44% 0.95% 1.49%
Ratio of expenses to
average net assets* 1.34% 1.32% 1.34% 1.36%
Ratio of net investment
income to average
net assets* (0.14)% 0.36% 0.82% 1.39%
Portfolio turnover (a) 117.34% 57.17% 35.51% 14.22%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-111-
<PAGE> 114
ONE GROUP LARGE CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 19.61 $ 15.63 $ 13.63 $ 11.47
Investment Activities:
Net investment income (loss) (0.10) (0.04) 0.05 0.09
Net realized and unrealized
gains (losses) from
investments 6.10 4.82 2.17 3.06
Total from Investment Activities 6.00 4.78 2.22 3.15
Distributions:
From net investment income -- -- (0.05) (0.09)
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)
NET ASSET VALUE, END OF PERIOD $ 22.73 $ 19.61 $ 15.63 $ 13.63
Total Return (Excludes
Sales Charge) 34.39% 31.74% 16.41% 20.65%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $280,563 $132,268 $ 56,261 $ 6,918
Ratio of expenses to
average net assets 1.99% 2.00% 1.96% 2.01%
Ratio of net investment
income (loss) to
average net assets (0.80)% (0.33)% 0.20% 0.74%
Ratio of expenses to
average net assets* 1.99% 2.00% 1.99% 2.01%
Ratio of net investment
income (loss) to
average net assets* (0.80)% (0.33)% 0.17% 0.74%
Portfolio turnover (a) 117.34% 57.17% 35.51% 14.22%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-112-
<PAGE> 115
ONE GROUP LARGE CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 1998(a)
- -------- ---- -------
<S> <C> <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:
From 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.
-113-
<PAGE> 116
ONE GROUP LARGE CAP GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 19.44 $ 15.44 $ 13.47 $ 11.32
Investment Activities:
Net investment income 0.04 0.12 0.18 0.20
Net realized and
unrealized gains
(losses) from investments 6.13 4.79 2.14 3.04
Total from Investment
Activities 6.17 4.91 2.32 3.24
Distributions:
From net investment income (0.02) (0.11) (0.18) (0.20)
From net realized gains (2.88) (0.80) (0.17) (0.89)
Total Distributions (2.90) (0.91) (0.35) (1.09)
NET ASSET VALUE,
END OF PERIOD $ 22.71 $ 19.44 $ 15.44 $ 13.47
Total Return 35.75% 33.11% 17.36% 21.85%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $1,510,521 $1,142,864 $745,986 $531,595
Ratio of expenses
to average net assets 0.99% 0.99% 0.96% 1.00%
Ratio of net investment
income to average
net assets 0.21% 0.69% 1.20% 1.72%
Ratio of expenses to
average net assets* 0.99% 0.99% 0.99% 1.00%
Ratio of net investment
income to average
net assets* 0.21% 0.69% 1.17% 1.72%
Portfolio turnover (a) 117.34% 57.17% 35.51% 14.22%
</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)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-114-
<PAGE> 117
ONE GROUP LARGE CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $14.85 $ 12.87 $ 12.89 $ 11.34
INVESTMENT ACTIVITIES:
NET INVESTMENT INCOME 0.18 0.23 0.27 0.28
NET REALIZED AND UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS 2.84 3.04 1.22 2.20
TOTAL FROM INVESTMENT ACTIVITIES 3.02 3.27 1.49 2.48
DISTRIBUTIONS:
FROM NET INVESTMENT INCOME (0.17) (0.23) (0.27) (0.27)
IN EXCESS OF NET INVESTMENT
INCOME -- -- -- (0.02)
FROM NET REALIZED GAINS (0.93) (1.06) (1.24) (0.64)
TOTAL DISTRIBUTIONS (1.10) (1.29) (1.51) (0.93)
NET ASSET VALUE, END OF PERIOD $ 16.77 $ 14.85 $ 12.87 $ 12.89
TOTAL RETURN (EXCLUDES
SALES CHARGE) 21.14% 26.90% 12.40% 22.64%
RATIOS/SUPPLEMENTARY DATA:
NET ASSETS AT END OF
PERIOD (000) $15,699 $14,832 $ 9,380 $ 3,481
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 1.20% 1.22% 1.22% 1.25%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS 1.10% 1.72% 2.18% 2.52%
RATIO OF EXPENSES TO
AVERAGE NET ASSETS* 1.30% 1.31% 1.33% 1.37%
RATIO OF NET INVESTMENT
INCOME TO AVERAGE
NET ASSETS* 1.00% 1.63% 2.07% 2.41%
PORTFOLIO TURNOVER(a) 47.35% 77.05% 186.84% 203.13%
</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.
-115-
<PAGE> 118
ONE GROUP LARGE CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.95 $ 12.98 $ 12.96 $ 11.41
Investment Activities:
Net investment income 0.07 0.14 0.18 0.17
Net realized and
unrealized gains
(losses) from
investments 2.84 3.04 1.26 2.19
Total from Investment
Activities 2.91 3.18 1.44 2.36
Distributions:
From net investment
income (0.09) (0.15) (0.18) (0.17)
From net realized gains (0.93) (1.06) (1.24) (0.64)
Total Distributions (1.02) (1.21) (1.42) (0.81)
NET ASSET VALUE, END
OF PERIOD $ 16.84 $ 14.95 $ 12.98 $ 12.96
Total Return (Excludes
Sales Charge) 20.18% 25.86% 11.95% 22.28%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 17,154 $ 9,288 $ 4,135 $ 861
Ratio of expenses to
average net assets 1.95% 1.97% 1.97% 2.00%
Ratio of net investment
income to average
net assets 0.33% 0.96% 1.43% 1.74%
Ratio of expenses to
average net assets* 1.95% 1.97% 1.98% 2.01%
Ratio of net investment
income to average
net assets* 0.33% 0.96% 1.42% 1.72%
Portfolio turnover(a) 47.35% 77.05% 186.84% 203.13%
</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.
-116-
<PAGE> 119
ONE GROUP LARGE CAP VALUE FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.79 $ 12.83 $ 12.87 $ 11.34
Investment Activities:
Net investment income 0.21 0.27 0.31 0.31
Net realized and
unrealized gains
(losses) from
investments 2.84 3.01 1.20 2.18
Total from Investment
Activities 3.05 3.28 1.51 2.49
Distributions:
From net investment income (0.21) (0.26) (0.31) (0.32)
From net realized gains (0.93) (1.06) (1.24) (0.64)
Total Distributions (1.14) (1.32) (1.55) (0.96)
NET ASSET VALUE, END OF PERIOD $ 16.70 $ 14.79 $ 12.83 $ 12.87
Total Return 21.46% 27.10% 12.71% 23.42%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $792,649 $686,156 $584,527 $365,376
Ratio of expenses to
average net assets 0.95% 0.97% 0.97% 1.00%)
Ratio of net investment
income to average net assets 1.34% 1.99% 2.43% 2.74%
Ratio of expenses to
average net assets* 0.95% 0.97% 0.98% 1.01%
Ratio of net investment
income to average
net assets* 1.34% 1.99% 2.42% 2.73%
Portfolio turnover (a) 47.35% 77.05% 186.84% 203.13%
</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
-117-
<PAGE> 120
ONE GROUP EQUITY INCOME FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.90 $ 17.64 $ 15.11 $ 13.20
Investment Activities:
Net investment income 0.25 0.31 0.38 0.03
Net realized and unrealized
gains from investments 4.37 4.87 3.20 2.29
Total from Investment Activities 4.62 5.18 3.58 2.32
Distributions:
From net investment income (0.25) (0.31) (0.35) (0.03)
In excess of net
investment income -- -- -- (0.01)
From net realized gains (2.23) (0.61) (0.70) (0.37)
Total Distributions (2.48) (0.92) (1.05) (0.41)
NET ASSET VALUE, END OF PERIOD $ 24.04 $ 21.90 $ 17.64 $ 15.11
Total Return (Excludes
Sales Charge) 22.91% 30.39% 24.23% 20.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $117,682 $ 78,976 $ 44,284 $ 13,793
Ratio of expenses
to average net assets 1.25% 1.25% 1.23% 1.26%
Ratio of net investment
income to average net assets 1.15% 1.65% 2.19% 2.61%
Ratio of expenses to
average net assets* 1.35% 1.34% 1.36% 1.36%
Ratio of net investment
income to average net assets* 1.05% 1.56% 2.06% 2.51%
Portfolio turnover(a) 14.64% 28.18% 14.92% 4.03%
</TABLE>
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-118-
<PAGE> 121
ONE GROUP EQUITY INCOME FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.95 $ 17.68 $ 15.14 $ 13.23
Investment Activities:
Net investment income 0.26 0.17 0.24 0.26
Net realized and
unrealized gains
(losses) from
investments 4.36 4.89 3.23 2.29
Total from Investment
Activities 4.62 5.06 3.47 2.55
Distributions:
From net investment
income (0.26) (0.18) (0.23) (0.25)
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)
NET ASSET VALUE,
END OF PERIOD $ 24.08 $ 21.95 $ 17.68 $ 15.14
Total Return (Excludes
Sales Charge) 21.97% 29.48% 23.41% 19.91%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 165,813 $ 79,518 $ 29,169 $ 3,468
Ratio of expenses
to average
net assets 1.99% 2.00% 1.98% 2.01%
Ratio of net investment
income to average
net assets 0.39% 0.89% 1.44% 1.88%
Ratio of expenses
to average net
assets* 1.99% 2.00% 2.01% 2.02%
Ratio of net investment
income to average
net assets* 0.39% 0.89% 1.41% 1.87%
Portfolio turnover(a) 14.64% 28.18% 14.92% 4.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (a)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-119-
<PAGE> 122
ONE GROUP EQUITY INCOME FUND Financial Highlights
<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:
From net investment income (0.07)
From 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.
-120-
<PAGE> 123
ONE GROUP EQUITY INCOME FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.93 $ 17.65 $ 15.13 $ 13.22
Net investment income 0.32 0.36 0.40 0.40
Net realized and
unrealized gains
from investments 4.36 4.89 3.22 2.28
Total from Investment
Activities 4.68 5.25 3.62 2.68
From net investment income (0.31) (0.36) (0.40) (0.40)
From net realized gains (2.23) (0.61) (0.70) (0.37)
Total Distributions (2.54) (0.97) (1.10) (0.77)
NET ASSET VALUE,
END OF PERIOD $ 24.07 $ 21.93 $ 17.65 $ 15.13
Total Return 23.18% 30.90% 24.53% 21.04%
Net Assets at end
of period (000) $ 691,878 $ 649,007 $ 321,827 $ 170,919
Ratio of expenses
to average net assets 1.00% 1.00% 0.98% 1.01%
Ratio of net investment
income to average
net assets 1.39% 1.91% 2.44% 2.85%
Ratio of expenses to
average net assets* 1.00% 1.00% 1.01% 1.01%
Ratio of net investment
income to average
net assets* 1.39% 1.91% 2.41% 2.85%
Portfolio turnover(a) 14.64% 28.18% 14.92% 4.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-121-
<PAGE> 124
ONE GROUP DIVERSIFIED EQUITY FUND Financial Highlights
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
JUNE 30, ENDED
---------- JUNE 30,
CLASS A 1999 1998 1997 1996(a) 1995
- ------- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.50 $ 10.39 $ 11.15 $ 9.00
Investment Activities:
Net investment income 0.05 0.09 0.94 0.12
Net realized and
unrealized gains
(losses) from
investments 3.36 2.83 0.08 2.44
Total from Investment
Activities 3.41 2.92 1.02 2.56
Distributions:
From net investment
income (0.05) (0.08) (0.94) (0.12)
In excess of net
investment income -- -- (0.01) --
From net realized gains (1.36) (1.73) (0.83) (0.29)
Total Distributions (1.41) (1.81) (1.78) (0.41)
NET ASSET VALUE,
END OF PERIOD $ 13.50 $ 11.50 $ 10.39 $ 11.15
Total Return
(Excludes Sales Charge) 31.96% 31.53% 10.40%(b) 29.57%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $80,500 $ 47,306 $ 5,984 $ 217,978
Ratio of expenses
to average net assets 1.23% 1.23% 0.97%(c) 0.95%
Ratio of net investment
income to average
net assets 0.40% 0.83% 0.85%(c) 1.25%
Ratio of expenses
to average net assets* 1.33% 1.34% 1.05%(c) 0.95%
Ratio of net investment
income to average
net assets* 0.30% 0.72% 0.77%(c) 1.25%
Portfolio turnover (d) 62.37% 113.17% 65.21% 77.00%
</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 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.
-122-
<PAGE> 125
ONE GROUP DIVERSIFIED EQUITY FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
JUNE 30, ENDED YEAR ENDED
---------- JUNE 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(a) 1995
- ------- ---- ---- ---- ------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.47 $ 10.39 $ 11.16 $ 9.01
Investment Activities:
Net investment income (0.02) 0.01 0.91 0.05
Net realized and unrealized
gains (losses) from investments 3.31 2.82 0.07 2.46
Total from Investment Activities 3.29 2.83 0.98 2.51
Distributions:
From net investment income -- (0.02) (0.91) (0.07)
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)
NET ASSET VALUE, END OF PERIOD $ 13.40 $ 11.47 $ 10.39 $ 11.16
Total Return (Excludes Sales Charge) 30.89% 30.52% 9.96%(b) 28.74%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 25,501 $ 10,517 $ 4,673 $ 2,923
Ratio of expenses to average
net assets 1.98% 1.98% 1.86%(c) 1.70%
Ratio of net investment
income to average net assets (0.35)% 0.07% 0.13%(c) 0.38%
Ratio of expenses to average
net assets* 1.98% 2.00% 1.94%(c) 1.70%
Ratio of net investment
income to average net assets* (0.35)% 0.05% 0.05%(c) 0.38%
Portfolio turnover (d) 62.37% 113.17% 65.21% 77.00%
</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 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) 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.
-123-
<PAGE> 126
ONE GROUP DIVERSIFIED EQUITY FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 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:
From net investment income (0.01)
From 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.
-124-
<PAGE> 127
ONE GROUP DIVERSIFIED EQUITY FUND Financial Highlights
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996
------------------- TO JUNE 30,
CLASS I 1999 1998 1997 1996(a)
- ------- ---- ---- ---- -------
<S> <C> <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 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.
-125-
<PAGE> 128
ONE GROUP BALANCED FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.00 $ 11.72 $ 10.74 $ 9.65
Investment Activities:
Net investment income 0.36 0.39 0.37 0.35
Net realized and unrealized
gains (losses) from investments 2.24 1.83 1.16 1.13
Total from Investment Activities 2.60 2.22 1.53 1.48
Distributions:
From net investment income (0.36) (0.40) (0.37) (0.34)
In excess of net investment
income -- -- -- (0.01)
From net realized gains (1.43) (0.54) (0.18) (0.04)
Total Distributions (1.79) (0.94) (0.55) (0.39)
NET ASSET VALUE, END OF PERIOD $ 13.81 $ 13.00 $ 11.72 $ 10.74
Total Return (Excludes
Sales Charge) 21.71% 19.85% 14.48% 15.76%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 50,456 $ 31,379 $ 17,849 $ 4,745
Ratio of expenses to average
net assets 1.10% 1.05% 1.19% 1.31%
Ratio of net investment
income to average net assets 2.77% 3.30% 3.33% 3.57%
net assets* 1.38% 1.34% 1.54% 1.66%
Ratio of net investment
income to average net assets* 2.49% 3.01% 2.98% 3.22%
Portfolio turnover (a) 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-126-
<PAGE> 129
ONE GROUP BALANCED FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 13.04 $ 11.76 $ 10.76 $ 9.67
Investment Activities:
Net investment income 0.26 0.30 0.28 0.27
Net realized and unrealized
gains (losses) from investments 2.26 1.83 1.18 1.14
Total from Investment Activities 2.52 2.13 1.46 1.41
Distributions:
From net investment income (0.26) (0.31) (0.28) (0.27)
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)
NET ASSET VALUE, END OF PERIOD $ 13.87 $ 13.04 $ 11.76 $ 10.76
Total Return (Excludes Sales Charge) 20.95% 18.90% 13.79% 14.90%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 114,957 $ 43,900 $ 18,575 $ 3,019
Ratio of expenses to average
net assets 1.85% 1.81% 1.94% 2.07%
Ratio of net investment
income to average net assets 2.01% 2.54% 2.58% 2.77%
Ratio of expenses to average
net assets* 2.03% 2.01% 2.19% 2.31%
Ratio of net investment
income to average net assets* 1.83% 2.34% 2.33% 2.52%
Portfolio turnover (a) 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-127-
<PAGE> 130
ONE GROUP BALANCED FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.98 $ 11.71 $ 10.73 $ 9.64
Investment Activities:
Net investment income 0.40 0.43 0.41 0.38
Net realized and unrealized
gains (losses) from investments 2.24 1.81 1.16 1.12
Total from Investment Activities 2.64 2.24 1.57 1.50
Distributions:
From net investment income (0.39) (0.43) (0.41) (0.37)
From net realized gains (1.43) (0.54) (0.18) (0.04)
Total Distributions (1.82) (0.97) (0.59) (0.41)
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.98 $ 11.71 $ 10.73
Total Return 22.12% 20.16% 14.87% 16.06%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $105,243 $94,971 $50,323 $ 37,658
Ratio of expenses to
average net assets 0.85% 0.80% 0.94% 1.06%
Ratio of net investment
income to average net assets 3.03% 3.55% 3.58% 3.72%
Ratio of expenses to average
net assets* 1.03% 1.00% 1.19% 1.31%
Ratio of net investment income
to average net assets* 2.85% 3.35% 3.33% 3.47%
Portfolio turnover (a) 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated:
(a)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-128-
<PAGE> 131
ONE GROUP EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.81 $ 16.67 $ 14.02 $ 11.59
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29
Net realized and
unrealized gains (losses)
from investments 5.97 5.28 3.18 2.58
Total from Investment
Activities 6.23 5.57 3.45 2.87
Distributions:
From net investment income (0.26) (0.28) (0.27) (0.28)
In excess of net
investment income -- -- (0.01) --
From net realized gains (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.89) (0.43) (0.80) (0.44)
NET ASSET VALUE, END
OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02
Total Return (Excludes
Sales Charge) 29.33% 33.94% 25.16% 25.43%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 218,518 $ 98,338 $ 32,186 $ 3,003
Ratio of expenses
to average net assets 0.60% 0.55% 0.55% 0.56%
Ratio of net investment
income to average
net assets 1.11% 1.59% 1.93% 2.38%
Ratio of expenses to
average net assets* 0.96% 0.95% 0.94% 1.01%
Ratio of net investment
income to average
net assets* 0.75% 1.19% 1.54% 1.94%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
</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)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-129-
<PAGE> 132
ONE GROUP(R) EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
NET ASSET VALUE,
<S> <C> <C> <C> <C> <C>
BEGINNING OF PERIOD $ 21.80 $ 16.68 $ 14.05 $ 11.61
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18
Net realized and
unrealized gains
(losses) from
investments 5.97 5.27 3.16 2.61
Total from Investment
Activities 6.07 5.43 3.32 2.79
Distributions:
From net investment
income (0.11) (0.16) (0.16) (0.19)
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)
NET ASSET VALUE,
END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05
Total Return (Excludes
Sales Charge) 28.47% 32.93% 24.05% 24.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of period
(000) $351,624 $ 168,699 $ 38,538 $ 1,408
Ratio of expenses
to average net assets 1.35% 1.30% 1.30% 1.34%
Ratio of net investment
income to average
net assets 0.36% 0.83% 1.18% 1.60%
Ratio of expenses
to average net assets* 1.61% 1.61% 1.59% 1.67%
Ratio of net investment
income to average
net assets* 0.10% 0.52% 0.89% 1.27%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
130
<PAGE> 133
ONE GROUP(R) EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 1998(a)
- ------- ---- -------
<S> <C> <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:
From net investment income (0.08)
From 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.
131
<PAGE> 134
ONE GROUP EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32
Net realized and
unrealized gains
(losses) from
investments 5.98 5.27 3.16 2.59
Total from Investment
Activities 6.31 5.62 3.49 2.91
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29)
In excess of net
investment income -- -- (0.01) (0.02)
From net realized gains (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.95) (0.48) (0.86) (0.47)
NET ASSET VALUE, END
OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03
Total Return 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $671,422 $480,819 $321,058 $234,895
Ratio of expenses
to average net assets 0.35% 0.30% 0.30% 0.33%
Ratio of net investment
income to average
net assets 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to
average net assets* 0.62% 0.61% 0.59% 0.66%
Ratio of net investment
income to average
net assets* 1.10% 1.56% 1.89% 2.24%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
</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) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares
issued.
132
<PAGE> 135
ONE GROUP SMALL CAP GROWTH FUND Financial Highlights
ONE GROUP INTERNATIONAL EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.92 $ 15.16 $ 13.92 $ 13.49
- ------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.19 0.11 0.14 0.12
- ----------------------------------------------------------------------------------------------------------
Net realized and
unrealized gains
from investments 1.31 2.03 1.40 0.43
- ------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 1.50 2.14 1.54 0.55
- ------------------------------------------------------------------------------------------------------------
Distributions:
- ------------------------------------------------------------------------------------------------------------
From net investment income -- (0.13) (0.16) (0.08)
In excess of net
investment income -- (0.10) (0.02) --
- ------------------------------------------------------------------------------------------------------------
From net realized gains (0.43) (0.15) (0.12) (0.04)
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.38) (0.30) (0.12)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 17.99 $ 16.92 $ 15.16 $ 13.92
- ------------------------------------------------------------------------------------------------------------
Total Return (Excludes
Sales Charge) 9.34% 14.31% 11.20% 3.87%
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 24,060 $ 12,562 $ 10,789 $ 5,028
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses
to average net assets 1.13% 1.11% 1.22% 1.28%
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 1.11% 0.73% 0.79% 1.09%
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to
- ------------------------------------------------------------------------------------------------------------
average net assets* 1.23% 1.19% 1.35% 1.38%
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets* 1.01% 0.65% 0.66% 0.99%
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover(a) 9.90% 9.61% 6.28% 4.67%
- ------------------------------------------------------------------------------------------------------------
</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) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
133
<PAGE> 136
ONE GROUP INTERNATIONAL EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.44 $ 14.79 $ 13.73 $ 13.40
Investment Activities:
Net investment income 0.08 0.09 0.03 0.03
Net realized and
unrealized gains
from investments 1.24 1.86 1.32 0.41
Total from Investment
Activities 1.32 1.95 1.35 0.44
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
Total Return (Excludes
Sales Charge) 8.48% 13.37% 9.97% 3.17%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 13,307 $ 10,033 $ 5,856 $ 3,687
Ratio of expenses
to average net assets 1.88% 1.86% 1.97% 2.04%
Ratio of net investment
income to average
net assets 0.26% 0.08% 0.04% 0.25%
Ratio of expenses to
average net assets* 1.88% 1.86% 2.00% 2.04%
Ratio of net investment
income to average
net assets* 0.26% 0.08% 0.01% 0.25%
Portfolio turnover(a) 9.90% 9.61% 6.28% 4.67%
</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)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-134-
<PAGE> 137
ONE GROUP INTERNATIONAL EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 1998(a)
- ------- ---- -------
<S> <C> <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:
From 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.
-135-
<PAGE> 138
ONE GROUP INTERNATIONAL EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.89 $ 15.17 $ 13.93 $ 13.46
Investment Activities:
Net investment income 0.21 0.15 0.11 0.13
Net realized and
unrealized gains
from investments 1.32 2.02 1.43 0.46
Total from Investment
Activities 1.53 2.17 1.54 0.59
Distributions:
From net investment income (0.02) (0.17) (0.16) (0.08)
In excess of net
investment income -- (0.13) (0.02) --
From net realized gains (0.43) (0.15) (0.12) (0.04)
In excess of net
realized gains -- -- -- --
Total Distributions (0.45) (0.45) (0.30) (0.12)
NET ASSET VALUE,
END OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93
Total Return 9.54% 14.64% 11.22% 4.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 586,741 $ 449,949 $ 347,790 $218,299
Ratio of expenses
to average net assets 0.88% 0.86% 0.97% 1.04%
Ratio of net investment
income to average
net assets 1.29% 1.00% 1.04% 1.25%
Ratio of expenses to
average net assets* 0.88% 0.86% 1.00% 1.04%
Ratio of net investment
income to average
net assets* 1.29% 1.00% 1.01% 1.25%
Portfolio turnover(a) 9.90% 9.61% 6.28% 4.67%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
-136-
<PAGE> 139
<TABLE>
<CAPTION>
YEAR ENDED MARCH 26,
JUNE 30, 1996 TO
---------- JUNE 30,
CLASS I 1999 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 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.
-137-
<PAGE> 140
ONE GROUP DIVERSIFIED INTERNATIONAL FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS A JUNE 30, 1999 1998 1997 1996 1995
- ------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.11 $ 11.77 $ 11.05 $ 10.01
Investment Activities:
Net investment income 0.11 0.07 0.10 0.10
Net realized and unrealized
gains (losses) from
investments and futures 1.84 0.36 0.72 1.05
Total from Investment Activities 1.95 0.43 0.82 1.15
Distributions:
Net investment income (0.13) (0.09) (0.10) (0.11)
In excess of net
investment income (0.04) -- -- --
From net realized gain -- -- -- --
In excess of net realized
gain -- -- -- --
Total Distributions (0.17) (0.09) (0.10) (0.11)
Net Asset Value, End of Period $ 13.89 $ 12.11 $ 11.77 $ 11.05
Total Return (Excludes
Sales Charge) 16.12% 3.69% 7.50% 11.47%
Ratios/Supplementary Data:
Net Assets at end
of period (000) $ 44,232 $ 26,703 $ 10,836 $ 988
Ratio of expenses to
average net assets 1.34 % 1.35% 1.23% 1.16%
Ratio of net investment
income to average
net assets 0.79% 0.80% 0.88% 1.43%
Ratio of expenses to
average net assets* -- -- -- 1.24%
Portfolio turnover 8.50% 3.56%(a) 6.37% 2.09%
</TABLE>
*During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.(a) The
Portfolio Turnover Percentage was adjusted for a conversion of assets from First
National Bank of Chicago's International Equity Common Trust Fund, which took
place during 1997. The Fund's securities purchases were approximately reduced by
the fair market value of the asset transfer approximating $20 million.
-138-
<PAGE> 141
ONE GROUP DIVERSIFIED INTERNATIONAL FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS B JUNE 30, 1999 1998 1997 1996(a)
- ------- ------------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.37 $ 11.08 $ 10.84
Investment Activities:
Net investment income 0.01 0.01 0.04
Net realized and unrealized
gains (losses) from investments
and futures 1.74 0.34 0.24
Total from Investment Activities 1.75 0.35 0.28
Distributions:
Net investment income (0.08) (0.06) (0.04)
In excess of net investment income (0.03) -- --
From net realized gain -- -- --
In excess of net realized gain -- -- --
Total Distributions (0.11) (0.06) (0.04)
NET ASSET VALUE, END OF PERIOD $ 13.01 $ 11.37 $ 11.08
Total Return (Excludes Sales Charge) 15.43% 2.90% 2.62%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 2,545 $ 1,763 $ 1,131
Ratio of expenses to average
net assets 2.09% 2.10% 2.05%(d)
Ratio of net investment income
to average net assets 0.04% 0.05% 0.75%(d)
Ratio of expenses to average
net assets* -- -- --
Portfolio turnover 8.50% 3.56%(b) 6.37%(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) For
the period August 24, 1996 (initial offering date of class B shares) through
December 31, 1996. (b) The Portfolio Turnover Percentage was adjusted for a
conversion of assets from First National Bank of Chicago's International Equity
Common Trust Fund, which took place during 1997. The Fund's securities purchases
were appropriately reduced by the fair market value of the asset transfer
approximating $20 million. (c) Not Annualized. (d) Annualized.
-139-
<PAGE> 142
ONE GROUP DIVERSIFIED INTERNATIONAL FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS I JUNE 30, 1999 1998 1997 1996 1995
- ------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.14 $ 11.79 $ 11.05 $ 10.01
Investment Activities:
Net investment income 0.14 0.10 0.11 0.10
Net realized and unrealized
gains (losses) from
investments and futures 1.85 0.37 0.74 1.05
Total from Investment Activities 1.99 0.47 0.85 1.15
Distributions:
Net investment income (0.15) (0.12) (0.11) (0.11)
In excess of net
investment income (0.05) -- -- --
From net realized gain -- -- -- --
In excess of net realized gain -- -- -- --
Total Distributions (0.20) (0.12) (0.11) (0.11)
NET ASSET VALUE, END OF PERIOD $ 13.93 $ 12.14 $ 11.79 $ 11.05
Total Return 16.43% 3.98% 7.90% 11.47%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $569,522 $487,986 $389,997 $106,300
Ratio of expenses to
average net assets 1.09% 1.10% 1.10% 1.16%
Ratio of net investment
income to average net assets 1.04% 1.05% 1.01% 1.43%
Ratio of expenses to
average net assets* -- -- -- 1.24%
Portfolio turnover 8.50% 3.56%(a) 6.37% 2.09%
</TABLE>
*During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.(a) The
Portfolio Turnover Percentage was adjusted for a conversion of assets from First
National Bank of Chicago's International Equity Common Trust Fund, which took
place during 1997. The Fund's securities purchases were appropriately reduced by
the fair market value of the asset transfer approximating $20 million.
-140-
<PAGE> 143
ONE GROUP MARKET INDEX EXPANSION FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
JUNE 30, DECEMBER 31,
CLASS A 1999 1998(a)
- ------- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment Activities:
Net investment income --
Net realized and unrealized gains (losses)
from investments and futures 0.95
Total from Investment Activities 0.95
Distributions:
Net investment income (0.01)
In excess of net investment income --
From net realized gain (0.41)
In excess of net realized gain --
Total Distributions (0.42)
NET ASSET VALUE, END OF PERIOD $10.53
Total Return (Excludes Sales Charge) 9.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 30
Ratio of expenses to average net assets 0.77%(c)
Ratio of net investment income to average net assets 0.47%(c)
Ratio of expenses to average net assets* 1.24%(c)
Portfolio turnover 20.18%
</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) For
the period July 31, 1998 (commencement of operations) through December 31, 1998.
(b) Not Annualized. (c) Annualized.
-141-
<PAGE> 144
ONE GROUP MARKET INDEX EXPANSION FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
JUNE 30, DECEMBER 31,
CLASS B 1999 1998(a)
- ------- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Investment Activities:
Net investment income (0.02)
Net realized and unrealized gains (losses)
from investments and futures 0.92
Total from Investment Activities 0.90
Distributions:
Net investment income --
In excess of net investment income --
From net realized gain (0.41)
In excess of net realized gain --
Total Distributions (0.41)
NET ASSET VALUE, END OF PERIOD $ 10.49
Total Return (Excludes Sales Charge) 9.85%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 0(c)
Ratio of expenses to average net assets 1.87%(d)
Ratio of net investment income to average net assets (0.59)%(d)
Ratio of expenses to average net assets* 2.14%(d)
Portfolio turnover 20.18%
</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) For
the period July 31, 1998 (commencement of operations) through December 31, 1998.
(b) Not Annualized. (c) Amount is less than $1,000. (d) Annualized.
-142-
<PAGE> 145
ONE GROUP MARKET INDEX EXPANSION FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
JUNE 30, DECEMBER 31,
CLASS I 1999 1998(a)
- ------- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment Activities:
Net investment income 0.03
Net realized and unrealized gains (losses)
from investments and futures 0.93
Total from Investment Activities 0.96
Distributions:
Net investment income (0.03)
In excess of net investment income --
From net realized gain (0.41)
In excess of net realized gain --
Total Distributions (0.44)
NET ASSET VALUE, END OF PERIOD $ 10.52
Total Return 9.91%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $27,483
Ratio of expenses to average net assets 0.56%(c)
Ratio of net investment income to average net assets 0.75%(c)
Ratio of expenses to average net assets* 1.12%(c)
Portfolio turnover 20.18%
</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) For
the period July 31, 1998 (commencement of operations) through December 31, 1998.
(b) Not Annualized. (c) Annualized.
-143-
<PAGE> 146
APPENDIX A
----------
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>
ONE GROUP SMALL CAP GROWTH FUND 1
ONE GROUP SMALL CAP VALUE FUND 2
ONE GROUP MID CAP GROWTH FUND 3
ONE GROUP MID CAP VALUE FUND 4
ONE GROUP DIVERSIFIED MID CAP FUND 5
ONE GROUP LARGE CAP GROWTH FUND 6
ONE GROUP LARGE CAP VALUE FUND 7
ONE GROUP EQUITY INCOME FUND 8
ONE GROUP DIVERSIFIED EQUITY FUND 9
ONE GROUP BALANCED FUND 10
ONE GROUP EQUITY INDEX FUND 11
ONE GROUP MARKET EXPANSION INDEX FUND 12
ONE GROUP INTERNATIONAL EQUITY INDEX FUND 13
ONE GROUP DIVERSIFIED INTERNATIONAL FUND 14
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, 1-14 Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-14 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities 1-14 Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments 1-14 Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by 1-14 Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. 1-14 Market
REPURCHASE AGREEMENTS: The purchase of a security 1-14 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security 1-14 Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
</TABLE>
-144-
<PAGE> 147
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
SECURITIES LENDING: The lending of up to 33 1/3% 1-14 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-14 Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other 1-14 Market
mutual funds, including One Group money market
funds and shares of other money market funds 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 1-14 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer 1-14 Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing 1-14 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled 1-14 Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time 1-14 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-14 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, 1-10, 12-14 Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts and Global Depository
Receipts, and American Depository Securities.
</TABLE>
-145-
<PAGE> 148
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
RESTRICTED SECURITIES: Securities not registered 1-14 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1-14 Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with 1,2, 5-7, 9-14 Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that 1-14 Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations 2,5,10,14 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and 6,10 Market
non-convertible debt securities. Credit
DEMAND FEATURES: Securities that are subject to 10 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by 2, 5, 10, 14 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
MORTGAGE DOLLAR ROLLS: A transaction in which 2, 5, 10, 14 Pre-payment
a Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans 10 Pre-payment
in a mortgage pool which provide for a fixed Market
initial mortgage interest rate for a specified Credit
period of time, after which the rate may be Regulatory
subject to periodic adjustments.
SWAPS, CAPS AND FLOORS: A Fund may enter into 1-14 Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a 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>
-146-
<PAGE> 149
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
NEW FINANCIAL PRODUCTS: New options and futures 1-14 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued 1-14 Market
by agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign Foreign Investment
currency exchange rates, interest rates, or
one or more other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a 10 Market
state or political subdivision to obtain Credit
funds for various public purposes. Municipal Political
securities include private activity bonds and Tax
industrial development bonds, as well as General Regulatory
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 2, 5, 10, Credit
of supranational agencies who are chartered to 13, 14 Foreign Investment
promote economic development and are supported
by various governments and governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Funds 13,14 Management
may engage in transactions in financial futures Liquidity
and related options, which are generally described Credit
above. The Funds will enter into these transactions Market
in foreign currencies for hedging purposes only. Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual 13,14 Management
agreement to purchase or sell one specified currency Liquidity
for another currency at a specified future date Credit
and price. The Funds will enter into forward Market
foreign exchange transactions for hedging Political
purposes only. Leverage
Foreign Investment
INDEX SHARES: 1,3,4 Market
Ownership interests in unit 6-12
investment trusts and other pooled investment
vehicles that hold a portfolio of securities or stocks designed to track the
price performance and dividend yield of a particular index such as Standard &
Poor's Depository Receipts ("SPDRs") and Nasdaq 100's.
</TABLE>
-147-
<PAGE> 150
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
ZERO COUPON DEBT SECURITIES: Bonds and other 2, 5, 10, 14 Credit
debt that pay no interest, but are issued Market
at a discount from their value at maturity. Zero-Coupon
When held to maturity, their entire return equals the difference between their
issue price and their maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero coupon debt securities which 10 Credit
convert on a specified date to interest bearing debt securities. Market
Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class mortgage 10 Pre-payment
securities usually structured with two classes of shares that Market
receive different proportions of the interest and principal from a Credit
pool of mortgage-backed obligations. These Funds only invest in Regulatory
Stripped Mortgage-Backed Securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged variable rate debt 10 Market
instruments with interest rates that reset in the opposite direction Leverage
from the market rate of interest to which the inverse floater is indexed. Credit
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or assignments 10 Credit
of all or a portion of loans to corporations or to governments, Political
including governments of the less developed countries ("LDC's"). Liquidity
Foreign Investment
Market
FIXED RATE MORTGAGE LOANS: Investment in fixed rate mortgage loans 10 Credit
or mortgage pools which bear simple interest at fixed annual rates Pre-payment
and have short to long term final maturities. Regulatory
Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term funding 10 Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts ("GIC's") and Market
Bank Investment Contracts ("BIC's").
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - 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.
-148-
<PAGE> 151
- - 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.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
-149-
<PAGE> 152
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
-150-
<PAGE> 153
ONE GROUP(R) MUTUAL FUNDS
BOND FUNDS COMBINED PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) ULTRA SHORT-TERM BOND FUND
ONE GROUP(R) SHORT-TERM BOND FUND
ONE GROUP(R) INTERMEDIATE BOND FUND
ONE GROUP(R) BOND FUND
ONE GROUP(R) INCOME BOND FUND
ONE GROUP(R) GOVERNMENT BOND FUND
ONE GROUP(R) TREASURY & AGENCY FUND
ONE GROUP(R) HIGH YIELD BOND FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 154
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Ultra Short-Term Bond Fund
One Group Short-Term Bond Fund
One Group Intermediate Bond Fund
One Group Bond Fund
One Group Income Bond Fund
One Group Government Bond Fund
One Group Treasury & Agency Fund
One Group High Yield Bond Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
The Sub-Advisor
Advisory Fees
The Fund Managers
Banc One High Yield Partners-Prior Performance of Pacholder Associates, Inc.
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 155
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP ULTRA SHORT-TERM BOND FUND
WHAT IS THE GOAL OF THE ULTRA SHORT-TERM BOND FUND?
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.
WHAT ARE THE ULTRA SHORT-TERM BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in all types of debt securities, including money market
instruments and taxable and tax-exempt municipal securities. As part of its main
investment strategy, the Fund invests in adjustable rate mortgage pass-through
securities and other securities representing an interest in or secured by
mortgages with periodic interest rate resets. Banc One Investment Advisors
selects securities for the Fund by analyzing both individual securities and
different market sectors. Banc One Investment Advisors looks for market sectors
and individual securities that it believes will perform well over time. Banc One
Investment Advisors selects individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate risk, credit risk, and
structural risk. For more information about the Ultra Short-Term Bond Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE ULTRA SHORT-TERM BOND FUND?
The main risks of investing in the Ultra Short-Term Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Ultra Short-Term Bond Fund and its yield will change
every day in response to interest rates and other market conditions. You may
lose money if you invest in the Ultra Short-Term Bond Fund. For additional
information on risk, please read "Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect a security's liquidity and make it
difficult for the Fund to sell the security.
3
<PAGE> 156
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect return on investment and yield
of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The Fund may also
fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments. The Fund also uses investment management
hedging techniques that may expose the Fund to additional risks.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ULTRA SHORT-TERM BOND FUND PERFORMED?
By showing the variability of the Ultra Short-Term Bond Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE ULTRA SHORT-TERM
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Total Return Chart shows changes in the Fund's performance from
year to year. Total returns assume reinvestment of dividends and distributions.
The returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP ULTRA SHORT-TERM BOND FUND
- --------------------------------------------------------------------------------
Total Return (per calendar year)(1)
Class I Shares
[graph]
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
1.94% 6.98% 6.14% 6.64% 5.33%
- --------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.05%.
BEST QUARTER: 2.02% 2Q 1997; WORST QUARTER: 0.60% 4Q 1994
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
4
<PAGE> 157
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ----------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 3/10/93)
---------------
<S> <C> <C> <C>
One Group Ultra Short-Term Bond Fund 1.22% 4.85% 4.37%
Lehman Brothers 1 -3 Year Government
Index(1)
Merrill Lynch 1 Year Treasury Bill Index(2)
Lipper ARM and Ultra Short-Term Combined Index(3)
- ----------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
- ----------------------------------------------------------------------------------------
One Group Ultra Short-Term Bond Fund 1.02% 4.98% 4.54%
Lehman Brothers 1 -3 Year Government
Index(1)
Merrill Lynch 1 Year Treasury Bill Index(2)
Lipper ARM and Ultra Short-Term Combined Index(3)
- ----------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/2/93)
---------------
- ----------------------------------------------------------------------------------------
One Group Ultra Short-Term Bond Fund 4.66% 5.71% 5.10%
Lehman Brothers 1 -3 Year Government
Index(1)
Merrill Lynch 1 Year Treasury Bill Index(2)
Lipper ARM and Ultra Short-Term Combined Index(3)
- ----------------------------------------------------------------------------------------
</TABLE>
1. The Lehman Brothers 1-3 Year Government Index is comprised of U.S.
Government and agency securities with maturities of one to three years.
2. The Merrill Lynch 1 Year Treasury Bill Index is an unmanaged index which
reflects the total return of a hypothetical Treasury bill with a discount rate
equal to the average rate established at each of the auctions during a given
year. Investors are unable to purchase the index directly, although they can
invest in the underlying securities. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. By contrast, the performance of the Fund reflects
the deduction of these value-added services as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges on
Class B and Class C Shares.
3. The Lipper ARM and Ultra Short-Term Combined Index consists of an average of
the Lipper ARM index that invests at least 65% of its assets in adjustable rate
mortgage securities or other securities collateralized by or representing an
interest in mortgages and the Lipper Short-Term Index that invests at least 65%
of its assets in investment grade debt issues or better, and maintains a
portfolio dollar-weighted average maturities between 91 days and 365 days.
5
<PAGE> 158
FEES AND EXPENSES OF THE ULTRA SHORT-TERM BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) 3.00% none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales Charge none(2) 3.00% 1.00% none
(Load)(as a percentage of original
purchase price of redemption
proceeds, as applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .55% .55% .55% .55%
Distribution [and/or Service] .35% 1.00% 1.00% none
(12b-1) Fees
Other Expenses .24% .24% .24% .24%
1.14% 1.79% 1.79% .79%
Total Annual Fund Operating
Expenses
(.39%) (.54%) (.54%) (.29%)
Fee Waiver and/or Expense
Reimbursement(4)
.75% 1.25% 1.25% .50%
Net Expenses
- --------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .75% for Class A shares, 1.25% for Class B shares, 1.25 %
for Class C shares, and .50% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
6
<PAGE> 159
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at the redemption redemption at the
end of each end of each
period period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 374 $ 127 $ 427 $ 127 $ 227 $ 51
3 Years $ 614 $ 511 $ 711 $ 511 $ 511 $223
5 Years $ 872 $ 919 $ 919 $ 919 $ 919 $410
10 Years $1,611 $1,732 $1,732 $2,061 $2,061 $951
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $413
Class B (no redemption) $182
Class B (with redemption) $482
Class C (no redemption) $182
Class C (with redemption) $282
Class I $ 81
2. Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
7
<PAGE> 160
ONE GROUP SHORT-TERM BOND FUND
WHAT IS THE GOAL OF THE SHORT-TERM BOND FUND?
The Fund seeks current income consistent with preservation of capital through
investment in high- and medium-grade fixed income securities.
WHAT ARE THE SHORT-TERM BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in debt securities with short to intermediate remaining
maturities. These include mortgage-backed and asset-backed securities. Banc One
Investment Advisors selects securities for the Fund by analyzing both individual
securities and different market sectors. Banc One Investment Advisors looks for
market sectors and individual securities that it believes will perform well over
time. Banc One Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an evaluation of interest rate
risk, credit risk, and structural risk. For more information about the
Short-Term Bond Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE SHORT-TERM BOND FUND?
The main risks of investing in the Short-Term Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Short-Term Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Short-Term Bond Fund. For additional information on risk, please read
"Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect a security's liquidity and make it
difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect return on investment and yield
of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The Fund may also
fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
8
<PAGE> 161
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE SHORT-TERM BOND FUND PERFORMED?
By showing the variability of the Short-Term Bond Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE SHORT-TERM BOND FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP SHORT-TERM BOND FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS 1 SHARES
[GRAPH]
1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
13.43% 6.03% 6.84% -0.33% 11.85% 4.31% 6.29% 6.80%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.22%.
BEST QUARTER: 4.43% 4Q 1991; WORST QUARTER: -.86% 1Q 1994
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
9
<PAGE> 162
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
1.32% 5.29% 5.22%
One Group Short-Term Bond Fund
Lehman Brothers 1 -3 Year Government
Index(1)
Lipper Short US Government Bond Funds
Index(2)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
1.05% 5.43% 4.62%
One Group Short-Term Bond Fund
Lehman Brothers 1 -3 Year Government
Index(1)
Lipper Short US Government Bond Funds
Index(2)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 9/4/90)
--------------
One Group Short-Term Bond Fund 4.67% 5.78% 6.76%
Lehman Brothers 1 -3 Year Government
Index(1)
Lipper Short US Government Bond Funds
Index(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
1. The Lehman Brothers 1-3 Year Government Index is an unmanaged index comprised
of US Government and agency securities with maturities of one to three years.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction of
these value-added services as well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales charges on Class B Shares.
2. The Lipper Short US Government Bond Funds Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
10
<PAGE> 163
FEES AND EXPENSES OF THE SHORT-TERM BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 3.00% none none none
(Load) Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales Charge none(2) 3.00% 1.00% none
(Load)(as a percentage of original
purchase price of redemption
proceeds, as applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or Service] .35% 1.00% 1.00% none
(12b-1) Fees
Other Expenses .21% .21% .21% .21%
1.16% 1.81% 1.81% .81%
Total Annual Fund Operating
Expenses
(.36%) (.51%) (.51%) (.26%)
Fee Waiver and/or Expense
Reimbursement(4)
.80% 1.30% 1.30% .55%
Net Expenses
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .80% for Class A shares, 1.30% for Class B shares, 1.30%
for Class C shares, and .55% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
11
<PAGE> 164
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at the redemption redemption at the
end of each end of each
period period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 379 $ 132 $ 432 $ 132 $ 232 $ 56
3 Years $ 623 $ 520 $ 720 $ 520 $ 520 $233
5 Years $ 885 $ 932 $ 932 $ 932 $ 932 $424
10 Years $1,636 $1,756 $1,756 $2,085 $2,085 $977
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $415
Class B (no redemption) $184
Class B (with redemption) $484
Class C (no redemption) $184
Class C (with redemption) $284
Class I $ 83
2. Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
12
<PAGE> 165
ONE GROUP INTERMEDIATE BOND FUND
WHAT IS THE GOAL OF THE INTERMEDIATE BOND FUND?
The Fund seeks current income consistent with the preservation of capital by
investing in high and medium-grade fixed income securities with intermediate
maturities.
WHAT ARE THE INTERMEDIATE BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in debt securities of all types, including bonds, notes,
U.S. government obligations, and taxable and tax-exempt municipal securities
with intermediate maturities. These include mortgage-backed and asset-backed
securities. Banc One Investment Advisors selects securities for the Fund by
analyzing both individual securities and different market sectors. Banc One
Investment Advisors looks for market sectors and individual securities that it
believes will perform well over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward analysis that includes an
evaluation of interest rate risk, credit risk, and structural risk. For more
information about the Intermediate Bond Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INTERMEDIATE BOND FUND?
The main risks of investing in the Intermediate Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Intermediate Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Intermediate Bond Fund. For additional information on risk, please read
"Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect a security's liquidity and make it
difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset-backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect return on investment and yield
of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a
13
<PAGE> 166
lower yield. The Fund may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE INTERMEDIATE BOND FUND PERFORMED?
By showing the variability of the Intermediate Bond Fund's performance from year
to year, the chart and table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INTERMEDIATE BOND FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP INTERMEDIATE BOND FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.86% 9.24% 14.78% 6.06% 8.40% -6.30% 19.47% 5.74% 8.38% 7.59%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was - 0.08%. The Intermediate Bond Fund commenced operations on June 1,
1991 subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust fund
had been registered, its return may have been lower. One Group Intermediate Bond
Fund merged with the Pegasus Intermediate Bond Fund on March 22, 1999. For
financial reporting purposes, the Pegasus Fund was considered the accounting
survivor. Therefore, all performance information for One Group Intermediate Bond
Fund for periods prior to March 22, 1999 reflects the performance of the Pegasus
Fund.
BEST QUARTER: 6.10% 2Q 1995; WORST QUARTER: - 2.32% 1Q 1994
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. 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 for more than one year tend to
14
<PAGE> 167
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(1)
(through June 30, 1999)
- ---------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE (SINCE
- ------- ------ ------- -------- 12/31/83)(4)
------------
<S> <C> <C> <C> <C>
One Group Intermediate Bond Fund -.91% 6.39% 6.99% 8.12%
Lehman Brothers Intermediate Government/ 4.19% 7.38% 7.86%
Corporate Bond Index(2)
Lipper Short Intermediate US Government
Bond Index(3)
- ---------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE (SINCE
- ------- ------ ------- -------- 12/31/83)(4)
------------
One Group Intermediate Bond Fund -1.97% 6.69% 7.29% 8.32%
Lehman Brothers Intermediate Government/ 4.19% 7.38% 7.86%
Corporate Bond Index(2)
Lipper Short Intermediate US Government
Bond Index(3)
- ---------------------------------------------------------------------------------------------------
CLASS I(5) 1 YEAR 5 YEARS 10 YEARS LIFE (SINCE
- ------- ------ ------- -------- 12/31/83)(4)
------------
One Group Intermediate Bond Fund 3.97% 7.57% 7.60% 8.52%
Lehman Brothers Intermediate Government/ 4.19% 7.38% 7.86%
Corporate Bond Index(2)
Lipper Short-Intermediate US Government
Bond Index(3)
- ---------------------------------------------------------------------------------------------------
</TABLE>
1. One Group Intermediate Bond Fund merged with the Pegasus Intermediate Bond
Fund on March 22, 1999. For financial reporting purposes, the Pegasus Fund was
considered the accounting survivor. Therefore, all performance information for
One Group Intermediate Bond Fund for periods prior to March 22, 1999 reflects
the performance of the Pegasus Fund.
2. The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index comprised of US Government agency and Treasury securities and
investment grade corporate bonds. Investors are unable to purchase the index
directly, although they can invest in the underlying securities. The performance
of the index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management. By contrast, the performance of the Fund
reflects the deduction of these value-added services as well as the deduction of
sales charges on Class A Shares and applicable contingent deferred sales charges
on Class B Shares.
3. The Lipper Short Intermediate US Government Bond Index consists of the
equally weighted average monthly return of the largest funds within the universe
of all funds in the category.
4. The Intermediate Bond Fund commenced operations on June 1, 1991 subsequent to
the transfer of assets from a common trust fund with materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the performance of the common trust fund
for periods prior to the Fund's commencement of operations as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations, and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may have
been lower.
5. Performance for Class I shares is based on Class A Shares adjusted to reflect
the absence of sales charges.
15
<PAGE> 168
FEES AND EXPENSES OF THE INTERMEDIATE BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) 4.50% none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales Charge none(2) 5.00% 1.00% none
(Load)(as a percentage of original
purchase price of redemption
proceeds, as applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or Service] .35% 1.00% 1.00% none
(12b-1) Fees
Other Expenses .21% .21% .21% .21%
1.16% 1.81% 1.81% .81%
Total Annual Fund Operating
Expenses
(.33%) (.33%) (.33%) (.23%)
Fee Waiver and/or Expense
Reimbursement(4)
.83% 1.48% 1.48% .58%
Net Expenses
- ------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .83% for Class A shares, 1.48% for Class B shares, 1.48%
for Class C shares, and .58% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
16
<PAGE> 169
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at the redemption redemption at the
end of each end of each
period period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 531 $ 151 $ 651 $ 151 $ 251 $ 59
3 Years $ 771 $ 537 $ 837 $ 537 $ 537 $236
5 Years $1,029 $ 949 $1,149 $ 949 $ 949 $427
10 Years $1,767 $1,928 $1,928 $2,100 $2,100 $980
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $563
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $ 83
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
17
<PAGE> 170
ONE GROUP BOND FUND
WHAT IS THE GOAL OF THE BOND FUND?
The Fund seeks to maximize total return by investing primarily in a diversified
portfolio of intermediate and long-term debt securities.
WHAT ARE THE BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in investment grade bonds and debt securities. These
include mortgage-backed and asset-backed securities. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual securities
and different market sectors. Banc One Investment Advisors looks for market
sectors and individual securities that it believes will perform well over time.
Banc One Investment Advisors selects individual securities after performing a
risk/reward analysis that includes an evaluation of interest rate risk, credit
risk, and structural risk. For more information about the Bond Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE BOND FUND?
The main risks of investing in the Bond Fund and the circumstances likely to
adversely affect your investment are described below. The share price of the
Bond Fund and its yield will change every day in response to interest rates and
other market conditions. You may lose money if you invest in the Bond Fund. For
additional information on risk, please read "Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect a security's liquidity and make it
difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset-backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect the return on investment and
yield of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The Fund may also
fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
18
<PAGE> 171
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE BOND FUND PERFORMED?
By showing the variability of the Bond Fund's performance from year to year, the
chart and table below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP BOND FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
13.03% 9.25% 15.67% 6.57% 11.33% -6.91% 23.68% 5.08% 9.92% 8.21%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -.87%. The Bond Fund commenced operations on December 31, 1983
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes the performance of the common
trust fund for periods prior to the Fund's commencement of operations as
adjusted to reflect the expenses associated with the Fund. The common trust fund
was not registered with the SEC and was not subject to the investment
restrictions, limitations, and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower. The above quoted performance data also includes the
performance of the Pegasus Bond Fund for the period prior to the commencement
of operations of the One Group Bond Fund on March 22, 1999. Performance for
Class I shares is based on Class A share performance adjusted to reflect the
absence of sales charges.
BEST QUARTER: 7.61% 2Q 1995; WORST QUARTER: -2.66 1Q 1994
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
19
<PAGE> 172
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A 1 YEAR 5 YEAR 10 YEARS LIFE
- ------- ------ ------ -------- (SINCE 12/31/83)(4)
-------------------
One Group Bond Fund -1.62% 7.28% 7.80% 9.22%
Lehman Brothers Aggregate Index(2) 3.15% 7.83% 8.15%
Lipper Intermediate U.S. Government
Bond Funds Index(3)
- --------------------------------------- ------------------- ------------------ ------------------ -----------------------
CLASS B 1 YEAR 5 YEAR 10 YEARS LIFE
- ------- ------ ------ -------- (SINCE 12/31/83)(4)
-------------------
One Group Bond Fund -2.61% 7.62% 8.11% 9.42%
Lehman Brothers Aggregate Index(2) 3.15% 7.83% 8.15%
Lipper Intermediate U.S. Government
Bond Funds Index(3)
- -------------------------------------------------------------------------------------------------------------------------
CLASS I(5) 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ (SINCE 12/31/83)(4)
-------------------
One Group Bond Fund 3.25% 8.44% 8.38% 9.59%
Lehman Brothers Aggregate
Index(2) 3.15% 7.83% 8.15%
Lipper Intermediate U.S. Government
Bond Funds Index(3)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The above quoted performance data also includes the performance of the
Pegasus Bond Fund for the period prior to the commencement of operations of the
One Group Bond Fund on March 22, 1999. The Fund also offers Class C shares.
Class C shares commenced operations on March 22, 1999 and do not have a full
year of investment returns as of the date of this prospectus.
2. The Lehman Brothers Aggregate Index is an unmanaged index generally
representative of the bond market as a whole. Investors are unable to purchase
the index directly, although they can invest in the underlying securities. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management fees. By contrast, the
performance of the Fund reflects the deduction of these value-added services as
well as the deduction of sales charges on Class A Shares and applicable
contingent deferred sales charges on Class B and Class C Shares.
3. The Lipper Intermediate U.S. Government Bond Funds Index consists of the
equally weighted average monthly return of the largest funds within the
universe of all funds in the category.
4. The Bond Fund commenced operations on December 31, 1983 subsequent to the
transfer of assets from a common trust fund with materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the performance of the common trust fund
for periods prior to the Fund's commencement of operations as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations, and diversification requirements imposed by law on registered
mutual funds. If the common trust fund had been registered, its return may have
been lower.
5. Performance for Class I shares is based on Class A share performance
adjusted to reflect the absence of sales charges.
20
<PAGE> 173
FEES AND EXPENSES OF THE BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
Maximum Sales Charge 4.50% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .21% .21% .21% .21%
1.16% 1.81% 1.81% .81%
Total Annual Fund Operating
Expenses
(.31%) (.31%) (.31%) (.21%)
Fee Waiver and/or Expense
Reimbursement(4)
.85% 1.50% 1.50% .60%
Net Expenses
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .85% for Class A shares, 1.50% for Class B shares, 1.50%
for Class C shares, and .60% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
21
<PAGE> 174
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF EITHER YOU REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
1 Year(1) $ 509 $ 153 $ 653 $ 153 $ 253 $ 61
3 Years $ 677 $ 539 $ 839 $ 539 $ 539 $238
5 Years $ 860 $ 951 $1,151 $ 951 $ 951 $429
10 Years $1,388 $1,930 $1,930 $2,101 $2,101 $982
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[FN]
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $529
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $ 83
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
</FN>
22
<PAGE> 175
ONE GROUP INCOME BOND FUND
WHAT IS THE GOAL OF THE INCOME BOND FUND?
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of high, medium and low grade debt securities.
WHAT ARE THE INCOME BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in investment grade debt securities (or unrated debt
securities that are determined to be of comparable quality by Banc One
Investment Advisors). In addition, the Fund may also invest in convertible
securities, preferred stock, loan participations, and debt securities rated
below investment grade (i.e., junk bonds). (The Fund may not invest more than
30% of its total assets in these securities). The Fund also invests in
mortgage-backed and asset-backed securities. The Fund invests in securities with
short to long maturities. Banc One Investment Advisors selects securities for
the Fund by analyzing both individual securities and different market sectors.
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over time. Banc One Investment Advisors
selects individual securities after performing a risk/reward analysis that
includes an evaluation of interest rate risk, credit risk, and structural risk.
For more information about the Income Bond Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations. A "junk bond" is a debt security that
is rated below investment grade. (Junk bonds also include unrated securities
that Banc One Investment Advisors believes to be of comparable quality to debt
securities that are rated below investment grade). Junk bonds are also called
"high yield bonds" and "non-investment grade 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.) These securities generally offer a higher yield than investment grade
securities, but involve a high degree of risk.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INCOME BOND FUND?
The main risks of investing in the Income Bond Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Income Bond Fund and its yield will change every day in response to interest
rates and other market conditions. You may lose money if you invest in the
Income Bond Fund. For additional information on risk, please read "Investment
Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of a Fund.
Lower credit quality also may affect a security's liquidity and make it
difficult for the Fund to sell the security.
23
<PAGE> 176
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect return on investment and yield
of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The Fund may also
fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
Portfolio Quality. The Fund may invest in securities that are rated in
the lowest investment grade. Issuers of such securities are more
vulnerable to changes in economic conditions than issuers of higher
grade securities. The Fund also may invest in securities that are rated
below investment grade. These securities are considered to be
speculative and may be issued by companies which are highly leveraged,
less creditworthy or financially distressed.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE INCOME BOND FUND PERFORMED?
By showing the variability of the Income Bond Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE INCOME BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
24
<PAGE> 177
INCOME BOND FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C>
- -0.97% 17.51% 3.14% 8.88% 7.77%
1994 1995 1996 1997 1998
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.68%. One Group Income Bond Fund merged with the Pegasus Multi-
Sector Bond Fund on March 22, 1999. For financial reporting purposes, the
Pegasus Fund was the accounting survivor. Therefore, all performance information
for One Group Income Bond Fund for periods prior to March 22, 1999 reflects the
performance of the Pegasus Fund. Performance for Class I shares is based on
Class A shares adjusted to reflect the absence of sales charges.
BEST QUARTER: 5.88% 2Q 1995; WORST QUARTER: -1.63% 1Q 1996
-------------- ---------------
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ -------
(SINCE 3/5/93)
--------------
One Group Income Bond Fund -2.84% 5.89% 4.95%
Lehman Brothers Government/Corporate 2.70% 7.76%
Bond Index(2)
Lipper Intermediate Bond Funds Index(3)
- -------------------------------------------------------------------------------------------------
CLASS B(4) 1 YEAR 5 YEARS LIFE
- ------- ------ -------
(SINCE 3/5/93)(1)
--------------
One Group Income Bond Fund -3.89% 5.91% 5.21%
Lehman Brothers Government/Corporate 2.70% 7.76%
Bond Index(2)
Lipper Intermediate Investment Grade
Bond Funds Index(3)
</TABLE>
25
<PAGE> 178
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CLASS I(1) 1 YEAR 5 YEARS LIFE
------ -------
(SINCE 3/5/93)
-------------
<S> <C> <C> <C>
One Group Income Bond Fund 1.94% 7.15% 5.90%
Lehman Brothers Government/Corporate 4.19% 7.38%
Bond Index(2)
Lipper Intermediate Investment Grade
Bond Funds Index(3)
- ----------------------------------------------------------------------------------------------
</TABLE>
NEED DEFINITIVE INFORMATION ON INDICES
- --------------------------------------
1. One Group Income Bond Fund merged with the Pegasus Multi-Sector Bond Fund on
March 22, 1999. For financial reporting purposes, the Pegasus Fund was the
accounting survivor. Therefore, all performance information for One Group Income
Bond Fund for periods prior to March 22, 1999 reflects the performance of the
Pegasus Fund.
2. The Lehman Brothers Aggregate Bond Index is an unmanaged index comprised of
US Government, mortgage, corporate and asset-backed securities. Investors are
unable to purchase the index directly, although they can invest in the
underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the fund reflects the deduction of
these value-added services as well as the deduction of sales charges on Class A
shares and applicable contingent deferred sales charges on Class B and Class C
shares.
3. The Lipper Intermediate Investment Grade Bond Funds Index consists of the
equally weighted average monthly return of the largest funds within the universe
of all funds in the category.
4. The performance data for Class B shares includes the performance of the Class
A shares of the Pegasus Multi-Sector Bond Fund for the period December 2, 1994
to May 30, 1995, adjusted to reflect the absence of front-end sales charges.
26
<PAGE> 179
FEES AND EXPENSES OF THE INCOME BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
Maximum Sales Charge 4.50% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or
Service] (12b-1) Fees .35% 1.00% 1.00% none
Other Expenses .21% .21% .21% .21%
Total Annual Fund Operating 1.16% 1.81% 1.81% .81%
Expenses
Fee Waiver and/or Expense (.24%) (.24%) (.24%) (.14%)
Reimbursement(4)
.92% 1.57% 1.57% .67%
Net Expenses
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .92% for Class A shares, 1.57% for Class B shares, 1.57%
for Class C shares, and .67% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
27
<PAGE> 180
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
1 Year(1) $ 540 $ 160 $ 660 $ 160 $ 260 $ 68
3 Years $ 779 $ 546 $ 846 $ 546 $ 546 $245
5 Years $1,037 $ 958 $1,158 $ 958 $ 958 $436
10 Years $1,775 $1,936 $1,936 $2,107 $2,107 $989
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $563
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $ 83
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
28
<PAGE> 181
ONE GROUP GOVERNMENT BOND FUND
WHAT IS THE GOAL OF THE GOVERNMENT BOND FUND?
The Fund seeks a high level of current income with liquidity and safety of
principal
WHAT ARE THE GOVERNMENT BOND FUND'S MAIN INVESTMENT STRATEGIES?
The Fund limits its investments to securities issued by the U.S. government and
its agencies and instrumentalities (i.e., government bonds) or related to
securities issued by the U.S. government and its agencies and instrumentalities.
The Fund mainly invests in government bonds with intermediate to long remaining
maturities. These include mortgage-backed securities. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual securities
and different market sectors. Banc One Investment Advisors looks for individual
securities that it believes will perform well over time. The Government Bond
Fund spreads its holdings across various security types within the Government
market sector. Banc One Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an evaluation of interest rate
risk and structural risk. For more information about the Government Bond Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT IS A GOVERNMENT BOND?
A "government bond" is a debt instrument with principal and interest guaranteed
by the U.S. Government and its agencies and instrumentalities, as well as
stripped government securities and mortgage-related and mortgage-backed
securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE GOVERNMENT BOND FUND?
The main risks of investing in the Government Bond Fund and the circumstances
likely to adversely affect your investment are described below. Like all
non-money market mutual funds, the share price of the Government Bond Fund and
its yield will change every day in response market conditions. You may lose
money if you invest in the Government Bond Fund. For additional information on
risk, please read "Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Prepayment and Call Risk. As part of its main investment strategies,
the Fund invests in mortgage-backed securities. The issuers of these
securities and other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes in pre-payment
rates can affect the return on investment and yield of mortgage-backed
securities. When mortgage and other obligations are pre-paid and when
securities are called, the Fund may have to reinvest in securities with
a lower yield. The Fund may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Derivatives generally are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
29
<PAGE> 182
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW GOVERNMENT BOND FUND PERFORMED?
By showing the variability of the Government Bond Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE GOVERNMENT BOND FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP GOVERNMENT BOND FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
- -3.01% 18.11% 2.59% 9.74% 8.23%
1994 1995 1996 1997 1998
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -2.06%.
BEST QUARTER: 5.70% 2Q 1995; WORST QUARTER: -2.29% 1Q 1994
-------------- ----------------
The Average Annual Total Return Table shows how the Fund's average
annual returns for the periods indicated compare to those of a broad measure of
market performance. Average annual total returns for more than one year tend to
smooth out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 3/5/93)
--------------
-2.92% 6.04% 4.50%
One Group Government Bond Fund
Salomon Brothers 3-7 Year Treasury
Index (1)
Lipper US Government Bond Funds Index(2)
- --------------------------------------- ------------------- ------------------ ------------------
</TABLE>
30
<PAGE> 183
<TABLE>
<S> <C> <C> <C>
CLASS B 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 1/14/94)
---------------
One Group Government Bond Fund -3.68% 6.07% 4.70%
Salomon Brothers 3-7 Year Treasury
Index(1)
Lipper US Government Bond Funds Index(2)
- -----------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 2/8/83)
--------------
One Group Government Bond Fund 1.94% 7.27% 5.76%
Salomon Brothers 3-7 Year Treasury
Index(1)
Lipper US Government Bond Funds Index(2)
- -----------------------------------------------------------------------------------------------
</TABLE>
[FN]
1. The Salomon Brothers 3 to 7 Year Treasury Index is an unmanaged index
comprised of US Government agency and Treasury securities and agency
mortgage-backed securities. Investors are unable to purchase the index directly,
although they can invest in the underlying securities. The performance of the
index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management. By contrast, the performance of the Fund reflects
the deduction of these value-added services as well as the deduction of sales
charges on Class A Shares and applicable contingent deferred sales charges on
Class B Shares.
2. The Lipper US Government Bond Funds Index consists of the equally weighted
average monthly return of the largest funds within the universe of all funds in
the category.
</FN>
31
<PAGE> 184
FEES AND EXPENSES OF THE GOVERNMENT BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
none none none none
Redemption Fee
Exchange Fee
none none none none
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from
Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .20% .20% .20% .20%
Total Annual Fund Operating 1.00% 1.65% 1.65% .65%
Expenses
Fee Waiver and/or Expense (.10%) (.10%) (.10%) none
Reimbursement(4)
.90% 1.55% 1.55% .65%
Net Expenses
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55% for Class B shares, 1.55%
for Class C shares, and .65% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
32
<PAGE> 185
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 538 $ 158 $ 658 $ 158 $ 258 $ 66
3 Years $ 745 $ 511 $ 811 $ 511 $ 511 $ 208
5 Years $ 968 $ 888 $1,088 $ 888 $ 888 $ 362
10 Years $1,611 $1,773 $1,773 $1,946 $1,946 $ 810
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $547
Class B (no redemption) $168
Class B (with redemption) $668
Class C (no redemption) $168
Class C (with redemption) $268
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
33
<PAGE> 186
ONE GROUP TREASURY & AGENCY FUND
WHAT IS THE GOAL OF THE TREASURY & AGENCY FUND?
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.
WHAT ARE THE TREASURY & AGENCY FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in U.S. Treasury and other U.S. agency obligations
including fixed income and mortgage-related securities and repurchase
agreements. Mortgage-related securities include government mortgage-backed
securities and adjustable rate mortgage loans known as ARMs. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual securities
and different market sectors. Banc One Investment Advisors looks for individual
securities that it believes will perform well over time. The Treasury and Agency
Fund spreads its holdings across various security types within the Government
market sector and concentrates on issues with short or intermediate remaining
maturities. Banc One Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an evaluation of interest rate
risk, credit risk, and structural risk. For more information about the Treasury
& Agency Fund's investment strategies, please read "More About the Funds" and
"Principal Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY & AGENCY FUND?
The main risks of investing in the Treasury & Agency Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Treasury & Agency Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the Treasury & Agency Fund. For additional information on risk, please read
"Investment Risks."
Interest Rate Risk. The Fund mainly invests in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage-backed and asset backed securities. The
issuers of these securities and other callable securities may be able
to repay principal in advance, especially when interest rates fall.
Changes in pre-payment rates can affect the return on investment and
yield of mortgage and asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The Fund may also
fail to recover premiums paid for the securities, resulting in an
unexpected capital loss.
34
<PAGE> 187
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE TREASURY & AGENCY FUND PERFORMED?
By showing the variability of the Treasury & Agency Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE TREASURY & AGENCY FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
ONE GROUP TREASURY & AGENCY FUND
- -------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
11.01% 8.94% 11.49% 5.89% 5.06% 1.20% 15.22% 3.30% 7.30% 8.00%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was - 1.01%. The Treasury & Agency Fund commenced operations on January
20, 1997 subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for periods prior to the Fund's
commencement of operations as adjusted to reflect the expenses associated with
the Fund. The common trust fund was not registered with the SEC and was not
subject to the investment restrictions, limitations, and diversification
requirements imposed by law on registered mutual funds. If the common trust fund
had been registered, its return may have been lower.
BEST QUARTER: 5.24% 2Q 1995; WORST QUARTER: -1.24% 1Q 1996
--------------- ---------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include sales charges and recurring account fees.
35
<PAGE> 188
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/88)(3)
-------------------
<S> <C> <C> <C> <C>
One Group Treasury & Agency Fund .22% 5.89% 6.33% 6.54%
Lehman Brothers Intermediate Treasury 4.49% 6.85% 7.47%
Index(1)
Lipper Mix(2)
- --------------------------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/88)(3)
-----------------
One Group Treasury & Agency Fund -.03% 6.01% 6.13% 6.29%
Lehman Brothers Intermediate Treasury 4.49% 6.85% 7.47%
Index(1)
Lipper Mix(2)
- --------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 4/30/88)(3)
-----------------
One Group Treasury & Agency Fund 3.54% 6.71% 6.87% 7.04%
Lehman Brothers Intermediate Treasury 4.49% 6.85% 7.47%
Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------ -------------------
</TABLE>
1. The Lehman Brothers Intermediate Treasury Index is an unmanaged index
comprised of US Treasury-issued securities with maturities of one to ten years.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction of
these value-added services as well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales charges on Class B Shares.
2. The Lipper Mix consists of the average monthly returns of the Lipper
Intermediate Treasury Bond Funds Index from April 1988 through December 1989.
Thereafter, the data is from the Lipper Short US Government Bond Funds Index
which corresponds with the initiation of the Index on January 1, 1989. The
Lipper Indices consist of the equally weighted average monthly return of the
largest funds within the universe of all funds in the category.
3. The Treasury & Agency Fund commenced operations on January 20, 1997
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes the performance of the common
trust fund for periods prior to the Fund's commencement of operations as
adjusted to reflect the expenses associated with the Fund. The common trust fund
was not registered with the SEC and was not subject to the investment
restrictions, limitations, and diversification requirements imposed by law on
registered mutual funds. If the common trust fund had been registered, its
return may have been lower.
36
<PAGE> 189
FEES AND EXPENSES OF THE TREASURY & AGENCY FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 3.00% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 3.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .40% .40% .40% .40%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .25% .25% .25% .25%
Total Annual Fund Operating 1.00% 1.65% 1.65% .65%
Expenses
Fee Waiver and/or Expense (.30%) (.45%) (.45%) (.20%)
Reimbursement(4)
Net Expenses .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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .70% for Class A shares, 1.20% for Class B shares, 1.20%
for Class C shares, and .45% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
37
<PAGE> 190
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 369 $ 122 $ 422 $ 122 $ 222 $ 46
3 Years $ 580 $ 476 $ 676 $ 476 $ 476 $ 188
5 Years $ 808 $ 855 $ 855 $ 855 $ 855 $ 342
10 Years $1,461 $1,583 $1,583 $1,917 $1,917 $ 791
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $399
Class B (no redemption) $168
Class B (with redemption) $468
Class C (no redemption) $168
Class C (with redemption) $268
Class I $ 66
2. Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
38
<PAGE> 191
ONE GROUP HIGH YIELD BOND FUND
WHAT IS THE GOAL OF THE 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.
WHAT ARE THE HIGH YIELD BOND FUND'S MAIN INVESTMENT STRATEGIES?
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 investments generally will be rated below
investment grade or unrated. Such securities are also known as junk bonds. The
Fund's sub-advisor, Banc One High Yield Partners, LLC focuses on value in
choosing securities for the Fund by using a "bottom-up" research methodology.
Banc One High Yield Partners monitors investments on an ongoing basis by staying
abreast of positive and negative credit developments and having regular
discussions with senior management of issuers of the Fund's investments. For
more information about the High Yield Bond Fund's investment strategies, please
read "More About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND?
A "bond" is a debt security with a remaining maturity of ninety days or more
issued by the U.S. Government or its agencies and instrumentalities, a
corporation, or a municipality, securities issued or guaranteed by a foreign
government or its agencies and instrumentalities, securities issued or
guaranteed by domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities, stripped government
securities, and zero coupon obligations.
WHAT IS A JUNK BOND?
A "junk bond" is a debt security that is rated below investment grade. (Junk
bonds also include unrated securities that Banc One Investment Advisors or Banc
One High Yield Partners believes to be of comparable quality to debt securities
that are rated below investment grade.) Junk bonds are also called "high yield
bonds" and "non-investment grade 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.) These
securities generally offer a higher yield than investment grade securities, but
involve a high degree of risk.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE HIGH YIELD BOND FUND?
The main risks of investing in the High Yield Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the High Yield Bond Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose money if you invest in
the High Yield Bond Fund. For additional information on risk, please read
"Investment Risks."
Junk Bond Risk. The Fund's main investment strategy is to invest in
securities which are considered to be speculative. These investments
may be issued by companies which are highly leveraged, less
creditworthy or financially distressed. While these investments
generally provide a higher yield than higher rated debt securities, the
high degree of risk involved in these investments can result in
substantial or total losses. The market price of these securities can
change suddenly and unexpectedly. As a result, the Fund is intended as
a long term investment program for investors who are able and willing
to assume a high degree of risk.
Smaller Companies. As part of its high yield strategy, the Funds
invests in debt securities of smaller, newer companies. These
investments may be riskier than investments in larger, more established
companies. Securities of smaller companies tend to be less liquid than
securities of larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry changes. Because
39
<PAGE> 192
economic events have a greater impact on smaller companies, there may
be greater and more frequent changes in the value of their debt
securities. This may cause unexpected decreases in the value of your
investment in the Fund.
Sensitivity to Interest Rates 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 Fund's
investments and the Fund's net asset value may be volatile.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
This Section would normally include a bar chart and average annual total return
table. The High Yield Bond Fund began operations on November 13, 1999 and does
not have a full calendar year of investment returns at the date of this
prospectus.
40
<PAGE> 193
FEES AND EXPENSES OF THE HIGH YIELD BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .75% .75% .75% .75%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .27% .27% .27% .27%
Total Annual Fund Operating 1.37% 2.02% 2.02% 1.02%
Expenses
Fee Waiver and/or Expense (.22%) (.22%) (.22%) (.12%)
Reimbursement(4)
Net Expenses 1.15% 1.80% 1.80% .90%
- -------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.15% for Class A shares, 1.80% for Class B shares, 1.80%
for Class C shares, and .90% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
41
<PAGE> 194
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 562 $ 183 $ 683 $ 183 $ 283 $ 92
3 Years $ 844 $ 612 $ 912 $ 612 $ 612 $ 313
5 Years $1,146 $1,068 $1,268 $1,068 $1,068 $ 552
10 Years $2,004 $2,163 $2,163 $2,330 $2,330 $1,237
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $583
Class B (no redemption) $205
Class B (with redemption) $705
Class C (no redemption) $205
Class C (with redemption) $305
Class I $104
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
42
<PAGE> 195
MORE ABOUT THE FUNDS
Each of the eight funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement of Additional
Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes eight mutual funds with a variety of investment
objectives, including total return, capital appreciation, current income, and
long-term capital growth. Banc One Investment Advisors selects securities for
the Funds by analyzing both individual securities and different industry
sectors. Banc One Investment Advisors looks for sectors and securities that it
believes will perform consistently well over time as measured by total return.
The Portfolios attempt to enhance total return by selecting market sectors that
offer risk/reward advantages based on structural risks and credit trends.
Individual securities that are purchased by the Funds are subject to a
disciplined risk/reward analysis both at the time of purchase and on an ongoing
basis. This analysis includes an evaluation of interest rate risk, credit risk
and risks associated with the structure of the investment (e.g., asset-backed
securities). In addition, the principal investment strategies that are used to
meet each Fund's investment objective are described in Fund Summaries:
Investments, Risk, & Performance in the front of this prospectus. They are also
described below.
----------------------------------------------------------------------
FUNDAMENTAL POLICIES
Each Fund's investment strategy may involve "fundamental policies." A
policy is fundamental if it cannot be changed without the consent of a
majority of the outstanding shares of the Fund.
----------------------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP ULTRA SHORT-TERM BOND FUND. 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 interest rate sensitivity
approximately equal to that of a two year U.S. Treasury security,
although the Fund's actual interest rate sensitivity is expected to be
approximately equal to that of a one year U.S. Treasury security.
- The Fund normally invests at least 80% of its total assets in
debt securities. Debt securities include bonds, notes and
other obligations.
- Up to 20% of the Fund's total assets may be invested in
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 and
asset-backed securities that are issued by non-governmental
entities. Such securities may or may not have private insurer
guarantees of timely payments.
ONE GROUP SHORT-TERM BOND FUND. The Fund invests in all types of debt
securities with short to intermediate maturities.
43
<PAGE> 196
- 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.
- The Fund also may purchase taxable or tax-exempt municipal
securities.
- Up to 20% of the Fund's total assets may be invested in
preferred stock.
- The Fund's effective average weighted maturity ordinarily will
be three years or less taking into account expected
amortization and prepayment of principal on certain
investments.
ONE GROUP INTERMEDIATE BOND FUND. 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 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.
- Up to 20% of the Fund's total assets may be invested in
preferred stock.
- The Fund's average weighted maturity will ordinarily range
between three and ten years, taking into account expected
prepayment of principal on certain investments. The Fund may
shorten that weighted average maturity to as little as one
year for temporary defensive purposes.
----------------------------------------------------------------------
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average of all the current
maturities (that is, the term of the securities) of the individual
securities in a fund. Average maturity is important to bond investors
as an indication of a fund's sensitivity to changes in interest rates.
Usually, the longer the average maturity, the more fluctuation in
share price you can expect. The terms "Intermediate" and "Short-Term"
in a fund's name refer to the average maturity the fund maintains.
----------------------------------------------------------------------
ONE GROUP BOND FUND. The Fund invests in all types of debt securities rated as
investment grade, as well as convertible securities, preferred stock, and loan
participations.
- The Fund invests at least 65% of its total assets in debt
securities of all types with intermediate to long maturities.
- 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.
- The Fund may invest in debt securities that are rated in the
lowest investment grade category.
44
<PAGE> 197
- The Fund's average weighted maturity ordinarily will normally
range between four and twelve years, although the Fund may
shorten its weighted average if deemed appropriate for
temporary defensive purposes.
ONE GROUP INCOME BOND FUND. 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 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.
- 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.
- 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 may also purchase taxable or tax-exempt municipal
securities.
- The Fund's average weighted maturity will ordinarily range
between five and twenty years, although the Fund may shorten
its weighted average maturity to as little as two years if
deemed appropriate for temporary defensive purposes.
ONE GROUP GOVERNMENT BOND FUND. 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.
- 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.
- The Fund's average weighted 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.
ONE GROUP TREASURY & AGENCY FUND. The Fund invests in U.S. Treasury and
other U.S. agency obligations including fixed income securities and
mortgage-related securities. At least 65% of the Fund's total assets
will be invested in Treasury Obligations.
45
<PAGE> 198
----------------------------------------------------------------------
WHAT IS A TREASURY OBLIGATION?
For purposes of the Treasury & Agency Fund, a Treasury
Obligation includes U.S. Treasury bills, notes and other obligations
issued or guaranteed by U.S. government agencies and instrumentalities,
Separately Traded Registered Interest and Principal Securities known as
STRIPS and Coupons Under Book Entry Safekeeping known as CUBES.
----------------------------------------------------------------------
- - The Fund also invests in other government-only investment companies,
including other funds of One Group. The Fund also may invest in
government mortgage-backed securities and government adjustable rate
mortgage loans known as ARMS, as well as engage in securities lending.
- - Normally, the Fund's average weighted maturity will range between two
and five years.
ONE GROUP HIGH YIELD BOND FUND. The Fund's sub-advisor, Banc One High Yield
Partners, LLC focuses on value in choosing securities for the Fund by using a
"bottom-up" research methodology.
----------------------------------------------------------------------
WHAT IS A BOTTOM-UP RESEARCH METHODOLOGY?
When Banc One High Yield Partners uses a bottom-up research
methodology, it looks primarily at individual companies against the
context of broader market factors.
----------------------------------------------------------------------
For each issuer, Banc One High Yield Partners performs an in-depth
analysis of the issuer including, business prospects, management,
capital requirements, capital structure, enterprise value, and security
structure and covenants. In addition, Banc One High Yield Partners
monitors investments on an ongoing basis by staying abreast of positive
and negative credit developments, expediting the review of the Fund's
investments which are considered to be the most risky, and having
regular discussions with senior management of issuers of the Fund's
investments.
- The Fund 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. The Fund may invest up to 100% of the Fund's total
assets in such securities.
- Up to 20% of the Fund's total assets may be invested 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 Fund's average weighted maturity will ordinarily 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.
INVESTMENT RISKS. The risks associated with investing in the Bond Funds are
described below and in Fund Summaries: Investments, Risk, & Performance at the
front of this prospectus.
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
46
<PAGE> 199
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 Funds may invest in securities that may be considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
----------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of underlying
assets or securities.
----------------------------------------------------------------------
LOWER RATED SECURITIES: The Intermediate Bond Fund, the Ultra Short-Term Bond
Fund, the Short-Term Bond Fund, the Bond Fund and the Income Bond Fund may
purchase 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 High Yield Bond Fund and, to a lesser extent, the
Income 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 their 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 often 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
47
<PAGE> 200
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 Statement
of Additional Information). Because investments in lower rated
or unrated securities involve greater investment risk,
achievement of the Funds' investment objectives will be more
dependent on Banc One Investment Advisor's or the
Sub-Advisor's credit analysis than would be the case if the
Funds were investing in higher rated securities. The Funds may
seek to hedge investments through transactions in options,
futures contracts and related options. The Funds also may use
swap agreements to further manage exposure to lower rated
securities.
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.
FOREIGN SECURITIES: Investments in foreign securities involve risks different
from investments in U.S. securities. Because of these risk factors, the share
price of Funds that invest 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. On January 1, 1999, the European Economic and
Monetary Union introduced the "euro." The euro will serve as a common currency
for participating European nations. All stocks issued by corporations located in
those nations will be denominated in Euros. In addition, outstanding shares have
been redenominated in euros. All government bonds issued by participating
nations will be in euros, and outstanding government bonds have been
redenominated in euros. The introduction of the euro presents some
uncertainties, such as the adequacy of newly created accounting, clearing,
settlement and payment systems for the new currency. These uncertainties
surrounding the introduction of the euro could adversely affect the value of the
securities held by the Funds.
For more information about risks associated with the types of investments that
the Bond Funds purchase, please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
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 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;
48
<PAGE> 201
(ii) enter into repurchase agreements; and
(iii) engage in securities lending.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities (other
than equity securities). Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet the rating criteria
described below. Banc One Investment Advisors (or Banc One High Yield Partners
with respect to the High Yield Bond Fund) will look at a security's rating at
the time of investment. If the securities are unrated, Banc One Investment
Advisors (or Banc One High Yield Partners with respect to the High Yield Bond
Fund) must determine that they are of comparable quality to rated securities.
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<PAGE> 202
RATINGS OF THE FUNDS' SECURITIES
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 Bond Fund, the Intermediate Bond Fund, the
Short-Term Bond Fund and the 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 Fund Summaries:
Investments, Risk, & Performance and "High Yield/Junk Bonds" for more
information about the Income Bond Fund and the High Yield Bond Fund.
PREFERRED STOCK
- - The Ultra Short-Term Bond Fund, the Short-Term Bond Fund, the 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 Ultra Short-Term Bond Fund, the Short-Term Bond Fund, Intermediate
Bond Fund, and the Bond Fund may only invest in municipal bonds rated
in any of the four highest rating categories.
- - The Ultra Short-Term Bond Fund, the Intermediate Bond Fund and the Bond
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
Short-Term 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 Short-Term Bond Fund, the Bond Fund and
the Ultra Short-Term Bond 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.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Funds
may invest all or most of their assets in cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Funds from
meeting their investment objectives.
----------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its
agencies and instrumentalities, repurchase agreements (other than
equity repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, and bank money market
deposit accounts.
----------------------------------------------------------------------
50
<PAGE> 203
PORTFOLIO TURNOVER.
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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, 1999 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.
51
<PAGE> 204
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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,
Christmas Eve, 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?
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."
- - When deciding what class of shares to buy, you should consider the
amount of your investment, the length of time you intend to hold the
shares, and the sales charges and expenses applicable to each class of
shares. 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. Sales charges are discussed in the section of this
prospectus entitled SALES CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
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.
52
<PAGE> 205
- - 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 for all Funds except the
Treasury & Agency Fund is $1,000 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum
initial investment for the Treasury & Agency Fund is $50,000
per Fund. The minimum initial investment for an IRA and 403(b)
is $250.
- Subsequent investments for all Funds except the Treasury &
Agency Fund must be at least $25 per Fund. Subsequent
investments for the Treasury & Agency Funds must be at least
$1000.
- You may purchase no more than $249,999 of Class B shares. This
is because Class A shares offer a reduced sales charge on
purchases of $250,000 or more and have lower expenses. The
section of this prospectus entitled WHAT KIND OF SHARES CAN I
BUY? provides information that can help you choose the
appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services
Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
53
<PAGE> 206
8. 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 "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 One Group Fund (ex: One Group Intermediate Bond Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund, but minimum automatic additions are only
$25 per Fund. 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 five (5) calendar days.
- 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
- Your Class B shares automatically convert to Class A shares.
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<PAGE> 207
- Class B shares of the Intermediate Bond fund, the Income Bond Fund,
the Government Bond Fund, the High Yield Bond Fund and the Bond Fund
automatically convert after eight years. Class B shares of the Ultra
Short-Term Bond Fund, the Short-Term Bond Fund, and the Treasury &
Agency Fund automatically convert after six years.
- Conversion periods are measured from the end of the month in which
Class B shares 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 for purposes of calculating the six and eight year time
period.
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SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources. The
tables below show the charges for each class of shares and the percentage your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
If you buy Class A shares of THE SHORT-TERM BOND FUND, THE ULTRA SHORT-TERM BOND
FUND and THE TREASURY & AGENCY FUND, the following table shows the amount of
sales charge you pay and the commissions paid to Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.07%
$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 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 and 0.50% of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company receives notice before you
invest indicating that your Shareholder Servicing Agent is waiving its
commission.
If you buy Class A shares of THE INTERMEDIATE BOND FUND, THE INCOME BOND FUND,
THE GOVERNMENT BOND FUND, THE HIGH YIELD BOND FUND and THE BOND FUND, the
following table shows the amount of sales charge you pay and the commissions
paid to Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES 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 and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
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, THE HIGH YIELD BOND FUND or THE BOND FUND before
the sixth anniversary of purchase, you will be assessed a Contingent Deferred
Sales Charge ("CDSC") according to the following schedule:
56
<PAGE> 209
<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 None
</TABLE>
Or if you redeem Class B shares of THE ULTRA SHORT-TERM BOND FUND, THE
SHORT-TERM 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 price to Shareholder Servicing Agents who sell Class B shares of THE
INTERMEDIATE BOND FUND, THE INCOME BOND FUND, THE GOVERNMENT BOND FUND, THE HIGH
YIELD BOND FUND or THE BOND FUND. Shareholder Servicing Agents who sell Class B
shares of THE ULTRA SHORT-TERM BOND FUND, THE SHORT-TERM 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.
- No CDSC is imposed on share appreciation, nor is a CDSC 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 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 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 One
Group shares you receive in the reorganization.
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12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds 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 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, the High Yield Bond Fund and the Bond Fund and to .75% for
the Short-Term Bond Fund, the Ultra Short-Term Bond 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 .90% of the average daily net assets of the Class B shares
and .90% of the average daily net assets of the Class C shares of the
Intermediate Bond Fund, the Income Bond Fund, the Government Bond
Fund, the High Yield Bond Fund and the Bond Fund, and .75% of the
average daily net assets of the Class B shares and .75% of the
average daily net assets of the Class C shares of the Short-Term Bond
Fund, the Ultra Short-term Bond 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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
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.
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<PAGE> 211
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:
- 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 One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and
subsidiaries.
- 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.
- Accounts which participate in select affinity programs with Bank One
Corporation and its subsidiaries and affiliates.
- Certain 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 One Group Fund 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
One Group Fund, 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 One Group Fund.
8. Bought with assets of 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.
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WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group Fund.
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- 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 One
Group Fund, 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 One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares
of another One Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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?
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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, 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, 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.
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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:
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
participant in 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. 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 The One Group Service
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.
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- State Street Bank and Trust Company may charge you a wire
redemption fee. The current charge is $7.00.
- 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, 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 you begin participating in the Plan. Shares
received from dividend and capital gains reinvestment
are included in calculating the 10%. The applicable
Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually.
Withdrawals in excess of 10% will subject the entire
annual withdrawal to the applicable sales load.
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
- Generally, all redemptions will be for cash. However, if you
redeem shares worth $500,000 or more of a Fund's assets, the
Fund reserves the right to pay part or all of your redemption
proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes
its NAV. This process minimizes the effect of large
redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One
Group has not yet received payment on the check, One Group
will delay forwarding your redemption proceeds until payment
has been collected from your bank.
- Because of the high cost of handling small investments, 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.
- 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 than weekend and holiday
closings).
3. The SEC has permitted a suspension.
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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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SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
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.
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. You also may call The One Group Services Company
at 1-800-480-4111 to make this change.
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 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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
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TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
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-Advisor
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 RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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, call
1-800-480-4111 or visit www.onegroup.com.
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REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
THE SUB-ADVISOR
Banc One High Yield Partners, LLC (8044 Montgomery Road, Suite 382, Cincinnati,
Ohio 45236), is the sub-advisor to the High Yield Bond Fund. Banc One High Yield
Partners was formed in June, 1998 to provide investment advisory services
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. As of June 30, 1999, Banc One
High Yield Partners had approximately $150 million in assets under management.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
<TABLE>
<CAPTION>
ANNUAL RATE AS PERCENTAGE
FUND OF AVERAGE DAILY NET ASSETS
- ---- ---------------------------
<S> <C>
One Group Ultra Short-Term Bond Fund .23%
One Group Short-Term Bond Fund .32%
One Group Intermediate Bond Fund* .38%
One Group Bond Fund* .40%
One Group Income Bond Fund* .39%
One Group Government Bond Fund .45%
One Group Treasury & Agency Fund .20%
</TABLE>
* In March 1999, the Pegasus Funds and One Group Mutual Funds merged. The
investment advisory fee includes fees paid to First Chicago NBD Investment
Management Company, an affiliate of Banc One Investment Advisors, as advisor to
the Pegasus Funds.
The High Yield Bond Fund began operations on November 13, 1998 and does not have
a full fiscal year of advisory fees. Under the investment advisory agreement
with the Fund, Banc One Investment Advisors is entitled to a fee, which is
calculated daily and paid monthly, of .75% of the average daily net assets of
the High Yield Bond Fund.
THE FUND MANAGERS
The Funds are managed by teams of Fund managers, research analysts, and fixed
income traders. The team works together to establish general duration and sector
strategies for the Funds. Each team member makes recommendations about
securities in the Funds. 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.
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<PAGE> 222
Banc One High Yield Partners serves as sub-advisor to the High Yield Bond Fund.
Anthony L. Longi, Jr., an officer of Banc One High Yield Partners, 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.
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. 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 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. THE FOURTH COLUMN SHOWS THE PERFORMANCE OF THE HIGH YIELD BOND FUND FOR
PERIOD FROM NOVEMBER 13, 1998 THROUGH JUNE 30, 1999.
With the exception of 1995 and 1998, 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, 1995, and 1998, 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.
1. Prior to August 21, 1998, Pacholder was responsible for advising the
Pacholder Fund through a partnership known as Pacholder & Company.
HISTORICAL PERFORMANCE(1)
<TABLE>
<CAPTION>
PACHOLDER FUND
---------------------
PACHOLDER FUND TOTAL RETURN ASSUMING
-------------- COMMON STOCK IS NOT
COMMON LEVERAGED THROUGH CS FIRST BOSTON
SHAREHOLDER'S RETURN ISSUANCE OF HIGH YIELD HIGH YIELD
BASED ON NAV(2) PREFERRED STOCK(3) INDEX BONDFUND
-------------------- --------------------- --------------- ----------
<S> <C> <C> <C> <C>
1989(4) NA 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%
1998 -3.19% -0.40% 0.58%
1998(6)
1999 4.25% 4.08% 2.82% (7)
1 YR Average Annual Return -3.72% -0.81% 0.85%
3 YR Average Annual Return 9.48% 8.51% 8.06%
5 YR Average Annual Return 9.36% 8.60% 9.31%
Average Annual Return since
1990(4) 12.37% 11.97% 11.62%
</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.
70
<PAGE> 223
(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, 1998 were audited by the Pacholder Fund's independent
auditor in conjunction with the audit of the Pacholder Fund. As a
closed-end fund, the Pacholder Fund is not required to redeem shares.
As a result, it may be fully invested, hold more illiquid securities,
and have a greater potential for gain or loss than the High Yield Bond
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.
(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.
Beginning in the first quarter of 1990, the Pacholder Fund was managed
with substantially similar investment objectives to the High Yield Bond
Fund.
(5) No preferred stock was issued prior to April 6, 1992.
(6) For the period from November 13, 1998 through December 31, 1998. Return
has not been annualized
(7) For the period from January 1, 1999 through June 30, 1999. Returns have
not been annualized.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's
71
<PAGE> 224
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are incorporated by reference in the Statement of
Additional Information.
ONE GROUP ULTRA SHORT-TERM BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.87 $ 9.78 $ 9.83 $ 9.84
Investment Activities:
Net investment income 0.56 0.58 0.58 0.52
Net realized and unrealized
gains (losses) from
investments and futures (0.01) 0.09 (0.06) (0.06)
Total from Investment Activities 0.55 0.67 0.52 0.46
Distributions:
Net investment income (0.55) (0.58) (0.57) (0.46)
In excess of net investment
income -- -- (0.01) (0.04)
Total Distributions (0.55) (0.58) (0.57) (0.47)
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.78 $ 9.83
Total Return (Excludes Sales
Charge) 5.75% 7.00% 5.42% 4.84% 1.95%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $24,747 $29,643 $ 3,969 $4,631 $19,053
Ratio of expenses to
average net assets 0.54% 0.61% 0.70% 0.86%
Ratio of net investment
income to average net assets 5.66% 5.78% 5.95% 4.88%
Ratio of expenses to average
net asset* 1.15% 1.17% 1.41% 1.36%
Ratio of net investment
income to average net asset* 5.05% 5.22% 5.24% 4.38%
Portfolio Turnover(a) 41.15% 70.36% 67.65% 2.91%
</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.
72
<PAGE> 225
ONE GROUP ULTRA SHORT-TERM BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------
CLASS B 1999 1998 1997 1996 1995
- --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 9.76 $ 9.84 $ 9.86
Investment Activities:
Net investment income 0.52 0.54 0.52 0.47
Net realized and unrealized gains
(losses) from investments and futures (0.01) 0.05 (0.07) (0.04)
Total from Investment Activities 0.51 0.59 0.45 0.43
Distributions:
Net investment income (0.51) (0.54) (0.53) (0.45)
In excess of net investment income -- -- -- --
Total Distributions (0.51) (0.54) (0.53) (0.45)
Net Asset Value, End of Period $ 9.81 $ 9.81 $ 9.76 $ 9.84
Total Return (Excludes Sales Charge) 5.32% 6.22% 4.63% 4.77%
Ratios/Supplementary Data:
Net Assets at end of period (000) $4,531 $2,818 $1,144 $ 160
Ratio of expenses to average net assets 0.99% 1.07% 1.20% 1.31%
Ratio of net investment income to
average net assets 5.23% 5.18% 5.45% 4.91%
Ratio of expenses to average net assets* 1.75% 1.81% 2.06% 1.96%
Ratio of net investment income to
average net assets* 4.47% 4.44% 4.59% 4.26%
Portfolio Turnover(a) 41.15% 70.36% 67.65% 2.91%
</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.
73
<PAGE> 226
ONE GROUP ULTRA SHORT-TERM BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.87 $ 9.79 $ 9.84 $ 9.85
Investment Activities:
Net investment income 0.59 0.62 0.62 0.55
Net realized and unrealized
gains (losses) from
investments and futures (0.01) 0.05 (0.07) (0.05)
Total from Investment Activities 0.58 0.67 0.55 0.50
Distributions:
Net investment income (0.58) (0.59) (0.60) (0.48)
In excess of net investment
income -- -- -- (0.03)
Total Distributions (0.58) (0.59) (0.60) (0.51)
Net Asset Value, End of Period $9.87 $9.87 $9.79 $9.84
Total Return 6.00% 7.14% 5.71% 5.14%
Ratios/Supplementary Data:
Net Assets at end of period
(000) $188,133 $114,413 $57,276 $51,050 $139,593
Ratio of expenses to average
net assets 0.30% 0.35% 0.45% 0.61%
Ratio of net investment income
to average net assets 5.92% 6.02% 6.20% 5.18%
Ratio of expenses to
average net assets* 0.81% 0.81% 1.06% 1.01%
Ratio of net investment
income to average net assets* 5.41% 5.56% 5.59% 4.78%
Portfolio Turnover(a) 41.15% 70.36% 67.65% 2.91%
</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.
74
<PAGE> 227
ONE GROUP SHORT-TERM BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.46 $ 10.41 $ 10.52 $ 10.32
Investment Activities:
Net investment income 0.61 0.61 0.63 0.56
Net realized and unrealized
gains (losses) from
investments and futures 0.04 0.05 (0.13) 0.21
Total from Investment
Activities 0.65 0.66 0.50 0.77
Distributions:
Net investment income (0.61) (0.61) (0.61) (0.56)
In excess of net
investment income -- -- -- (0.01)
Net realized gains -- -- -- --
Total Distributions (0.61) (0.61) (0.61) (0.57)
Net Asset Value, End of Period $ 10.50 $ 10.46 $ 10.41 $ 10.52
Total Return (Excludes
Sales Charge) 6.32% 6.47% 4.86% 7.67%
Ratios/Supplementary Data:
Net Assets at end of
period (000) $15,582 $20,055 $21,343 $ 12,516
Ratio of expenses to
average net assets 0.78% 0.76% 0.76% 0.77%
Ratio of net investment
income to average
net assets 5.77% 5.81% 5.81% 5.57%
Ratio of expenses to
average net assets* 1.17% 1.16% 1.17% 1.20%
Ratio of net investment
income to average
net assets* 5.38% 5.41% 5.40% 5.14%
Portfolio Turnover(a) 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
75
<PAGE> 228
ONE GROUP SHORT-TERM BOND FUND --Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.53 $10.49 $10.60 $10.40
Investment Activities:
Net investment income 0.58 0.55 0.55 0.53
Net realized and unrealized gains
(losses) from investments
and futures 0.04 0.04 (0.10) 0.19
Total from Investment Activities 0.62 0.59 0.45 0.72
Distributions:
Net investment income (0.58) (0.55) (0.56) (0.52)
In excess of net realized gains -- -- -- --
Total Distributions (0.58) (0.55) (0.56) (0.52)
NET ASSET VALUE, END OF PERIOD $10.57 $10.53 $10.49 $10.60
Total Return (Excludes Sales Charge) 5.98% 5.74% 4.28% 7.18%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,851 $4,920 $4,923 $2,906
Ratio of expenses to average
net assets 1.11% 1.20% 1.26% 1.28%
Ratio of net investment
income to average net assets 5.44% 5.21% 5.31% 5.10%
Ratio of expenses to average
net assets* 1.64% 1.81% 1.82% 1.86%
Ratio of net investment income
to average net assets* 4.91% 4.60% 4.75% 4.52%
Portfolio Turnover(a) 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
76
<PAGE> 229
ONE GROUP SHORT-TERM BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.47 $ 10.42 $ 10.53 $ 10.33
Investment Activities:
Net investment income 0.63 0.63 0.64 0.60
Net realized and unrealized
gains (losses) from
investments and futures 0.04 0.05 (0.11) 0.19
Total from Investment Activities 0.67 0.68 0.53 0.79
Distributions:
Net investment income (0.63) (0.63) (0.64) (0.59)
In excess of net investment
income -- -- -- --
Net realized gains -- -- -- --
Total Distributions (0.63) (0.63) (0.64) (0.59)
Net Asset Value, End
of Period $ 10.51 $ 10.47 $ 10.42 $ 10.53
Total Return 6.59% 6.75% 5.13% 7.96%
Ratios/Supplementary Data:
Net Assets at end of
period (000) $ 592,669 $ 563,979 $ 604,916 $ 410,746
Ratio of expenses to
average net assets 0.53% 0.51% 0.51% 0.52%
Ratio of net investment
income to average
net assets 6.01% 6.06% 6.06% 5.82%
Ratio of expenses to
average net assets* 0.82% 0.81% 0.82% 0.85%
Ratio of net investment
income to average
net assets* 5.72% 5.76% 5.75% 5.49%
Portfolio Turnover(a) 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a)Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
77
<PAGE> 230
ONE GROUP INTERMEDIATE BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED -----------------------
CLASS A JUNE, 30, 1999 1998 1997 1996 1995
- ------- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.29 $ 10.37 $ 9.21
Investment Activities:
Net investment income 0.61 0.62 0.64 0.59
Net realized and unrealized
gains (losses) from
investments and futures 0.14 0.18 (0.07) 1.16
Total Income from Investment
Activities 0.75 0.80 0.57 1.75
Less Distributions:
Net investment income (0.61) (0.62) (0.65) (0.59)
In excess of net investment income -- -- -- --
From net realized gain -- -- -- --
Total Distributions (0.61) (0.62) (0.65) (0.59)
Net Asset Value, End of Period $ 10.61 $ 10.47 $ 10.29 $ 10.37
Total Return (Excludes Sales Charge) 7.37% 8.04% 5.65% 19.48
Ratios/Supplementary Data:
Net Assets at end of
period (000) $ 88,072 $ 42,343 $ 18,324 $ 11,654
Ratio of expenses to average
net assets 0.91% 0.86% 0.79% 0.73%
Ratio of net investment income
to average net assets 5.77% 6.01% 6.17% 5.98%
Ratio of expenses to average
net assets* -- -- -- --
Portfolio Turnover 50.32% 31.66% 31.62% 36.47%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
78
<PAGE> 231
ONE GROUP INTERMEDIATE BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ---------------------------------
CLASS B JUNE 30, 1999 1998 1997 1996(A)
- ------- ------------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.38 $ 10.20 $ 10.00
Investment Activities:
Net investment income 0.47 0.55 0.15
Net realized and unrealized gains
(losses) from investments and futures 0.18 0.17 0.20
Total from Investment Activities 0.65 0.72 0.35
Distributions:
Net investment income (0.53) (0.54) (0.15)
In excess of net investment income -- -- --
From net realized gains -- -- --
Total Distributions (0.53) (0.54) (0.15)
Net Asset Value, End of Period $ 10.50 $ 10.38 $ 10.20
Total Return (Excludes Sales Charge) 6.44% 7.32% 3.50%(b)
Ratios/Supplementary Data:
Net Assets at end of period (000) $ 857 $ 385 $ 122
Ratio of expenses to average
net assets 1.66% 1.61% 1.60%(c)
Ratio of investment income to
average net assets 5.02% 5.26% 1.52%(c)
Ratio of expenses to average
net assets* -- -- --
Portfolio Turnover 50.32% 31.66% 31.62%(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) For the period September 23, 1996 (initial offering
date of Class B shares) through December 31, 1996. (b) Not Annualized.
(c) Annualized.
79
<PAGE> 232
ONE GROUP INTERMEDIATE BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ----------------------------
CLASS I JUNE, 30, 1999 1998 1997 1996 1995
- ------- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.48 $ 10.29 $ 10.37 $ 9.21
Investment Activities:
Net investment income 0.63 0.65 0.64 0.59
Net realized and unrealized
gains (losses) from
investments and futures 0.14 0.18 (0.07) 1.16
Total from Investment Activities 0.77 0.83 0.57 1.75
Distributions:
Net investment income (0.64) (0.64) (0.65) (0.59)
In excess of net
investment income -- -- -- --
From net realized gain -- -- -- --
Total Distributions (0.64) (0.64) (0.65) (0.59)
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 10.48 $ 10.29 $ 10.37
Total Return 7.62% 8.37% 5.78% 19.48%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $567,609 $482,679 $395,105 $393,656
Ratio of expenses to
average net assets 0.66% 0.61% 0.67% 0.73%
Ratio of net investment
income to average
net assets 6.02% 6.26% 6.29% 5.98%
Ratio of expenses to
average net assets* -- -- -- --
Portfolio Turnover 50.32% 31.66% 31.62% 36.47%
</TABLE>
*During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
80
<PAGE> 233
ONE GROUP BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ------------------------
CLASS A JUNE 30, 1999 1998 1997 1996 1995
- ------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.59 $ 10.27 $ 10.45 $ 9.01
Investment Activities:
Net investment income 0.61 0.63 0.67 0.63
Net realized and unrealized
gains (losses) from
investments and futures 0.21 0.32 (0.18) 1.45
Total from Investment
Activities 0.82 0.95 0.49 2.08
Distributions:
Net investment income (0.63) (0.63) (0.67) (0.64)
From net realized gain -- -- -- --
Total Distributions (0.63) (0.63) (0.67) (0.64)
Net Asset Value, End of Period $ 10.78 $ 10.59 $ 10.27 $ 10.45
Total Return 7.92% 9.65% 4.98% 23.75%
Ratios/Supplementary Data:
Net Assets at end
of period (000) $226,261 $125,515 $46,977 $31,714
Ratio of expenses to
average net assets 0.89% 0.86% 0.78% 0.74%
Ratio of net investment
income to average net assets 5.85% 6.16% 6.59% 6.39%
Ratio of expenses to
average net assets* -- -- -- --
Portfolio Turnover 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
81
<PAGE> 234
ONE GROUP BOND FUND --Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ------------------------------------------
CLASS B JUNE 30, 1999 1998 1997 1996(a)
- ------- ------------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.59 $ 10.27 $ 10.00
Investment Activities:
Net investment income 0.47 0.56 0.21
Net realized and unrealized
gains (losses) from
investments and futures 0.27 0.32 0.27
Total from Investment Activities 0.74 0.88 0.48
Distributions:
Net investment income (0.55) (0.56) (0.21)
From net realized gain -- -- --
Total Distributions (0.55) (0.56) (0.21)
Net Asset Value, End of Period $ 10.78 $ 10.59 $ 10.27
Total Return (Excludes Sales Charge) 7.16% 8.91% 4.81%(b)
Ratios/Supplementary Data:
Net Assets at end of period (000) $ 9,074 $ 3,394 $ 280
Ratio of expenses to average
net assets 1.64% 1.61% 1.59%(c)
Ratio of net investment income
to average net assets 5.10% 5.41% 3.01%(c)
Ratio of expenses to average
net assets* -- -- --
Portfolio Turnover 34.69% 17.60% 24.92%(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)For the period August 24, 1996 (initial offering date
for Class B Shares) through December 31, 1996. (b) Not Annualized. (c)
Annualized.
82
<PAGE> 235
ONE GROUP BOND FUND - Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR ENDED --------------------------
CLASS I JUNE 30, 1999 1998 1997 1996 1995
- ------- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.59 $ 10.27 $ 10.45 $ 9.01
Investment Activities:
Net investment income 0.65 0.66 0.68 0.63
Net realized and
unrealized gains (losses) from
investments and futures 0.19 0.32 (0.18) 1.45
Total from Investment
Activities 0.84 0.98 0.50 2.08
Distributions:
Net investment income (0.65) (0.66) (0.68) (0.64)
From net realized gain -- -- -- --
Total Distributions (0.65) (0.66) (0.68) (0.64)
Net Asset Value, End of Period $ 10.78 $ 10.59 $ 10.27 $ 10.45
Total Return (Excludes
sales charge) 8.17% 9.97% 5.08% 23.75%
Ratios/Supplementary Data:
Net Assets at end
of period (000) $1,277,246 $1,101,894 $757,627 $485,851
Ratio of expenses
to average net assets 0.64% 0.61% 0.66% 0.74%
Ratio of net investment
income to average net
assets 6.10% 6.41% 6.71% 6.39%
Ratio of expenses to average
net assets* -- -- -- --
Portfolio Turnover 34.69% 17.60% 24.92% 41.91%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
83
<PAGE> 236
ONE GROUP INCOME BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
PERIOD ENDED ------------------------- --------------------
CLASS A JUNE 30, 1999 1998 1997 1996 1995(a) 1995
- ------- ------------- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 8.00 $ 7.84 $ 8.18 $ 7.68 $ 8.25
Investment Activities:
Net investment income 0.44 0.48 0.41 0.44 0.52
Net realized and
unrealized gain (loss)
from investments and
futures 0.14 0.17 (0.25) 0.72 (0.57)
Total income from
investment activities 0.58 0.65 0.16 1.16 (0.05)
Less Distributions:
Net investment income (0.44) (0.47) (0.40) (0.44) (0.52)
From net realized gain (0.05) (0.02) (0.10) (0.22) --
Total Distributions (0.49) (0.49) (0.50) (0.66) (0.52)
NET ASSET VALUE, END
OF PERIOD $ 8.09 $ 8.00 $ 7.84 $ 8.18 $ 7.68
Total Return
(excludes sales charge) 7.44% 8.58% 2.75% 15.55%(b) (0.45)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 15,785 $ 7,832 $ 8,798 $ 6,095 $ 69
Ratio of expenses
to average net assets 0.90% 0.87% 0.84% 0.94%(c) 0.04%
Ratio of net
investment income
to average net assets 5.57% 5.83% 5.75% 5.72%(c) 6.70%
Ratio of expenses to
average net assets* -- -- 0.90% 1.15%(c) 2.78%
Ratio of net
investment income
to average net assets* -- -- -- -- --
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(b) 71.65%
</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) For the period February 1, 1995 (commencement of
operations) through December 31, 1995. Effective February 1, 1995, the
Fund changed its fiscal year end from January 31 to December 31. (b)
Not Annualized. (c) Annualized.
84
<PAGE> 237
ONE GROUP INCOME BOND FUND --Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED DECEMBER 31,
CLASS B JUNE 30, 1999 1998 1997 1996 1995(a)
- ------- ------------- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.00 $ 7.85 $ 8.18 $ 8.13
Investment Activities:
Net investment income 0.39 0.42 0.45 0.24
Net realized and unrealized gain
(loss) from investments and futures 0.14 0.17 (0.23) 0.27
Total income from investment activities 0.53 0.59 0.22 0.51
Less Distributions:
Net investment income (0.35) (0.42) (0.45) (0.24)
Net realized gain (0.05) (0.02) (0.10) (0.22)
In excess of net realized gain -- -- -- --
Total Distributions (0.40) (0.44) (0.55) (0.46)
Conversion to Class A Shares -- -- -- --
NET ASSET VALUE, END OF PERIOD $ 8.13 $ 8.00 $ 7.85 $ 8.18
Total Return (excludes sales charge) 6.74% 7.75% 2.09% 6.41%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $ 638 $ 533 $ 502 $ 259
Ratio of expenses to average net assets 1.65% 1.62% 1.58% 1.60%(d)
Ratio of net investment income to
average net assets 4.80% 5.08% 5.01% 5.00%(c)
Ratio of expenses to average net assets* -- -- 1.67% 1.78%(c)
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(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) For the period May 31, 1995 (re-offering date of Class
B Shares) through December 31, 1995. Effective February 1, 1995, the
Fund changed its fiscal year end from January 31 to December 31. (c)
Not Annualized. (d) Annualized.
85
<PAGE> 238
ONE GROUP INCOME BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
PERIOD ENDED JUNE 30, -------------------- ------------------------------------------
CLASS I 1999 1998 1997 1996 1995(a) 1995
- ------- ---- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
Beginning of Period $ 8.01 $ 7.85 $ 8.18 $ 7.68 $ 8.25
Investment Activities:
Net investment income 0.47 0.50 0.46 0.47 0.52
Net realized and unrealized
gain (loss) from
investments and futures 0.14 0.17 (0.24) 0.72 (0.57)
Total income from Investment
Activities 0.61 0.67 0.22 1.19 (0.05)
Distributions:
Net investment income (0.47) (0.49) (0.45) (0.47) (0.52)
From net realized gains (0.05) (0.02) (0.10) (0.22) --
Total Distributions (0.52) (0.51) (0.55) (0.69) (0.52)
NET ASSET VALUE, END OF PERIOD $ 8.10 $ 8.01 $ 7.85 $ 8.18 $ 7.68
Total Return 7.82% 8.86% 3.14% 15.90%(b) (0.48)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 385,672 $ 94,544 $ 187,112 $ 191,930 $ 7,101
Ratio of expenses to
average net assets 0.65% 0.62% 0.57% 0.55%(c) 0.04%
Ratio of net investment
income to average
net assets 5.79% 6.08% 6.02% 6.34%(c) 6.70%
Ratio of expenses to
average net assets* -- -- 0.66% 0.67%(c) 2.78%
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(c) 71.65%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee waiver had not occurred, the ratios would have been as
indicated. (a) For the period February 1, 1995 (commencement of
operations) through December 31, 1995. Effective February 1, 1995, the
Fund changed its fiscal year end from January 31 to December 31. (b)
Not Annualized. (c) Annualized.
86
<PAGE> 239
ONE GROUP GOVERNMENT BOND FUND --Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35
Investment Activities:
Net investment income 0.58 0.60 0.60 0.61
Net realized and unrealized
gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.45
Total from Investment Activities 1.00 0.73 0.35 1.06
Distributions:
Net investment income (0.58) (0.60) (0.60) (0.59)
In excess of net
investment income -- -- -- (0.01)
In excess of net realized
gains -- -- -- --
Total Distributions (0.58) (0.60) (0.60) (0.60)
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81
Total Return (Excludes
Sales Charge) 10.54% 7.83% 3.58% 11.84%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 31,548 $ 34,727 $ 38,800 $ 8,130
Ratio of expenses to
average net assets 0.87% 0.87% 0.93% 0.97%
Ratio of net investment
income to average
net assets 5.80% 6.20% 6.09% 6.46%
Ratio of expenses to
average net assets* 1.02% 1.03% 1.04% 1.09%
Ratio of net investment
income to average
net assets* 5.65% 6.04% 5.98% 6.34%
Portfolio Turnover(a) 91.49% 60.53% 62.70% 106.14%
</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.
87
<PAGE> 240
ONE GROUP GOVERNMENT BOND FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35
Investment Activities:
Net investment income 0.52 0.54 0.54 0.55
Net realized and unrealized gains
(losses) from investments and futures 0.42 0.13 (0.25) 0.46
Total from Investment Activities 0.94 0.67 0.29 1.01
Distributions:
Net investment income (0.52) (0.54) (0.54) (0.55)
In excess of net investment income -- -- -- --
Total Distributions (0.52) (0.54) (0.54) (0.55)
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81
Total Return (Excludes Sales Charge) 9.86% 7.14% 2.95% 11.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 20,922 $ 11,729 $ 10,782 $ 2,513
Ratio of expenses to average
net assets 1.52% 1.52% 1.58% 1.62%
Ratio of net investment income
to average net assets 5.14% 5.55% 5.44% 5.76%
Ratio of expenses to average
net assets* 1.67% 1.68% 1.69% 1.74%
Ratio of net investment income
to average net assets* 4.99% 5.39% 5.33% 5.64%
Portfolio Turnover(a) 91.49% 60.53% 62.70% 106.14%
</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.
88
<PAGE> 241
ONE GROUP GOVERNMENT BOND FUND Financial Highlights
YEAR ENDED JUNE 30,
<TABLE>
<CAPTION>
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 9.69 $ 9.56 $ 9.81 $ 9.35
Investment Activities:
Net investment income 0.60 0.62 0.62 0.62
Net realized and unrealized
gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.46
Total from Investment Activities 1.02 0.75 0.37 1.08
Distributions:
Net investment income (0.60) (0.62) (0.62) (0.61)
In excess of net
investment income -- -- -- (0.01)
In excess of net
realized gains -- -- -- --
Total Distributions (0.60) (0.62) (0.62) (0.62)
Net Asset Value, End of Period $ 10.11 $ 9.69 $ 9.56 $ 9.81
Total Return 10.81% 8.10% 3.81% 12.04%
Ratios/Supplementary Data:
Net Assets at end of
period (000) $851,517 $724,423 $677,326 $379,826
Ratio of expenses to
average net assets 0.62% 0.62% 0.68% 0.71%
Ratio of net investment
income to average
net assets 6.05% 6.45% 6.34% 6.65%
Ratio of expenses to
average net assets* 0.67% 0.68% 0.69% 0.73%
Ratio of net investment
income to average
net assets* 6.00% 6.39% 6.33% 6.63%
Portfolio Turnover(a) 91.49% 60.53% 62.70% 106.14%
</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.
89
<PAGE> 242
ONE GROUP TREASURY & AGENCY FUND --Financial Highlights
<TABLE>
<CAPTION>
JANUARY 20,
1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
------------------- JUNE 30,
CLASS A 1999 1998 1997(a)
- ------- ---- ---- -------
<S> <C> <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.
90
<PAGE> 243
ONE GROUP TREASURY & AGENCY FUND --Financial Highlights
<TABLE>
<CAPTION>
JANUARY 20,
1997
THROUGH
JUNE 30,
YEAR ENDED JUNE 30, JUNE 30,
CLASS B 1999 1998 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.
91
<PAGE> 244
ONE GROUP TREASURY & AGENCY FUND --Financial Highlights
<TABLE>
<CAPTION>
JANUARY 20,
1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
CLASS I 1999 1998 1997(a)
- ------- ---- ---- -------
<S> <C> <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.
92
<PAGE> 245
ONE GROUP HIGH YIELD BOND FUND -- Financial Highlights
93
<PAGE> 246
APPENDIX A
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> <C>
ONE GROUP ULTRA SHORT-TERM BOND 1
ONE GROUP SHORT-TERM BOND FUND 2
ONE GROUP INTERMEDIATE BOND FUND 3
ONE GROUP BOND FUND 4
ONE GROUP INCOME BOND FUND 5
ONE GROUP GOVERNMENT BOND FUND 6
ONE GROUP TREASURY & AGENCY FUND 7
ONE GROUP HIGH YIELD BOND
FUND 8
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, 1-8 Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-8 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities 1-8 Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments 1-5, 8 Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by 1-5, 8 Liquidity
a bank in exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security 1-8 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security 1-8 Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
</TABLE>
94
<PAGE> 247
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
SECURITIES LENDING: The lending of up to 33 1/3% 1-8 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-8 Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other 1-8 Market
mutual funds, including One Group money market funds
and shares of other money market mutual funds for
which Banc One Investment Advisors serves as
investment advisor or administrator. The Treasury &
Agency Fund and the Government Bond 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 1, 3-5, 8 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer 1-6, 8 Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing 1-6, 8 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled 2-5, 8 Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time 1-5, 8 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-5, 8 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, 1-5, 8 Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
</TABLE>
95
<PAGE> 248
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
--------- ---------
<S> <C> <C>
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered 1-5, 8 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1-8 Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with 5, 8 Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that 1-5, 8 Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations 1-8 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), and Real Estate Mortgage Investment Conduits Regulatory
("REMICs").
CORPORATE DEBT SECURITIES: Corporate bonds and 1-5, 8 Market
non-convertible debt securities. Credit
DEMAND FEATURES: Securities that are subject to 1-5, 8 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by 1-5, 8 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
MORTGAGE DOLLAR ROLLS: A transaction in which 1-8 Pre-payment
a Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans 1-8 Pre-payment
in a mortgage pool which provide for a fixed Market
initial mortgage interest rate for a specified Credit
period of time, after which the rate may be Regulatory
subject to periodic adjustments.
SWAPS, CAPS AND FLOORS: A Fund may enter into 1-6, 8 Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the
cap or floor to the extent that a specified
</TABLE>
96
<PAGE> 249
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures 1-6, 8 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued 1-8 Market
by agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign Foreign Investment
currency exchange rates, interest rates, or
one or more other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a 1-5, 8 Market
state or political subdivision to obtain Credit
funds for various public purposes. Municipal Political
securities include private activity bonds and Tax
industrial development bonds, as well as General Regulatory
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.
ZERO COUPON DEBT SECURITIES: Bonds and other 1-8 Credit
debt that pay no interest, but are issued Market
at a discount from their value at maturity. Zero-Coupon
When held to maturity, their entire return equals the
difference between their issue price and their
maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero coupon debt 1-8 Credit
securities which convert on a specified date to Market
interest bearing debt securities. Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative 1-6, 8 Pre-payment
multi-class mortgage securities usually structured with Market
two classes of shares that receive different Credit
proportions of the interest and principal from a pool of Regulatory
mortgage-backed obligations. These 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 variable 1-6, 8 Market
rate debt instruments with interest rates that reset Leverage
in the opposite direction from the market rate of Credit
interest to which the inverse floater is indexed.
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, 1-5, 8 Credit
or assignments of all or a portion of loans to Political
corporations or to governments, including governments Liquidity
of the less developed countries ("LDC's"). Foreign Investment
Market
FIXED RATE MORTGAGE LOANS: Investments in fixed rate 1-8 Credit
mortgage loans or mortgage pools which bear simple Pre-payment
interest at fixed annual rates and have short to long Regulatory
</TABLE>
97
<PAGE> 250
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
term final maturities. Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term 1- 5, 8 Credit
funding agreements issued by banks and highly rated U.S. Liquidity
insurance companies such as Guaranteed Investment Market
Contracts ("GIC's") and Bank Investment Contracts
("BIC's").
COMMON STOCK: Shares of ownership of a company. 8 Market
INVESTMENT RISKS
</TABLE>
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 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
98
<PAGE> 251
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.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
99
<PAGE> 252
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
100
<PAGE> 253
ONE GROUP(R) MUTUAL FUNDS
MUNICIPAL BOND FUNDS ONE GROUP(R) SHORT-TERM MUNICIPAL BOND FUND
PROSPECTUS ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND
NOVEMBER 1, 1999 ONE GROUP(R) TAX-FREE BOND FUND
ONE GROUP(R) MUNICIPAL INCOME FUND
ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND
ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND
ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND
ONE GROUP(R) MICHIGAN MUNICIPAL BOND FUND
ONE GROUP(R) OHIO MUNICIPAL BOND FUND
ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 254
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Short-Term Municipal Bond Fund
One Group Intermediate Tax-Free Bond Fund
One Group Tax-Free Bond Fund
One Group Municipal Income Fund
One Group Arizona Municipal Bond Fund
One Group Kentucky Municipal Bond Fund
One Group Louisiana Municipal Bond Fund
One Group Michigan Municipal Bond Fund
One Group Ohio Municipal Bond Fund
One Group West Virginia Municipal Bond Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
The Fund Manager
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
-2-
<PAGE> 255
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE SHORT-TERM MUNICIPAL BOND FUND?
The Fund seeks as high a level of current income exempt from Federal income tax
as is consistent with relative stability of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE SHORT-TERM MUNICIPAL BOND FUND?
The Fund invests in a portfolio of municipal securities with an average weighted
maturity of three years or less. Banc One Investment Advisors selects securities
for the Fund by analyzing both individual securities and different market
sectors. Taking a long-term approach, Banc One Investment Advisors looks for
market sectors and individual securities that it believes will perform well over
market cycles. The Short-Term Municipal Bond Fund spreads its holdings across
various security types within the municipal securities market. Banc One
Investment Advisors selects individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and structural risk. For more
information about the Fund's investment strategies, please read "More About The
Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE SHORT-TERM MUNICIPAL BOND FUND?
The main risks of investing in the Short-Term Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Short-Term Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the
Short-Term Municipal Bond Fund.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
-1-
<PAGE> 256
Portfolio Quality. 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.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE SHORT-TERM MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Short-Term Municipal Bond Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE SHORT-TERM MUNICIPAL BOND FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
Total Return shows changes in the Fund's performance from year to year. Total
returns assume reinvestment of dividends and distributions. The returns shown DO
NOT reflect applicable sales charges. If these charges were included, the
returns would be lower than those shown. The Fund has not been in existence for
an entire calendar year.
BEST QUARTER: 0.87% 4Q 1998; WORST QUARTER: -0.23% 2Q 1999
--------------- -----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-2-
<PAGE> 257
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- --------------------------------------------------------------------------------
CLASS A 1 YEAR LIFE
------ (SINCE 5/4/98)
--------------
<S> <C> <C>
One Group Short-Term Municipal Bond -0.02% 0.81%
Fund
Lehman Brothers 3 Year Municipal Bond
Index(1)
Lipper Short Term Municipal Bond
Index(2)
- --------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B ------ (SINCE 5/4/98)
--------------
One Group Short-Term Municipal Bond -0.61% 0.33%
Fund
Lehman Brothers 3 Year Municipal
Bond Index(1)
Lipper Short Term Municipal Bond
Index(2)
- --------------------------------------------------------------------------------
CLASS I 1 YEAR LIFE
------ (SINCE 5/4/98)
--------------
One Group Short-Term Municipal Bond 3.21% 3.85%
Fund
Lehman Brothers 3 Year Municipal
Bond Index(1)
Lipper Short Term Municipal Bond Index(2)
- --------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) The Lehman Brothers 3 Year Municipal Bond Index is an unmanaged index
generally representative of the short-term municipal bond market. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By contrast, the performance of the
One Group Short-Term Municipal Bond Fund reflects the deduction of these
value-added services as well as the deduction of sales charges on Class A shares
and contingent deferred sales charges on Class B and Class C shares.
(2) The Lipper Short Term Municipal Bond Index consists of funds that invest in
municipal debt issues with dollar-weighted average maturities of one to three
years.
-3-
<PAGE> 258
FEES AND EXPENSES OF THE SHORT-TERM MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 3.00% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 3.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
.60% .60% .60% .60%
Investment Advisory Fees
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .34% .34% .34% .34%
Total Annual Fund Operating 1.29% 1.94% 1.94% .94%
Expenses
(.49%) (.49%) (.49%) (.39%)
Fee Waiver [and/or Expense
Reimbursement](4)
.80% 1.45% 1.45% .55%
Net Expense
- ------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .80% for Class A shares, 1.45% for Class B shares, 1.45%
for Class C shares, and .55% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
- ---------------------
-4-
<PAGE> 259
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $379 $148 $448 $148 $248 $56
3 Years $650 $562 $762 $562 $562 $261
5 Years $941 $1,002 $1,002 $1,002 $1,002 $482
10 Years $1,768 $2,056 $2,056 $2,225 $2,225 $1,119
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
- ------------
<TABLE>
<CAPTION>
<S> <C>
Class A $427
Class B (no redemption) $197
Class B (with redemption) $497
Class C (no redemption) $197
Class C (with redemption) $297
Class I $96
</TABLE>
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-5-
<PAGE> 260
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
WHAT IS THE GOAL OF THE INTERMEDIATE TAX-FREE BOND FUND?
The Fund seeks current income exempt from Federal income taxes consistent with
prudent investment management and the preservation of capital.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE INTERMEDIATE TAX-FREE BOND FUND?
The Fund invests primarily in a portfolio OF municipal securities with an
average weighted maturity of between three and 10 years. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual securities
and different market sectors. Taking a long-term approach, Banc One Investment
Advisors looks for market sectors and individual securities that it believes
will perform well over market cycles. The Intermediate Tax-Free Bond Fund
spreads its holdings across various security types within the municipal
securities market. Banc One Investment Advisors selects individual securities
after performing a risk/reward evaluation of interest rate risk, credit risk,
and structural risk. For more information about the Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INTERMEDIATE TAX-FREE BOND FUND?
The main risks of investing in the Intermediate Tax-Free Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Intermediate Tax-Free Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the
Intermediate Tax-Free Bond Fund.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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
-6-
<PAGE> 261
considered to have speculative characteristics. Issuers of such
securities are more vulnerable to changes in economic conditions than
issuers of higher grade securities.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE INTERMEDIATE TAX-FREE BOND FUND PERFORMED?
By showing the variability of the Intermediate Tax-Free Bond Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INTERMEDIATE TAX-FREE BOND FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
<TABLE>
<CAPTION>
Total Return (per calendar year)
Class I
1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
10.02% 7.53% 9.68% -3.43% 13.06% 4.39% 8.20% 6.00%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.71 %.
BEST QUARTER: 5.14% 1Q 1995; WORST QUARTER: -4.73% 1Q 1994
----------------- -----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-7-
<PAGE> 262
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -----------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
One Group Intermediate Tax-Free Bond -3.07% 4.63% 4.78%
Fund
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Fund Index(2)
- -----------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 1/14/94)
---------------
One Group Intermediate Tax-Free Bond -3.99% 4.60% 3.49%
Fund
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond Fund
Index(2)
- -----------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 9/4/90)
--------------
One Group Intermediate Tax-Free Bond 1.71% 5.84% 6.34%
Fund
Lehman Brothers 7 Year Municipal Bond
Index (1)
Lipper Intermediate Municipal Bond Fund
Index(2)
- -----------------------------------------------------------------------------------------------
</TABLE>
(1)The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Intermediate Tax-Free Bond Fund reflects the
deduction of these value-added services as well as the deduction of sales
charges on Class A shares and contingent deferred sales charges on Class B and
Class C shares.
(2) The Lipper Intermediate Municipal Bond Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in this category.
- ----------------
-8-
<PAGE> 263
FEES AND EXPENSES OF THE INTERMEDIATE TAX-FREE BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
.60% .60% .60% .60%
Investment Advisory Fees
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .19% .19% .19% .19%
Total Annual Fund Operating 1.14% 1.79% 1.79% .79%
Expenses
(.29%) (.29%) (.29%) (.19%)
Fee Waiver [and/or Expense
Reimbursement](4)
.85% 1.50% 1.50% .60%
Net Expenses
- --------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .85% for Class A shares, 1.50% for Class B shares, 1.50%
for Class C shares, and .60% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-9-
<PAGE> 264
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $533 $165 $663 $163 $263 $61
3 Years $768 $545 $845 $545 $545 $233
5 Years $1,023 $952 $1,152 $952 $952 $420
10 Years $1,749 $1,918 $1,198 $2,090 $2,090 $960
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
- ------------
<TABLE>
<CAPTION>
<S> <C>
Class A $561
Class B (no redemption) $182
Class B (with redemption) $682
Class C (no redemption) $182
Class C (with redemption) $282
Class I $81
</TABLE>
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-10-
<PAGE> 265
ONE GROUP TAX-FREE BOND FUND
WHAT IS THE GOAL OF THE TAX-FREE BOND FUND?
The Fund seeks as high a level of current income exempt from Federal income tax
as is consistent with relative stability of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE TAX-FREE BOND FUND?
The Fund invests primarily in a portfolio of municipal securities. Banc One
Investment Advisors selects securities for the Fund by analyzing both individual
securities and different market sectors. Taking a long-term approach, Banc One
Investment Advisors looks for market sectors and individual securities that it
believes will perform well over market cycles. The Tax-Free Bond Fund spreads
its holdings across various security types within the municipal securities
market. Banc One Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate risk, credit risk, and
structural risk. For more information about the Fund's investment strategies,
please read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TAX-FREE BOND FUND?
The main risks of investing in the Tax-Free Bond Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Tax-Free Bond Fund will change every day in response to market
conditions. You may lose money if you invest in the Tax-Free Bond Fund.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Portfolio Quality: 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.
-11-
<PAGE> 266
Credit Risk: There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE TAX-FREE BOND FUND PERFORMED?
By showing the variability of the Tax-Free Bond Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE TAX-FREE BOND FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
<TABLE>
<CAPTION>
Total Return (per calendar year)(1)
Class I
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.31% 8.08% 12.15% 9.69% 11.02% -1.71% 17.20% 3.76% 9.33% 5.98%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.78%. Performance of Class I Shares is based on Class A Share
performance adjusted to reflect the absence of sales charges.
BEST QUARTER: 6.66% 1Q 1995; WORST QUARTER: -3.68% 1Q 1994
---------------- ----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-12-
<PAGE> 267
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE
------ ------- --------- (SINCE 3/1/88)
--------------
<S> <C> <C> <C> <C>
One Group Tax-Free Bond Fund -3.14% 5.62% 6.80% 7.14%
Lehman Brothers Municipal Bond
Index(1)
Lipper General Municipal Bond Index(3)
- ---------------------------------------------------------------------------------------------------------------------
CLASS B 1 YEAR LIFE
------ (SINCE 4/4/95)
--------------
One Group Tax-Free Bond Fund -4.08% 4.74%
Lehman Brothers Municipal Bond
Index(1)
Lipper General Municipal Bond Index(3)
- ---------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
------ ------- -------- (SINCE 3/1/88)(2)
-----------------
One Group Tax-Free Bond Fund 1.72% 6.89% 7.58% 7.86%
Lehman Brothers Municipal Bond
Index(1)
Lipper General Municipal Bond Index(3)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole. The performance of the
index does not reflect the deduction of expenses associated with a mutual fund,
such as management fees. By contrast, the performance of the One Group Tax-Free
Bond Fund reflects the deduction of these value-added services as well as the
deduction of sales charges on Class A shares and contingent deferred sales
charges on Class B and Class C shares.
2 Performance of Class I Shares is based on Class A Share performance adjusted
to reflect the absence of sales charges.
3 The Lipper General Municipal Bond Index consists of funds that invest at least
65% of their assets in municipal debt issues in the top four credit ratings.
-13-
<PAGE> 268
FEES AND EXPENSES OF THE TAX-FREE BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% None None None
(Load)Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .24% .24% .24% .24%
Total Annual Fund Operating 1.04% 1.69% 1.69% .69%
Expenses
(.17%) (.17%) (.17%) (.07%)
Fee Waiver [and/or Expense
Reimbursement](4)
Net Expenses .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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .87% for Class A shares, 1.52% for Class B shares, 1.52%
for Class C shares, and .62% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-14-
<PAGE> 269
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU REDEEMED ALL OF YOUR SHARES OR IF YOU HOLD THEM. THE
EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE
FUND'S OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED
DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $535 $155 $655 $155 $255 $63
3 Years $750 $516 $816 $516 $516 $214
5 Years $982 $902 $1,102 $902 $902 $377
10 Years $1,649 $1,811 $1,811 $1,984 $1,984 $852
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
- -----------
<TABLE>
<CAPTION>
<S> <C>
Class A $551
Class B (no redemption) $172
Class B (with redemption) $672
Class C (no redemption) $172
Class C (with redemption) $272
Class I $70
</TABLE>
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-15-
<PAGE> 270
ONE GROUP MUNICIPAL INCOME FUND
WHAT IS THE GOAL OF THE MUNICIPAL INCOME FUND?
The Fund seeks current income exempt from Federal income taxes.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE MUNICIPAL INCOME FUND?
The Fund invests in a portfolio of municipal securities, including
mortgage-backed securities. While current income is the Fund's primary focus, it
seeks to produce income in a manner consistent with the preservation of
principal. The Fund's average weighted maturity will normally range between five
and 15 years. From time to time, a significant portion of the Funds total assets
may be invested in municipal housing authority obligations. Banc One Investment
Advisors selects securities for the Fund by analyzing both individual securities
and different market sectors. Taking a long-term approach to time the market,
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over market cycles. The Municipal Income Fund
spreads its holdings across various security types within the municipal
securities market. Banc One Investment Advisors selects individual securities
after performing a risk/reward evaluation of interest rate risk, credit risk,
and structural risk. For more information about the Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MUNICIPAL INCOME FUND?
The main risks of investing in the Municipal Income Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Municipal Income Fund will change every day in response to market
conditions. You may lose money if you invest in the Municipal Income Fund.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. The securities 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. Your investment will decline in value
if the value of a Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to produce higher
yields, but are subject to greater fluctuations in value. Usually,
changes in the value of fixed income securities will not affect cash
income generated, but may affect the value of your investment.
Prepayment and Call Risk. As part of its main investment strategy, the
Municipal Income Fund may invest in mortgage-backed securities. The
issuers of these and other callable securities may be able to repay
principal in advance, especially when interest rates fall. Changes in
pre-payment rates can make the price and yield of mortgage -backed
securities volatile. When mortgages are pre-paid or when securities are
called, the Fund may have to reinvest in securities with a lower yield.
The Fund also may fail to recover premiums paid for the securities,
resulting in an unexpected capital loss.
-16-
<PAGE> 271
Credit Risk: There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE MUNICIPAL INCOME FUND PERFORMED?
By showing the variability of the Municipal Income Fund's performance from year
to year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MUNICIPAL INCOME FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
<TABLE>
<CAPTION>
Total Return (per calendar year)(1)
Class I
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
-1.60% 12.01% 4.58% 8.58% 6.14%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -0.16%
-17-
<PAGE> 272
BEST QUARTER: 4.74% 1Q 1995; WORST QUARTER: -1.91% 1Q 1994
----------------- -----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-18-
<PAGE> 273
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/9/93)
--------------
<S> <C> <C> <C>
One Group Municipal Income Fund -1.85% 4.89% 4.46%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
One Group Municipal Income Fund -2.77% 4.85% 4.20%
Lehman Brothers 7 Year Municipal
Bond Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 11/4/97)
---------------
One Group Municipal Income Fund -1.26% 6.35%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 Years LIFE
------- ------ ------- (SINCE 2/9/93)
--------------
One Group Municipal Income Fund 3.06% 6.11% 4.46%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
1 The Lehman Brothers 7 Year Municipal Bond Index an unmanaged index comprised
of investment grade municipal bonds with maturities close to seven years. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By contrast, the performance of
the One Group Municipal Income Fund reflects the deduction of these value-added
services as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and Class C shares.
2 The Lipper Intermediate Municipal Bond Funds Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
19
<PAGE> 274
FEES AND EXPENSES OF THE MUNICIPAL INCOME FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or
Service] (12b-1) Fees .35% 1.00% 1.00% None
Other Expenses .22% .22% .22% .22%
Total Annual Fund Operating
Expenses 1.02% 1.67% 1.67% .67%
Fee Waiver [and/or Expense (.15%) (.15%) (.15%) (.05%)
Reimbursement](4)
Net Expenses .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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .87% for Class A shares, 1.52% for Class B shares, 1.52%
for Class C shares, and .62% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
20
<PAGE> 275
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $535 $155 $655 $155 $255 $63
3 Years $746 $512 $812 $512 $512 $209
5 Years $974 $893 $1,093 $893 $893 $368
10 Years $1,629 $1,791 $1,791 $1,964 $1,964 $830
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $549
Class B (no redemption) $170
Class B (with redemption) $670
Class C (no redemption) $170
Class C (with redemption) $270
Class I $68
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
21
<PAGE> 276
ONE GROUP ARIZONA MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE ARIZONA MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and Arizona
personal income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE ARIZONA MUNICIPAL BOND FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
Arizona and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Arizona municipal securities is exempt
from Federal income tax and Arizona personal income tax. A portion of the Fund's
total assets also may be invested in municipal securities issued by other states
and territories. The Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors selects securities for
the Fund by analyzing both individual securities and different market sectors.
Taking a long-term approach, Banc One Investment Advisors looks for market
sectors and individual securities that it believes will perform well over market
cycles. The Arizona Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward evaluation
of interest rate risk, credit risk, and structural risk. For more information
about the Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE ARIZONA MUNICIPAL BOND FUND?
The main risks of investing in the Arizona Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Arizona Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Arizona
Municipal Bond Fund.
Non-Diversification: The Arizona Municipal Bond Fund is
"non-diversified". 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. Non-diversification increases 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.
Geographic Concentration: Because the Arizona Municipal Bond Fund is
not diversified and because it concentrates its investments in the
securities of issuers in Arizona, certain factors including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives may have a disproportionately negative
effect on the Fund's investments. For example, 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
22
<PAGE> 277
long-term revenues with expenditures. In addition, Arizona's
continued growth depends to some extent on its ability to manage its
water resources.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ARIZONA MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Arizona Municipal Bond Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE ARIZONA MUNICIPAL BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
--------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.50% 6.47% 10.37% 7.65% 9.97% -2.38% 11.96% 4.05% 7.33% 5.55%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.62 %. The Arizona Municipal Bond Fund
23
<PAGE> 278
commenced operations on January 20, 1997 subsequent to the transfer of assets
from a common trust fund with materially equivalent investment objectives,
policies, guidelines and restrictions as the Fund. The quoted performance of the
Fund includes the performance of the common trust fund for period prior to the
Fund's commencement of operations as adjusted to reflect the expenses associated
with the Fund. The quoted performance of the Fund for periods prior to the
Fund's commencement of operation s, as adjusted to reflect the expenses
associated with the Fund. The common trust fund was not registered with the SEC
and was not subject to the investment restrictions, limitations and
diversification requirements imposed by law on registered mutual funds. If the
common trust fund had been registered, its return may have been lower.
BEST QUARTER: 4.65% 4Q 1990; WORST QUARTER: -3.51% 1Q 1994
------------------ ------------------
24
<PAGE> 279
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges..
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ------------------------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 11/30/79)(2)
-------------------
<S> <C> <C> <C> <C>
One Group Arizona Municipal Bond Fund -2.84% 3.84% 5.35% 6.47%
Lehman Brother 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond Funds
Index(3)
- ------------------------------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 11/30/79)(2)
-------------------
One Group Arizona Municipal Bond Fund -3.76% 3.13% 4.83% 5.86%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond Funds
Index(3)
- ------------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 11/30/79)(2)
-------------------
One Group Arizona Municipal Bond Fund 1.94% 5.34% 6.24% 7.06%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond Funds
Index(3)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
1 The Lehman Brothers Municipal Bond Index is an unmanaged index generally
representative of the municipal bond market as a whole. The performance of the
index does not reflect the deduction of expenses associated with a mutual fund,
such as management fees. By contrast, the performance of the One Group Tax-Free
Bond Fund reflects the deduction of these value-added services as well as the
deduction of sales charges on Class A shares and contingent deferred sales
charges on Class B and Class C shares.
2 The Arizona Municipal Bond Fund commenced operations on January 20, 1997
subsequent to the transfer of assets from a common trust fund with materially
equivalent investment objectives, policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes the performance of the common
trust fund for period prior to the Fund's commencement of operations as adjusted
to reflect the expenses associated with the Fund. The quoted performance of the
Fund for periods prior to the Fund's commencement of operation s, as adjusted to
reflect the expenses associated with the Fund. The common trust fund was not
registered with the SEC and was not subject to the investment restrictions,
limitations and diversification restrictions imposed by law on registered mutual
funds. If the common trust fund had been registered, its return may have been
lower.
3 The Lipper Intermediate Municipal Bond Funds Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
25
<PAGE> 280
FEES AND EXPENSES OF THE ARIZONA MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)(1)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .27% .27% .27% .27%
Total Annual Fund Operating
Expenses 1.07% 1.72% 1.72% .72%
Fee Waiver [and/or Expense (.17%) (.17%) (.17%) (.07%)
Reimbursement](4)
Net Expenses .90% 1.55% 1.55% .65%
- -------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55 % for Class B shares, 1.55%
for Class C shares, and .65% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
26
<PAGE> 281
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $538 $158 $658 $158 $258 $66
3 Years $759 $525 $825 $525 $525 $223
5 Years $998 $917 $1,117 $917 $917 $394
10 Years $1,682 $1,844 $1,844 $2,016 $2,016 $888
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
27
<PAGE> 282
ONE GROUP KENTUCKY MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE KENTUCKY MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and Kentucky
personal income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE KENTUCKY MUNICIPAL BOND FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
Kentucky and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Kentucky municipal securities is exempt
from Federal income tax and Kentucky personal income tax. The Fund also invests
in municipal securities issued by other states and territories. The Fund's
average weighted maturity normally will range between five and 20 years. Banc
One Investment Advisors selects securities for the Fund by analyzing both
individual securities and different market sectors. Taking a long-term approach,
Banc One Investment Advisors looks for market sectors and individual securities
that it believes will perform well over market cycles. The Kentucky Municipal
Bond Fund spreads its holdings across various security types within the
municipal securities market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of interest rate risk,
credit risk, and structural risk. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE KENTUCKY MUNICIPAL BOND FUND?
The main risks of investing in the Kentucky Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Kentucky Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Kentucky
Municipal Bond Fund.
Non-Diversification: The Kentucky Municipal Bond Fund is
"non-diversified". 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. Non-diversification increases 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.
Geographic Concentration: Because the Kentucky Municipal Bond Fund is
not diversified and because it concentrates its investments in the
securities of issuers in Kentucky, certain factors including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives may have a disproportionately negative
effect on the Fund's investments. For example, 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.
28
<PAGE> 283
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE KENTUCKY MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Kentucky Municipal Bond Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE KENTUCKY MUNICIPAL BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1994 -5.66%
1995 15.32%
1996 4.18%
1997 7.50%
1998 5.53%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.12%.
BEST QUARTER: 6.16% 1Q 1995; WORST QUARTER: -4.62 1Q 1994
------------- -------------
29
<PAGE> 284
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table do include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------ (SINCE 3/12/93)(1)
------------------
<S> <C> <C> <C>
One Group Kentucky Municipal Bond Fund -2.78% 4.51% 3.98%
Lehman Brother 7 Year Municipal Bond
Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 3/16/95)
---------------
One Group Kentucky Municipal Bond Fund 3.81% 4.45%
Lehman Brothers 7 Year Municipal
Bond Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 3/12/93)
---------------
One Group Kentucky Municipal Bond Fund 2.05% 5.77% 4.96%
Lehman Brothers 7 Year Municipal Bond
Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
1 Performance for Class A shares is based on Class I performance adjusted to
reflect applicable sales loads.
2 The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Kentucky Municipal Bond Fund reflects the
deduction of these value-added services as well as the deduction of sales
charges on Class A shares and contingent deferred sales charges on Class B and
Class C shares.
3 The Lipper Intermediate Municipal Bond Fund Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
30
<PAGE> 285
FEES AND EXPENSES OF THE KENTUCKY MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .27% .27% .27% .27%
Total Annual Fund Operating 1.07% 1.72% 1.72% .72%
Expenses
Fee Waiver [and/or Expense (.17%) (.17%) (.17%) (.07%)
Reimbursement](4)
Net Expenses .90% 1.55% 1.55% .65%
- -------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55% for Class B shares, 1.55%
for Class C, and .65% for Class I shares for the period beginning November 1,
1999 and ending on October 31, 2000.
31
<PAGE> 286
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIOD SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $538 $158 $658 $158 $258 $66
3 Years $759 $525 $825 $525 $525 $223
5 Years $998 $917 $1,117 $917 $917 $394
10 Years $1,682 $1,844 $1,844 $2,016 $2,016 $888
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
32
<PAGE> 287
ONE GROUP LOUISIANA MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE LOUISIANA MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and Louisiana
personal income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE LOUISIANA MUNICIPAL BOND FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
Louisiana and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Louisiana municipal securities is exempt
from Federal income tax and Louisiana personal income tax. A portion of the
Fund's total assets also may be invested in municipal securities issued by other
states and territories. The Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors selects securities for
the Fund by analyzing both individual securities and different market sectors.
Taking a long-term approach, Banc One Investment Advisors looks for market
sectors and individual securities that it believes will perform well over market
cycles. The Louisiana Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward evaluation
of interest rate risk, credit risk, and structural risk. For more information
about the Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE LOUISIANA MUNICIPAL BOND FUND?
The main risks of investing in the Louisiana Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Louisiana Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Louisiana
Municipal Bond Fund.
Non-Diversification: The Louisiana Municipal Bond Fund is
"non-diversified". 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. Non-diversification increases 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.
Geographic Concentration: Because the Louisiana Municipal Bond Fund is
not diversified and because it concentrates its investments in the
securities of issuers in Louisiana, certain factors including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives may have a disproportionately negative
effect on the Fund's investments. For example, the Louisiana economy 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. Louisiana's average employment growth for the past five years
is the
33
<PAGE> 288
highest since 1982. Economic growth is expected to follow the
national trend and slow over the next five years.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE LOUISIANA MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Louisiana Municipal Bond Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE LOUISIANA MUNICIPAL BOND FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1990 7.41%
1991 9.93%
1992 7.97%
1993 10.35%
1994 -3.25%
1995 12.02%
1996 4.39%
1997 7.40%
1998 5.59%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.51%.
34
<PAGE> 289
BEST QUARTER: 4.81% 1Q 1995; WORST QUARTER: -4.19% 1Q 1994
--------------------- -------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return table do include applicable sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 12/29/89)(2)
-------------------
<S> <C> <C> <C>
One Group Louisiana Municipal Bond Fund -2.87% 4.38% 5.72%
Lehman Brother 7 Year Municipal Bond
Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- ---------------------------------------------------------------------------------------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 9/16/94)(2)
------------------
One Group Louisiana Municipal Bond -3.75% 4.26%
Fund
Lehman Brothers 7 Year Municipal
Bond Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- ---------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 12/29/89)
---------------
One Group Louisiana Municipal Bond 1.92% 5.46% 6.29%
Fund
Lehman Brothers 7 Year Municipal Bond
Index(2)
Lipper Intermediate Municipal Bond
Funds Index(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
1. Performance for Class I shares is based on Class A performance adjusted to
reflect the absence of sales charges.
2. The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Louisiana Municipal Bond Fund reflects the
deduction of these value-added services as well as the deduction of sales
charges on Class A shares and contingent deferred sales charges on Class B and
Class C shares.
3. The Lipper Intermediate Municipal Bond Fund Index consists of
the equally weighted average monthly return of the largest funds within the
universe of all funds in the category.
35
<PAGE> 290
FEES AND EXPENSES OF THE LOUISIANA MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .24% .24% .24% .24%
Total Annual Fund Operating 1.19% 1.84% 1.84% .84%
Expenses
Fee Waiver [and/or Expense (.29%) (.29%) (.29%) (.19%)
Reimbursement](4)
Net Expenses .90% 1.55% 1.55% .65%
- -------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55% for Class B shares, 1.55%
for Class C shares and .65% for Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
36
<PAGE> 291
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $538 $158 $658 $158 $258 $66
3 Years $783 $550 $850 $550 $550 $249
5 Years $1,048 $969 $1,169 $969 $969 $447
10 Years $1,804 $1,964 $1,964 $2,135 $2,135 $1,020
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1.Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $566
Class B (no redemption) $187
Class B (with redemption) $687
Class C (no redemption) $187
Class C (with redemption) $287
Class I $86
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
37
<PAGE> 292
ONE GROUP MICHIGAN MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE MICHIGAN MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and Michigan
personal income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE MICHIGAN MUNICIPAL BOND FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
Michigan and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Michigan municipal securities is exempt
from Federal income tax and Michigan personal income tax. A portion of the
Fund's total assets also may be invested in municipal securities issued by other
states and territories. The Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors selects securities for
the Fund by analyzing both individual securities and different market sectors.
Taking a long-term approach, Banc One Investment Advisors looks for market
sectors and individual securities that it believes will perform well over market
cycles. The Michigan Municipal Bond Fund spreads its holdings across various
security types within the municipal securities market. Banc One Investment
Advisors selects individual securities after performing a risk/reward evaluation
of interest rate risk, credit risk, and structural risk. For more information
about the Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MICHIGAN MUNICIPAL BOND FUND?
The main risks of investing in the Michigan Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Michigan Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Michigan
Municipal Bond Fund.
Non-Diversification: The Michigan Municipal Bond Fund is
"non-diversified". 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. Non-diversification increases 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.
Geographic Concentration: Because the Michigan Municipal Bond Fund is
not diversified and because it concentrates its investments in the
securities of issuers in Michigan, certain factors including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives may have a disproportionately negative
effect on the Fund's investments. For example, the Michigan economy is
heavily dependent on the automobile industry, a highly cyclical
industry. This affects the revenue streams of the State and local
governments because of its impact on tax sources, particularly sales
taxes, income taxes, and Michigan single business taxes. State and
local revenues also are affected by statutory and constitutional
changes adopted in 1993 and 1994, which limit annual assessment
increases and transfer a substantial part of the
38
<PAGE> 293
financing of education costs from local property taxes to sales taxes
and other taxes imposed at the State level.
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE MICHIGAN MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Michigan Municipal Bond Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MICHIGAN MUNICIPAL BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these were included,
the return would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I
1994 -5.37%
1995 16.43%
1996 3.46%
1997 9.42%
1998 5.92%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.46%.
39
<PAGE> 294
BEST QUARTER: 6.71% 1Q 1995; WORST QUARTER: -5.52% 1Q 1994
---------------- -----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/1/93)
--------------
<S> <C> <C> <C>
One Group Michigan Municipal Bond Fund -3.03% 5.55% 4.97%
Lehman Brother Michigan Municipal
Bond Index(1)
Lipper Michigan Municipal Bond Funds
Index(3)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/1/93)(2)
-----------------
One Group Michigan Municipal Bond Fund 4.05% 5.55% 5.37%
Lehman Brothers Michigan Municipal
Bond Index(1)
Lipper Michigan Municipal Bond Funds
Index(3)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------ ------- (SINCE 2/1/93)
--------------
One Group Michigan Municipal Bond Fund 1.75% 6.46% 5.84%
Lehman Brothers Michigan Municipal
Bond Index(1)
Lipper Michigan Municipal Bond Funds
Index(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
1. The Lehman Brothers Michigan Municipal Bond Index is an unmanaged index
generally representative of the Michigan Municipal Bond Market. The performance
of the index does not reflect the deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the performance of the One Group
Michigan Municipal Bond Fund reflects the deduction of these value-added
services as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and Class C shares.
2. Performance for Class B shares is based on Class A share performance adjusted
to reflect applicable sales charges.
3. The Lipper Michigan Municipal Band Fund Index is comprised of funds that
limit their assets to those securities that are exempt from taxation in a
specific state (double tax-exempt) or city (triple tax-exempt).
40
<PAGE> 295
FEES AND EXPENSES OF THE MICHIGAN MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C>
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .27% .27% .27% .27%
Total Annual Fund Operating 1.07% 1.72% 1.72% .72%
Expenses
Fee Waiver [and/or Expense (.17%) (.17%) (.17%) (.07%)
Reimbursement](4)
Net Expenses .90% 1.55% 1.55% .65%
- --------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55% for Class B shares, 1.55%
for Class C shares, and .65% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
41
<PAGE> 296
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $538 $158 $658 $158 $258 $66
3 Years $759 $525 $825 $525 $525 $223
5 Years $998 $917 $1,117 $917 $917 $394
10 Years $1,682 $1,844 $1,844 $2,016 $2,016 $888
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
42
<PAGE> 297
ONE GROUP OHIO MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE OHIO MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and Ohio personal
income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE OHIO MUNICIPAL BOND FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
Ohio and its respective authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Ohio municipal securities is exempt from
Federal income tax and Ohio personal income tax. A portion of the Fund's total
assets also may be invested in municipal securities issued by other states and
territories. The Fund's average weighted maturity normally will range between
five and 20 years. Banc One Investment Advisors selects securities for the Fund
by analyzing both individual securities and different market sectors. Taking a
long-term approach, Banc One Investment Advisors looks for market sectors and
individual securities that it believes will perform well over market cycles. The
Ohio Municipal Bond Fund spreads its holdings across various security types
within the municipal securities market. Banc One Investment Advisors selects
individual securities after performing a risk/reward evaluation of interest rate
risk, credit risk, and structural risk. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE OHIO MUNICIPAL BOND FUND?
The main risks of investing in the Ohio Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Ohio Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you invest in the Ohio
Municipal Bond Fund.
Non-Diversification: The Ohio Municipal Bond Fund is "non-diversified".
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. Non-diversification increases 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.
Geographic Concentration: Because the Ohio Municipal Bond Fund is not
diversified and because it concentrates its investments in the
securities of issuers in Ohio, certain factors including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives may have a disproportionately negative
effect on the Fund's investments. For example, 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.
43
<PAGE> 298
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of a Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE OHIO MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the Ohio Municipal Bond Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE OHIO MUNICIPAL BOND FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1992 8.54%
1993 11.52%
1994 -4.71%
1995 13.28%
1996 4.15%
1997 7.46%
1998 5.64%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.33%.
BEST QUARTER: 3.93% 1Q 1993; WORST QUARTER: -4.71 1Q 1994
--------------- ---------------
44
<PAGE> 299
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table do include applicable sales charges.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------ (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
One Group Ohio Municipal Bond Fund -2.96% 4.34% 4.98%
Lehman Brother 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 1/14/94)
---------------
One Group Ohio Municipal Bond Fund -3.84% 4.33% 3.34%
Lehman Brothers 7 Year Municipal
Bond Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- -------- ------ ------- (SINCE 7/2/91)
--------------
One Group Ohio Municipal Bond Fund 1.84% 5.57% 6.20%
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
1 The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment group municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group Arizona Municipal Bond Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A shares and contingent deferred sales charges on Class B and Class C shares.
2 The Lipper Intermediate Municipal Bond Funds Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
45
<PAGE> 300
FEES AND EXPENSES OF THE OHIO MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .60% .60% .60% .60%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .23% .23% .23% .23%
Total Annual Fund Operating 1.18% 1.83% 1.83% .83%
Expenses
Fee Waiver [and/or Expense (.31%) (.31%) (.31%) (.21%)
Reimbursement](4)
Net Expenses .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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .87% for Class A shares, 1.52% for Class B shares, 1.52%
for Class C shares, and .62% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
46
<PAGE> 301
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $535 $155 $655 $155 $255 $63
3 Years $779 $545 $845 $545 $545 $244
5 Years $1,041 $961 $1,161 $961 $961 $440
10 Years $1,791 $1,952 $1,952 $2,123 $2,123 $1,006
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $565
Class B (no redemption) $186
Class B (with redemption) $686
Class C (no redemption) $186
Class C (with redemption) $286
Class I $85
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
47
<PAGE> 302
ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND
WHAT IS THE GOAL OF THE WEST VIRGINIA MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income tax and West Virginia
personal income tax, consistent with the preservation of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE WEST VIRGINIA MUNICIPAL BOND
FUND?
The Fund invests in municipal securities issued by or on behalf of the state of
West Virginia and its respective authorities, political subdivisions, agencies
and instrumentalities. The interest paid on West Virginia municipal securities
is exempt from Federal income tax and West Virginia personal income tax. A
portion of the Fund's total assets also may be invested in municipal securities
issued by other states and territories. The Fund's average weighted maturity
normally will range between five and 20 years. Banc One Investment Advisors
selects securities for the Fund by analyzing both individual securities and
different market sectors. Taking a long-term approach, Banc One Investment
Advisors looks for market sectors and individual securities that it believes
will perform well over market cycles. The West Virginia Municipal Bond Fund
spreads its holdings across various security types within the municipal
securities market. Banc One Investment Advisors selects individual securities
after performing a risk/reward evaluation of interest rate risk, credit risk,
and structural risk. For more information about the Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE WEST VIRGINIA MUNICIPAL BOND FUND?
The main risks of investing in the West Virginia Municipal Bond Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the West Virginia Municipal Bond Fund will change every day
in response to market conditions. You may lose money if you invest in the West
Virginia Municipal Bond Fund.
Non-Diversification: The West Virginia Municipal Bond Fund is
"non-diversified". 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. Non-diversification increases 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.
Geographic Concentration: Because the West Virginia Municipal Bond Fund
is not diversified and because it concentrates its investments in the
securities of issuers in West Virginia, certain factors including
economic conditions, constitutional amendments, legislative and
executive measures, and voter initiatives may have a disproportionately
negative effect on the Fund's investments. For example, 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. West Virginia's unemployment rate is
above the national average.
48
<PAGE> 303
Interest Rate Risk: The Fund invests mainly in bonds and other debt
securities. These securities 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. Your investment will
decline in value if the value of the Fund's investments decrease.
Securities with greater interest rate sensitivity and longer maturities
tend to produce higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income securities will
not affect cash income generated, but may affect the value of your
investment.
Derivatives: The Fund may invest in securities that are considered to
be DERIVATIVES. The value of derivative securities is dependent upon
the performance of underlying assets or securities. If the underlying
assets do not perform as expected, the value of the derivative security
and your investment in the Fund declines. Generally, derivatives are
more volatile and are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and counterparties will not
make payments on securities and repurchase agreements held by the Fund.
Such default could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to
greater volatility in the price of a security and in shares of the
Fund. Lower credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. 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.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE WEST VIRGINIA MUNICIPAL BOND FUND PERFORMED?
By showing the variability of the West Virginia Municipal Bond Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE WEST VIRGINIA
MUNICIPAL BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1989 7.54%
1990 7.16%
1991 9.01%
1992 6.93%
1993 7.73%
1994 -0.12%
1995 10.66%
1996 4.71%
1997 7.87%
1998 5.87%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was -1.66%. The West Virginia Municipal Bond Fund commenced operations on
January 20, 1997 subsequent to the transfer of assets from a common trust fund
with materially equivalent investment objectives, policies, guidelines, and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for period prior to the Fund's commencement
of operations as adjusted to reflect the expenses associated with the Fund. The
quoted performance of the Fund for periods prior to the Fund's commencement of
operations, as adjusted to reflect the expenses associated with the Fund. The
common trust fund was not registered with the SEC and was not subject to the
investment restrictions, limitations and diversification requirements imposed by
law on registered mutual funds. If the common trust fund had been registered,
its return may have been lower.
49
<PAGE> 304
BEST QUARTER: 4.06% 1Q 1995; WORST QUARTER: -2.04% 2Q 1999
------------------- -----------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 12/31/83)(2)
-------------------
<S> <C> <C> <C> <C>
One Group West Virginia Municipal -3.21% 4.13% 5.36% 6.45%
Bond Fund
Lehman Brother 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(3)
- ---------------------------------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 12/31/83)(2)
-------------------
One Group West Virginia Municipal -4.04% 4.11% 5.19% 6.09%
Bond Fund
Lehman Brothers 7 Year Municipal
Bond Index(1)
Lipper Intermediate Municipal Bond
Funds Index(3)
- ---------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 12/31/83)(2)
-------------------
One Group West Virginia Municipal 1.71% 5.31% 6.09% 7.01%
Bond Fund
Lehman Brothers 7 Year Municipal Bond
Index(1)
Lipper Intermediate Municipal Bond
Funds Index(3)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The Lehman Brothers 7 Year Municipal Bond Index is an unmanaged index
comprised of investment grade municipal bonds with maturities close to seven
years. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as management fees. By contrast, the
performance of the One Group West Virginia Municipal Bond Fund reflects the
deduction of these value-added services as well as the deduction of sales
charges on Class A shares and contingent deferred sales charges on Class B and
Class C shares.
2. The West Virginia Municipal Bond Fund commenced operations on January 20,
1997 subsequent to the transfer of assets from a common trust fund with
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance of the Fund includes the
performance of the common trust fund for period prior to the Fund's commencement
of operations as adjusted to reflect the expenses associated with the Fund. The
quoted performance of the Fund for periods prior to the Fund's commencement of
operations, as adjusted to reflect the expenses associated with the Fund. The
common trust fund was not registered with the SEC and was not subject to the
investment restrictions, limitations and diversification requirements imposed by
law on registered mutual funds. If the common trust fund had been registered,
its return may have been lower.
3. The Lipper Intermediate Municipal Bond Funds Index consists of the equally
weighted average monthly return of the largest funds within the universe of all
funds in the category.
50
<PAGE> 305
FEES AND EXPENSES OF THE WEST VIRGINIA MUNICIPAL BOND FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
Maximum Sales Charge 4.50% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee None None None None
Exchange Fee None None None None
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .27% .27% .27% .27%
Total Annual Fund Operating
Expenses 1.07% 1.72% 1.72% .72%
Fee Waiver [and/or Expense (.17%) (.17%) (.17%) (.07%)
Reimbursement](4)
Net Expenses .90% 1.55% 1.55% .65%
- -------------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .90% for Class A shares, 1.55% for Class B shares, 1.55%
for Class C shares, and .65% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
51
<PAGE> 306
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM TO THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $538 $158 $658 $158 $258 $66
3 Years $759 $525 $825 $525 $525 $223
5 Years $998 $917 $1,117 $917 $917 $394
10 Years $1,682 $1,844 $1,844 $2,016 $2,016 $888
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1.Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
52
<PAGE> 307
MORE ABOUT THE FUNDS
Each of the ten funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of the Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The mutual funds described in this Prospectus are designed to produce income
exempt from Federal and/or state income tax. The principal investment strategies
that are used to meet each Fund's investment objective are described in Fund
Summaries: Investments, Risk & Performance in the front of this Prospectus. They
are also described below.
--------------------------------------------------------------
FUNDAMENTAL POLICIES
Each Fund's investment strategy may involve "fundamental
policies." A policy is fundamental if it cannot be changed
without the consent of a majority of the outstanding shares of
the Fund.
--------------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND. The Fund invests at least 80%
of its net assets in investment grade municipal securities, as well as
mortgage-backed securities and restricted securities. The securities in
which the Fund invests may have fixed rates of return or floating or
variable rates.
- As a matter of fundamental policy, the Fund invests as least 65%
of its total assets in bonds.
- The Fund will, from time to time, invest more than 25% of its net
assets in municipal housing authority obligations.
- Up to 20% of the Fund's total assets may be held in cash and cash
equivalents.
- The Fund's average weighted maturity normally will be three years
or less.
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND. The Fund invests at least
80% of its net assets in investment grade municipal securities,
including restricted securities. The securities in which the Fund
invests may have fixed rates of return or floating or variable rates.
- As a matter of fundamental policy, the Fund invests at least 65%
of its total assets in bonds.
- The Fund's average weighted maturity normally will range between
three and 10 years.
----------------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current
maturities (that is, the term of the securities) of the
individual bonds in a fund. Average maturity is important to bond
investors as an indication of a fund's sensitivity to changes in
interest rates. The longer the average maturity, the more
fluctuation in share price you can expect. The terms
"Intermediate" and "Short-Term" in a fund's name refer to the
average maturity the fund maintains.
----------------------------------------------------------------
ONE GROUP TAX-FREE BOND FUND. The Fund invests at least 80% of its net
assets in investment grade municipal securities. The securities in
which the Fund invests may have fixed rates of return or floating or
variable rates.
- As a matter of fundamental policy, the Fund invests as least 65%
of its total assets in bonds.
- Up to 20% of the Fund's total assets may be held in cash and cash
equivalents.
- The Fund may invest in securities without regard to maturity.
53
<PAGE> 308
ONE GROUP MUNICIPAL INCOME FUND. The Fund invests at least 80% of its
net assets in investment grade municipal securities, as well as
mortgage-backed securities and restricted securities. The securities in
which the Fund invests may have fixed rates of return or floating or
variable rates.
- As a matter of fundamental policy, the Fund invests as 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, from time to time,
the Fund will invest more than 25% of its net assets in
municipal housing authority obligations.
- The Fund's average weighted maturity will range from five to 15
years, although the Fund may shorten its average weighted
maturity to as little as two years if appropriate for temporary
defensive purposes.
ONE GROUP ARIZONA MUNICIPAL BOND FUND. The Fund invests at least 80% of
its total assets in municipal securities issued by or on behalf of the
State of Arizona and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a fundamental
policy.
- The Fund also may invest up to 20% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase Arizona municipal securities only if it
receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is exempt
from Federal income tax and Arizona personal income tax.
- The securities in which the Fund invests may have fixed rates of
return or floating or variable rates.
- The Fund's average weighted maturity normally will be between
five and 20 years, although the Fund may invest in securities
with any maturity.
ONE GROUP KENTUCKY MUNICIPAL BOND FUND. The Fund invests at least 80%
of its total assets in municipal securities that are exempt from
Federal income tax. Alternatively, the Fund invests its assets so that
80% of its annual interest income is exempt from Federal income tax.
The Fund invests at least 65% of its total assets in securities issued
by or on behalf of the State of Kentucky and its respective
authorities, political subdivisions, agencies and instrumentalities.
These are fundamental policies.
- The Fund also may invest up to 35% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase Kentucky municipal securities only if it
receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is exempt
from Federal income tax and Kentucky personal income tax.
- The securities in which the Fund invests may have fixed rates of
return or floating or variable rates.
- The Fund's average weighted maturity normally will be between
five and 20 years, although the Fund may invest in securities
with any maturity.
ONE GROUP LOUISIANA MUNICIPAL BOND FUND. The Fund invests at least 80%
of its total assets in municipal securities issued by or on behalf of
the State of Louisiana and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a fundamental
policy.
- The Fund also may invest up to 20% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase Louisiana municipal securities only if it
receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is exempt
from Federal income tax and Louisiana personal income tax.
- The securities in which the Fund invests may have fixed rates of
return or floating or variable rates.
- The Fund's average weighted maturity normally will be between
five and 20 years, although the Fund may invest in securities
with any maturity.
54
<PAGE> 309
ONE GROUP MICHIGAN MUNICIPAL BOND FUND. The Fund invests at least 80%
of its total assets in municipal securities issued by or on behalf of
the State of Michigan and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a fundamental
policy.
- The Fund also may invest up to 20% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase Michigan municipal securities only if
it receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is
exempt from Federal income tax and Michigan personal income
tax.
- The securities in which the Fund invests may have fixed rates
of return or floating or variable rates.
- The Fund may invest in securities without regard to any
maturity.
- The Fund's average weighted maturity normally will be between
five and 20 years, although the Fund may invest in securities
with any maturity.
ONE GROUP OHIO MUNICIPAL BOND FUND. The Fund invests at least 80% of
its total assets in municipal securities issued by or on behalf of the
State of Ohio and its respective authorities, political subdivisions,
agencies and instrumentalities. This is a fundamental policy.
- The Fund also may invest up to 20% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase Ohio municipal securities only if it
receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is
exempt from Federal income tax and Ohio personal income tax.
- The securities in which the Fund invests may have fixed rates
of return or floating or variable rates.
ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND. The Fund invests at least
80% of its total assets in municipal securities issued by or on behalf
of the State of West Virginia and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a fundamental
policy.
- The Fund also may invest up to 20% of its total assets in
municipal securities of other states and territories.
- The Fund will purchase West Virginia municipal securities only
if it receives assurances from attorneys for the issuer of the
securities that the interest payable on the securities is
exempt from Federal income tax and West Virginia personal
income tax.
- The securities in which the Fund invests may have fixed rates
of return or floating or variable rates.
- The Fund's average weighted maturity normally will be between
five and 20 years, although the Fund may invest in securities
with any maturity.
INVESTMENT RISKS
The main risks of investing in the Funds is are described in the Fund Summaries.
Additional risk information is described below.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
----------------------------------------------------------
-55-
<PAGE> 310
PREPAYMENT AND CALL RISK: The Funds may invest in a portion of their assets in
mortgage-backed securities. These securities are subject to prepayment and call
risk. The issuers of mortgage-backed and other callable securities may be able
to repay principal in advance, especially when interest rates fall. Changes in
prepayment rates can affect the return on investment and yield of
mortgage-backed securities. When mortgages are prepaid, a Fund may have to
reinvest in securities with a lower yield. A Fund also may fail to recover
premiums paid for the securities, resulting in unexpected capital loss.
INVESTMENT POLICIES
Each Fund's investment objective and the following investment policies
summarized below are fundamental. In addition to the fundamental policies
mentioned in PRINCIPAL INVESTMENT STRATEGIES, 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, the Kentucky
Municipal Bond Fund, and the Michigan 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 agreements 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 United States
government or its agencies and instrumentalities and
repurchase agreements involving such securities; and
- Municipal 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 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.
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PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to debt securities
(i.e., bonds). Generally, ratings are divided into two main categories:
"Investment Grade Securities" and "Non-Investment Grade Securities." Although
there is always a risk of default, rating agencies believe that issuers of
Investment Grade Securities have a high probability of making payments on such
securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet the rating criteria
described below.
- 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 also may 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
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITION For liquidity and to respond to unusual market
conditions, the Funds may invest all or most of their assets in cash and CASH
EQUIVALENTS (see below) for temporary defensive purposes. These investments may
result in a lower yield than lower-quality or longer term investments and may
prevent the Funds from meeting their investment objectives.
------------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased. They
include securities issued by the U.S. Government, its agencies and
instrumentalities, repurchase agreements (other than equity repurchase
agreements), certificates of deposit, bankers' acceptances, commercial
paper (rated in one of the two highest rating categories), variable
rate master demand notes, and bank money market deposit accounts.
------------------------------------------------------------------------
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
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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, 1999 is shown on
the Financial Highlights. To the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at ordinary income tax rates.
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HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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 Fund is 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,
Christmas Eve, 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 if the Fund's Custodian, State Street
Bank and Trust Company, 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?
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."
- - When deciding what class of shares to buy, you should consider the
amount of your investment, the length of time you intend to hold the
shares, and the sales charges and expenses applicable to each class of
shares. 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. Sales charges are discussed in the section of this
prospectus entitled SALES CHARGES.
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.
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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 per Fund ($100 for
employees of Bank One Corporation and its affiliates).
- Subsequent investments must be at least $25 per Fund .
- You may purchase no more than $249,999 of Class B shares. This
is because Class A shares offer a reduced sales charge on
purchases of $250,000 or more and have lower expenses. The
section of this prospectus entitled WHAT KIND OF SHARES CAN I
BUY? provides information that can help you choose the
appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
If you choose to pay by wire, please call The One Group Services
Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does in accept "third
party checks". Checks made payable to any individual and endorsed to
One Group are considered third party checks. All checks must be payable
to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
8. 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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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 to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Intermediate Tax-Free Bond Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - 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, 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 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 per Fund, but
minimum automatic additions are only $25 per Fund. 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 five (5) calendar days.
- - 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 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.
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<PAGE> 315
- - 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 One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the sales charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES 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 buy Class A shares of the Short-Term Municipal Bond Fund, the following
table shows the amount of sales charge and the commissions paid to Shareholder
Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.07%
$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 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 and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
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>
Or if you redeem Class B shares of the Short-Term Municipal Bond Fund prior to
the fourth anniversary of purchase, you will be assessed a CDSC according to the
following schedule:
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<PAGE> 316
<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 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 of all
the Funds except for the Short-Term Municipal Bond Fund. Shareholder Servicing
Agents receive a commission of 2.75% of the purchase price of Class B shares of
the Short-Term Municipal Bond Fund.
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.
- - No CDSC is imposed on share appreciation, nor is a CDSC 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 acquired through
dividend reinvestment followed by 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 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 One
Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees. These fees are called "12b-1 fees".
12b-1 fees are paid by 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 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
financing the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
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<PAGE> 317
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
.90% 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)
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis,
over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
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 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:
- 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
One Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which
participate in select affinity programs with Bank One
Corporation and its affiliates and subsidiaries.
- 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.
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<PAGE> 318
- Certain 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 One Group
Fund 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 One Group Fund, for which a sales charge was paid, but only
if the purchase is made within 60 days of the sale or distribution.
7. Bought with assets of One Group.
8. 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.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Fund:
1. If you withdraw, no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need to participate 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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I Pay a Sales Charge on an Exchange?
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Fund:
1. If you withdraw, no more than 10% of the value of your account.
Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need
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. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I Pay a Sales Charge on an Exchange?
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<PAGE> 319
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group Fund.
- - 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 One Group Fund, 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
One Group Fund.
- - Class C shares of a Fund may be exchanged for Class C shares of another
One Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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.
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<PAGE> 320
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, 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, 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:
One Group
c/o State Street Bank and Trust Company
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 participant 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. your Shareholder Servicing Agent.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
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<PAGE> 321
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Funds will attempt to honor requests for same day payment
if the request is received before 4:00 p.m. ET. If redemption requests
are received after 4:00 p.m. ET, the Funds will attempt to wire payment
the next business day.
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 The One Group Service 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.
- - 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, 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. Shares received from dividend and capital gains
reinvestment are included in calculating the 10%. The
applicable Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually. Withdrawals in
excess of 10% will subject the entire annual withdrawal to the
applicable sales charge.
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
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the
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<PAGE> 322
same manner in which it computes its NAV. This process minimizes the
effect of large redemptions on the Fund and its remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - Because of the high cost of handling small investments, 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 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- - 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 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 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.
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends 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.
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
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<PAGE> 323
effective upon receipt by State Street. You also may call The One Group Services
Company at 1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
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<PAGE> 324
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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
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 Short-Term
Municipal Bond Fund, the Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Kentucky Municipal Bond Fund, the Louisiana Municipal
Bond Fund, the Ohio Municipal Bond Fund and the Michigan 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 and the Tax-Free Bond Fund may invest as much as
20% of their 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, the
excess of net short-term capital gains over net long-term capital losses) and
net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis. Dividends you receive
from a Fund, other than "exempt-interest dividends," will be taxable to you,
whether reinvested or received in cash. Dividends from a Fund's net investment
income, if any, will be taxable as ordinary income and distributions from a
Fund's long-term capital gains will be taxable to you as such, regardless of how
long you have held the shares. Distributions are taxable to you even if they are
paid from income or gains earned by a Fund prior to your investment (and thus
were included in the price you paid).
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
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<PAGE> 325
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.
Michigan Taxes: Distributions received from the Michigan Municipal Bond Fund are
exempt from Michigan personal income tax to the extent they are derived from
interest on tax-exempt securities, under the current position of the Michigan
Department of Treasury. Such distributions, if received in connection with a
shareholder's business activity, may, however, be subject to Michigan single
business tax. For Michigan personal income tax, and single business tax
purposes, Fund distributions attributable to any source other than interest on
tax-exempt securities will be fully taxable. Fund distributions may be subject
to the uniform city income tax imposed by certain Michigan cities.
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, call
1-800-480-4111, or visit www.onegroup.com.
REPORTING
In September and March you will receive a financial report from One
Group. In addition, One Group will periodically send you proxy
statements and other reports.
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MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to One
Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentages of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates.
ANNUAL RATE AS PERCENTAGE
OF AVERAGE DAILY NET ASSETS
One Group Short-Term Municipal Income Fund .31%
One Group Intermediate Tax-Free Bond Fund .39%
One Group Tax-Free Bond Fund* .40%
One Group Municipal Income Fund .35%
One Group Arizona Municipal Bond Fund .41%
One Group Kentucky Municipal Bond Fund .36%
One Group Louisiana Municipal Bond Fund .38%
One Group Michigan Municipal Bond Fund* .39%
One Group Ohio Municipal Bond Fund .33%
One Group West Virginia Municipal Bond Fund .37%
* In March 1999, the Pegasus Funds and One Group Mutual Funds merged. The
investment advisory fee includes fees paid to First Chicago NBD Investment
Management Company, an affiliate of Banc One Investment Advisors, as advisor to
the Pegasus Funds.
THE FUND MANAGERS
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.
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<PAGE> 327
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
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FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are incorporated in the Statement of Additional
Information, which is available upon request.
ONE GROUP(R) SHORT-TERM MUNICIPAL BOND FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED
PERIOD ENDED DECEMBER 31,
CLASS I JUNE 30, 1999 1998(a)
- ------- ------------- -------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Investment Activities:
Net investment income 0.25
Net realized and unrealized gains (losses) from investments
and futures 0.16
Total from Investment Activities 0.41
Distributions:
Net investment income (0.25)
From net realized gain --
Total Distributions (0.25)
NET ASSET VALUE, END OF PERIOD $ 10.16
Total Return 4.15%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $118,296
Ratio of expenses to average net assets 0.61%(b)
Ratio of net investment income to average net assets 3.75%(b)
Ratio of expenses to average net assets* 0.70%(b)
Portfolio Turnover 32.23%(c)
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a)For the period May 4, 1998 (commencement of operations) through
December 31, 1998. (b)Annualized. (c)Not Annualized
<CAPTION>
PERIOD ENDED
PERIOD ENDED DECEMBER 31,
CLASS A JUNE 30, 1999 1998(a)
- ------- ------------- -------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment Activities:
Net investment income 0.22
Net realized and unrealized gains (losses)
from investments and futures 0.16
Total from Investment Activities 0.38
Distributions:
Net investment income (0.23)
From net realized gain --
Total Distributions (0.23)
NET ASSET VALUE, END OF PERIOD $10.15
Total Return 3.89%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $559
Ratio of expenses to average net assets 0.86%(c)
Ratio of net investment income to average net assets 3.53%(c)
Ratio of expenses to average net assets* 0.99%(c)
Portfolio Turnover 32.23%(b)
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a)For the period May 4, 1998 (commencement of operations) through
December 31, 1998. (b)Not Annualized. (c)Annualized.
</TABLE>
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<PAGE> 329
ONE GROUP(R) SHORT-TERM MUNICIPAL BOND FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED
PERIOD ENDED DECEMBER 31,
CLASS B JUNE 30, 1999 1998(A)
- ------- ------------- -------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment Activities:
Net investment income 0.13
Net realized and unrealized gains (losses) from
investments and futures 0.21
Total from Investment Activities 0.34
Distributions:
Net investment income (0.15)
From net realized gains --
Total Distributions (0.15)
NET ASSET VALUE, END OF PERIOD $10.19
Total Return 3.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 112
Ratio of expenses to average net assets 1.61%(c)
Ratio of net investment income to average net assets 2.43%(c)
Ratio of expenses to average net assets* 1.68%(c)
Portfolio Turnover 32.23%(b)
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a)For the period May 4, 1998 (commencement of operations) through
December 31, 1998. (b) Not Annualized. (c) Annualized.
</TABLE>
CLASS C
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<PAGE> 330
<TABLE>
<CAPTION>
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.92 $ 10.67 $ 10.64 $ 10.49
Investment Activities:
Net investment income 0.52 0.54 0.52 0.54
Net realized and unrealized
gains (losses) from
investments 0.31 0.27 0.04 0.15
Total from Investment Activities 0.83 0.81 0.56 0.69
Distributions:
Net investment income (0.52) (0.54) (0.51) (0.54)
In excess of net investment
income -- -- -- --
Net realized gains (0.08) (0.02) (0.02) --
In excess of net realized gains -- -- -- --
Total Distributions (0.60) (0.56) (0.53) (0.54)
NET ASSET VALUE, END OF PERIOD $ 11.15 $ 10.92 $ 10.67 $ 10.64
Total Return 7.74% 7.76% 5.39% 6.75%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $493,686 $451,089 $217,201 $211,229
Ratio of expenses to
average net assets 0.60% 0.58% 0.54% 0.53%
Ratio of net investment
income to average net assets 4.70% 5.05% 4.87% 5.17%
Ratio of expenses to average
net assets* 0.81% 0.81% 0.87% 0.88%
Ratio of net investment income
to average net assets* 4.49% 4.82% 4.54% 4.82%
Portfolio turnover (a) 109.03% 86.89% 111.58% 199.76%
<FN>
*During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
</TABLE>
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<PAGE> 331
<TABLE>
<CAPTION>
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.91 $ 10.67 $ 10.63 $ 10.48
Investment Activities:
Net investment income 0.50 0.51 0.50 0.51
Net realized and unrealized
gains (losses) from investments 0.31 0.26 0.05 0.15
Total from Investment Activities 0.81 0.77 0.55 0.66
Distributions:
From net investment income (0.50) (0.51) (0.49) (0.49)
In excess of net investment
income -- -- -- (0.02)
Net realized gains (0.08) (0.02) (0.02) --
In excess of net realized gains -- -- -- --
Total Distributions (0.58) (0.53) (0.51) (0.51)
NET ASSET VALUE, END OF PERIOD $ 11.14 $ 10.91 $ 10.67 $ 10.63
Total Return (Excludes Sales Charge) 7.50% 7.39% 5.28% 6.49%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 14,515 $ 8,457 $ 6,622 $ 5,614
Ratio of expenses to average
net assets 0.85% 0.83% 0.79% 0.78%
Ratio of net investment income
to average net assets 4.45% 4.75% 4.62% 4.91%
Ratio of expenses to average
net assets* 1.16% 1.15% 1.22% 1.23%
Ratio of net investment income
to average net assets* 4.14% 4.43% 4.19% 4.46%
Portfolio turnover(a) 109.03% 86.89% 111.58% 199.76%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
</TABLE>
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<PAGE> 332
<TABLE>
<CAPTION>
ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.93 $ 10.68 $ 10.65 $10.50
Investment Activities:
Net investment income 0.43 0.45 0.43 0.46
Net realized and
unrealized gains (losses)
from investments 0.31 0.27 0.04 0.14
Total from Investment
Activities 0.74 0.72 0.47 0.60
Distributions:
From net investment income (0.43) (0.45) (0.42) (0.45)
Net realized gains (0.08) (0.02) (0.02) --
In excess of net
realized gains -- -- -- --
Total Distributions (0.51) (0.47) (0.44) (0.45)
NET ASSET VALUE, END
OF PERIOD $ 11.16 $ 10.93 $ 10.68 $10.65
Total Return (Excludes
Sales Charge) 6.81% 6.82% 4.48% 5.89%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 5,659 $ 3,307 $ 2,439 $1,116
Ratio of expenses to average
net assets 1.50% 1.47% 1.44% 1.43%
Ratio of net investment income
to average net assets 3.80% 4.09% 3.97% 4.29%
Ratio of expenses to average
net assets* 1.81% 1.78% 1.87% 1.88%
Ratio of net investment income
to average net assets* 3.49% 3.78% 3.54% 3.84%
Portfolio turnover (a) 109.03% 86.89% 111.58% 199.76%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
</TABLE>
CLASS C
-78-
<PAGE> 333
ONE GROUP TAX-FREE BOND FUND Financial Highlights
-79-
<PAGE> 334
<TABLE>
<CAPTION>
ONE GROUP(R) MUNICIPAL INCOME FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.66
Investment Activities:
Net investment income 0.51 0.53 0.56 0.57
Net realized and
unrealized gains
(losses) from investments 0.27 0.18 (0.03) 0.03
Total from Investment Activities 0.78 0.71 0.53 0.60
Distributions:
Net investment income (0.51) (0.53) (0.56) (0.57)
In excess of net
realized gains -- -- -- --
Total Distributions (0.51) (0.53) (0.56) (0.57)
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.84 $ 9.66 $ 9.69
Total Return 8.09% 7.49% 5.54% 6.46%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $617,885 $408,577 $241,115 $185,916
Ratio of expenses to
average net assets 0.57% 0.57% 0.56% 0.56%
Ratio of net investment
income to average
net assets 5.08% 5.38% 5.70% 6.02%
Ratio of expenses to
average net assets* 0.67% 0.68% 0.76% 0.74%
Ratio of net investment
income to average
net assets* 4.98% 5.27% 5.50% 5.84%
Portfolio turnover(a) 69.76% 62.83% 83.17% 66.02%
<FN>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
</TABLE>
-80-
<PAGE> 335
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.87 $ 9.69 $ 9.72 $ 9.67
Investment Activities:
Net investment income 0.49 0.51 0.55 0.55
Net realized and
unrealized gains
(losses) from
investments 0.27 0.18 (0.04) 0.05
Total from Investment
Activities 0.76 0.69 0.51 0.60
Distributions:
Net investment income (0.49) (0.51) (0.54) (0.55)
In excess of net
realized gains -- -- -- --
Total Distributions (0.49) (0.51) (0.54) (0.55)
NET ASSET VALUE,
END OF PERIOD $ 10.14 $ 9.87 $ 9.69 $ 9.72
Total Return (Excludes
Sales Charge) 7.84% 7.24% 5.35% 6.21%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period (000) $101,805 $41,829 $25,787 $11,462
Ratio of expenses
to average net assets 0.82% 0.82% 0.81% 0.81%
Ratio of net
investment income
to average net assets 4.83% 5.13% 5.45% 5.76%
Ratio of expenses to
average net assets* 1.02% 1.03% 1.11% 1.09%
Ratio of net investment
income to average
net assets* 4.63% 4.92% 5.15% 5.48%
Portfolio turnover (a) 69.76% 62.83% 83.17% 66.02%
<FN>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
</TABLE>
-81-
<PAGE> 336
<TABLE>
<CAPTION>
ONE GROUP(R) MUNICIPAL INCOME FUND Financial Highlights
YEAR ENDED JUNE 30,
-------------------
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.62
Investment Activities:
Net investment income 0.42 0.44 0.47 0.49
Net realized and unrealized gains
(losses) from investments 0.26 0.18 (0.03) 0.07
Total from Investment Activities 0.68 0.62 0.44 0.56
Distributions:
Net investment income (0.42) (0.44) (0.47) (0.49)
Total Distributions (0.42) (0.44) (0.47) (0.49)
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 9.84 $ 9.66 $ 9.69
Total Return (Excludes Sales Charge) 7.04% 6.55% 4.65% 5.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $56,911 $36,258 $23,204 $8,326
Ratio of expenses to average
net assets 1.47% 1.47% 1.46% 1.46%
Ratio of net investment income
to average net assets 4.18% 4.48% 4.80% 5.14%
Ratio of expenses to average
net assets* 1.67% 1.67% 1.76% 1.74%
Ratio of net investment income
to average net assets* 3.98% 4.28% 4.50% 4.86%
Portfolio turnover (a) 69.76% 62.83% 83.17% 66.02%
<FN>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
indicated. (a) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
<CAPTION>
YEAR ENDED JUNE 30, NOVEMBER 4, 1997
CLASS C 1999 TO JUNE 30, 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
-82-
<PAGE> 337
<TABLE>
<CAPTION>
ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND Financial Highlights
JAN. 20, 1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
CLASS I 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
-83-
<PAGE> 338
<TABLE>
<CAPTION>
JAN. 20, 1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
CLASS A 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
-84-
<PAGE> 339
<TABLE>
<CAPTION>
ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND Financial Highlights
JAN. 20, 1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
CLASS B 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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.
</TABLE>
CLASS C
-85-
<PAGE> 340
<TABLE>
<CAPTION>
ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND Financial Highlights
JANUARY 20,
1995 TO
YEAR ENDED JUNE 30, JUNE 30,
CLASS I 1999 1998 1997 1996 1995(a)(b)
- ------- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.20 $ 10.04 $ 9.92 $ 9.49
Investment Activities:
Net investment income 0.51 0.50 0.50 0.20
Net realized and unrealized
gains (losses) from
investments 0.20 0.16 0.12 0.43
Total from Investment Activities 0.71 0.66 0.62 0.63
Distributions:
Net investment income (0.51) (0.50) (0.50) (0.20)
Total Distributions (0.51) (0.50) (0.50) (0.20)
NET ASSET VALUE, END OF PERIOD $ 10.40 $ 10.20 $ 10.04 $ 9.92
Total Return 7.11% 6.74% 6.35% 6.56%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $122,220 $116,830 $30,300 $32,520
Ratio of expenses to average
net assets 0.60% 0.59% 0.68% 0.65%(d)
Ratio of net investment
income to average net assets 4.94% 5.12% 4.60% 4.70%(d)
Ratio of expenses to average
net assets* 0.69% 0.72% 1.02% 0.97%(d)
Ratio of net investment
income to average net assets* 4.85% 4.99% 4.26% 4.38%(d)
Portfolio turnover (e) 5.81% 13.30% 16.78% 19.75%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a) Period from date reorganized as a fund of One Group. Prior to
reorganizing as a fund of One Group, the Fund offered only one class of shares. (b) Class I commenced
operation on March 12, 1993 (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>
-86-
<PAGE> 341
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1995 TO
------------------- JUNE 30,
CLASS A 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a) Period from date reorganized as a fund of 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.
</TABLE>
-87-
<PAGE> 342
<TABLE>
<CAPTION>
ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND Financial Highlights
MARCH 16, 1995
TO
YEAR ENDED JUNE 30, JUNE 30,
CLASS B 1999 1998 1997 1996 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) 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.
</TABLE>
Class C
-88-
<PAGE> 343
<TABLE>
<CAPTION>
ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND Financial Highlights
YEAR
ENDED
MARCH 26, 1996
YEAR ENDED JUNE 30, THROUGH JUNE 30,
CLASS I 1999 1998 1997 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%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated. (a) Period from date reorganized as a fund of 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.
</TABLE>
-89-
<PAGE> 344
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED ENDED
JUNE 30, JUNE 30,
CLASS A 1999 1997 1996(a) 1995
- ------- ---- ---- ------- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.10 $ 9.93 $ 10.09 $ 9.38
Investment Activities:
Net investment income 0.47 0.47 0.24 0.50
Net realized and
unrealized gains
(losses) from
investments 0.16 0.17 (0.16) 0.71
Total from Investment
Activities 0.63 0.64 0.08 1.21
Distributions:
Net investment income (0.47) (0.47) (0.24) (0.50)
Net realized gains -- -- -- --
Total Distributions (0.47) (0.47) (0.24) (0.50)
NET ASSET VALUE,
END OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09
Total Return (Excludes
Sales Charge) 6.35% 6.55% 0.84%(b) 13.11%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) $47,078 $48,498 $53,479 $206,119
Ratio of expenses to
average net assets 0.85% 0.87% 0.69%(c) 0.62%
Ratio of net investment
income to average
net assets 4.60% 4.66% 4.71%(c) 5.07%
Ratio of expenses to
average net assets* 1.18% 1.19% 0.86%(c) 0.77%
Ratio of net investment
income to average
net assets* 4.27% 4.34% 4.54%(c) 4.92%
Portfolio turnover(d) 12.03% 17.39% 16.72% 28.00%
<FN>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated. (a) Upon reorganizing as a fund of 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.
</TABLE>
-90-
<PAGE> 345
<TABLE>
<CAPTION>
ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND Financial Highlights
SEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED,
JUNE 30, JUNE 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(a) 1995 (b)
- --------------------------------------------------------- ---- ---- ------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $ 9.93 $10.09 $9.36
Investment Activities:
Net investment income 0.41 0.40 0.21 0.42
Net realized and unrealized gains
(losses) from investments 0.16 0.17 (0.16) 0.73
Total from Investment Activities 0.57 0.57 0.05 1.15
Distributions:
Net investment income (0.41) (0.40) (0.21) (0.42)
Total Distributions (0.41) (0.40) (0.21) (0.42)
NET ASSET VALUE, END OF PERIOD $10.26 $10.10 $ 9.93 $10.09
Total Return (Excludes Sales Charge) 5.69% 5.87% 0.48%(c) 12.52%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,474 $3,835 $3,223 $2,115
Ratio of expenses to average net assets 1.50% 1.51% 1.50%(d) 1.37%
Ratio of net investment income to
average net assets 3.95% 4.02% 3.98%(d) 4.27%
Ratio of expenses to average
net assets* 1.83% 1.85% 1.70%(d) 1.52%
Ratio of net investment income to
average net assets* 3.62% 3.68% 3.78%(d) 4.12%
Portfolio turnover(e) 12.03% 17.39% 16.72% 28.00%
<FN>
*During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a) Upon
reorganizing as a fund of 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 operation 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.
</TABLE>
Class C
- -------
-91-
<PAGE> 346
<TABLE>
<CAPTION>
ONE GROUP(R) MICHIGAN MUNICIPAL BOND FUND Financial Highlights
PERIOD ENDED YEAR ENDED DECEMBER 31,
CLASS I JUNE 30, 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.93 $ 10.48 $ 10.60 $ 9.54
Investment Activities:
Net investment income 0.50 0.51 0.49 0.48
Net realized and unrealized
gains (losses)
from investments and futures 0.13 0.45 (0.14) 1.06
Total from Investment Activities 0.63 0.96 0.35 1.54
Distributions:
Net investment income (0.51) (0.51) (0.47) (0.48)
From net realized gain (0.02) -- -- --
Total Distributions (0.53) (0.51) (0.47) (0.48)
Net Asset Value, End of Period $ 11.03 $ 10.93 $ 10.48 $ 10.60
Total Return 5.94% 9.42% 3.44% 16.49
Ratios/Supplementary Data:
Net Assets at end
of period (000) $298,842 $ 61,768 $41,909 $32,419
Ratio of expenses to
average net assets 0.66% 0.67% 0.77% 0.79%
Ratio of net investment
income to average net assets 4.52% 4.84% 4.68% 4.71%
Ratio of expenses to
average net assets* 0.67% 0.73% 0.85% 1.04%
Portfolio turnover (a) 23.33% 37.84% 24.49% 26.97%
<FN>
*
During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among classes of shares issued.
</TABLE>
-92-
<PAGE> 347
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED DECEMBER 31,
CLASS A JUNE 30, 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.93 $ 10.48 $ 10.60 $ 9.54
Investment Activities:
Net investment income 0.47 0.49 0.48 0.48
Net realized and unrealized
gains (losses)
from investments and futures 0.13 0.44 (0.14) 1.06
Total from Investment Activities 0.60 0.93 0.34 1.54
Distributions:
Net investment income (0.48) (0.48) (0.46) (0.48)
From net realized gain (0.02) -- -- --
Total Distributions (0.50) (0.48) (0.46) (0.48)
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 10.93 $ 10.48 $ 10.60
Total Return 5.61% 9.15% 3.32% 16.49%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $22,876 $18,687 $18,575 $21,034
Ratio of expenses to
average net assets 0.91% 0.92% 0.88% 0.79%
Ratio of net investment
income to average net assets 4.27% 4.59% 4.57% 4.71%
Ratio of expenses to
average net assets* 0.92% 0.98% 0.96% 1.04%
Portfolio turnover (a) 23.33% 37.84% 24.49% 26.97%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated. (A) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among classes of shares issued.
</TABLE>
-93-
<PAGE> 348
<TABLE>
<CAPTION>
ONE GROUP(R) MICHIGAN MUNICIPAL BOND FUND Financial Highlights
PERIOD ENDED YEAR ENDED DECEMBER 31,
CLASS B JUNE 30, 1999 1998 1997 1996(a)
- ------- ---- ---- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.59 $ 10.18 $ 10.00
Investment Activities:
Net investment income 0.39 0.38 0.07
Net realized and unrealized
gains (losses)
from investments and futures 0.12 0.44 0.17
Total from Investment Activities 0.51 0.82 0.24
Distributions:
Net investment income (0.40) (0.41) (0.06)
From net realized gain (0.02) -- --
Total Distributions (0.42) (0.41) (0.06)
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 10.59 $ 10.18
Total Return 4.92% 8.26% 2.45%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,940 $ 707 $ 110
Ratio of expenses to average
net assets 1.66% 1.67% 1.69%(c)
Ratio of net investment income
to average net assets 3.52% 3.84% 2.01%(c)
Ratio of expenses to average
net assets* 1.67% 1.73% 1.77%(c)
Portfolio turnover (d) 23.33% 37.84% 24.49%(c)
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) For the period September 23, 1996 (initial offering date of Class B shares)
through December 31, 1996. (b) Not Annualized. (c) Annualized. (d) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among classes of shares issued.
</TABLE>
Class C
- -------
-94-
<PAGE> 349
<TABLE>
<CAPTION>
ONE GROUP(R) OHIO MUNICIPAL BOND FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- -------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.88 $ 10.69 $ 10.65 $ 10.58
Investment Activities:
Net investment income 0.56 0.56 0.56 0.55
Net realized and unrealized gains (losses)
from investments 0.20 0.19 0.04 0.07
Total from Investment Activities 0.76 0.75 0.60 0.62
Distributions:
Net investment income (0.56) (0.56) (0.56) (0.55)
In excess of net realized gains -- -- -- --
Total Distributions (0.56) (0.56) (0.56) (0.55)
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 10.88 $ 10.69 $ 10.65
Total Return 7.13% 7.22% 5.69% 6.07%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $149,890 $133,172 $80,611 $79,993
Ratio of expenses to average net assets 0.54% 0.54% 0.57% 0.58%
Ratio of net investment income to average
net assets 5.09% 5.24% 5.17% 5.29%
Ratio of expenses to average net assets* 0.83% 0.84% 0.95% 0.91%
Ratio of net investment income to average
net assets* 4.80% 4.94% 4.79% 4.96%
Portfolio turnover (a) 10.49% 7.45% 24.61% 77.69%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.(a)Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
</TABLE>
-95-
<PAGE> 350
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.91 $10.72 $10.68 $10.61
Investment Activities:
Net investment income 0.54 0.54 0.55 0.53
Net realized and unrealized gains
(losses) from investments 0.20 0.19 0.03 0.07
Total from Investment Activities 0.74 0.73 0.58 0.60
Distributions:
Net investment income (0.54) (0.54) (0.54) (0.51)
In excess of net investment
income -- -- -- (0.02)
In excess of net realized gains -- -- -- --
Total Distributions (0.54) (0.54) (0.54) (0.53)
NET ASSET VALUE, END OF PERIOD $11.11 $10.91 $10.72 $10.68
Total Return (Excludes Sales
Charge) 6.87% 6.95% 5.44% 5.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $17,297 $16,114 $16,507 $12,006
Ratio of expenses to average
net assets 0.79% 0.79% 0.82% 0.82%
Ratio of net investment income
to average net assets 4.83% 4.96% 4.92% 5.01%
Ratio of expenses to average
net assets* 1.18% 1.19% 1.30% 1.25%
Ratio of net investment income
to average net assets* 4.44% 4.56% 4.44% 4.58%
Portfolio turnover (a) 10.49% 7.45% 24.61% 77.69%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated.(a)Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
</TABLE>
-96-
<PAGE> 351
<TABLE>
<CAPTION>
ONE GROUP(R) OHIO MUNICIPAL BOND FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.98 $ 10.79 $10.75 $10.68
Investment Activities:
Net investment income 0.47 0.47 0.48 0.43
Net realized and unrealized
gains (losses) from investments 0.20 0.19 0.03 0.07
Total from Investment Activities 0.67 0.66 0.51 0.50
Distributions:
Net investment income (0.47) (0.47) (0.47) (0.43)
In excess of net investment income -- -- -- --
Total Distributions (0.47) (0.47) (0.47) (0.43)
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 10.98 $10.79 $10.75
Total Return (Excludes Sales Charge) 6.20% 6.26% 4.79% 5.17%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $26,138 $14,316 $8,854 $3,209
Ratio of expenses to average
net assets 1.44% 1.44% 1.47% 1.48%
Ratio of net investment income
to average net assets 4.19% 4.33% 4.27% 4.40%
Ratio of expenses to average
net assets* 1.83% 1.84% 1.95% 1.91%
Ratio of net investment income
to average net assets* 3.80% 3.93% 3.79% 3.97%
Portfolio turnover (a) 10.49% 7.45% 24.61% 77.69%
<FN>
*During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the ratios
would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
</TABLE>
Class C
- -------
-97-
<PAGE> 352
<TABLE>
<CAPTION>
ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND Financial Highlights
JAN 20, 1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
CLASS I 1999 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%
<FN>
*During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
-98-
<PAGE> 353
<TABLE>
<CAPTION>
JAN 20, 1997
THROUGH
JUNE 30,
YEAR ENDED JUNE 30, JUNE 30,
CLASS A 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
-99-
<PAGE> 354
<TABLE>
<CAPTION>
ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND Financial Highlights
JAN 20, 1997
THROUGH
JUNE 30,
YEAR ENDED JUNE 30, JUNE 30,
CLASS B 1999 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
CLASS C
- -------
-100-
<PAGE> 355
APPENDIX A
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>
One Group Short-Term Municipal Bond Fund 1
One Group Intermediate Tax-Free Bond Fund 2
One Group Tax-Free Bond Fund 3
One Group Municipal Income Fund 4
One Group Arizona Municipal Bond Fund 5
One Group Kentucky Municipal Bond Fund 6
One Group Louisiana Municipal Bond Fund 7
One Group Michigan Municipal Bond Fund 8
One Group Ohio Municipal Bond Fund 9
One Group West Virginia Municipal Bond Fund 10
<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 agencies 1-10 Market
and instrumentalities of the U.S. Government. These include Credit
Ginnie Mae, Fannie Mae and Freddie Mac.
When-Issued Securities and Forward Commitments: Purchase or 1-10 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
Credit
Investment Company Securities: Shares of other mutual funds, 1-10 Market
including money market funds of The One Group and shares of
other money market mutual funds for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
Call and Put Options: A call option gives the buyer the right to 1-10 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Funds will sell only covered call and Leverage
secured put options.
Futures and Related Options: A contract providing for the future 1-10 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Commercial Paper: Secured and unsecured short-term promissory 1-10 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
</TABLE>
-101-
<PAGE> 356
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
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. Credit
Variable and Floating Rate Instruments: Obligations with 1-10 Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. Liquidity
Mortgage-Backed Securities: Debt obligations secured by real 1-10 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
Demand Features: Securities that are subject to puts and standby 1-10 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Swaps, Caps and Floors: A Fund may enter into these transactions 1-10 Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined interest.
New Financial Products: New options and futures contracts and 1-10 Management
other financial products continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 1-10 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other references indices. Foreign Investment
Municipal Securities: Securities issued by a state or political 1-10 Credit
subdivision to obtain funds for various public purposes. Political
Municipal securities include private activity bonds and Tax
industrial development bonds, as well as General Obligation Market
Notes, Anticipation Notes, Bond Tax Anticipation Notes, Revenue Regulatory
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 1-10 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 1-10 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
Zero-Coupon Debt Securities: Bonds and other debt that pay no 1-10 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the differences
between their issue price and their maturity value.
Inverse Floating Rate Instruments: Leveraged floating rate debt 1-10 Credit
instruments with interest rates that reset in the opposite Market
direction from the market rate of interest to which the inverse Leverage
floater is indexed.
Loan Participations and Assignments: Participations in, or 1-10 Market
assignments of municipal securities, including municipal leases. Credit
Political
Liquidity
Tax
</TABLE>
-102-
<PAGE> 357
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.
-103-
<PAGE> 358
- 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
lender has when a borrower defaults on 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.
-104-
<PAGE> 359
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
-105-
<PAGE> 360
ONE GROUP(R) MUTUAL FUNDS
MONEY MARKET FUNDS COMBINED PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) PRIME MONEY MARKET FUND
ONE GROUP(R) U. S. TREASURY SECURITIES MONEY MARKET FUND
ONE GROUP(R) MUNICIPAL MONEY MARKET FUND
ONE GROUP(R) MICHIGAN MUNICIPAL MONEY MARKET FUND
ONE GROUP(R) OHIO MUNICIPAL MONEY MARKET FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 361
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Prime Money Market Fund
One Group U. S. Treasury Securities Money Market Fund
One Group Municipal Money Market Fund
One Group Michigan Municipal Money Market Fund
One Group Ohio Municipal Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
Temporary Defensive Positions
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 362
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP PRIME MONEY MARKET FUND
WHAT IS THE GOAL OF THE PRIME MONEY MARKET FUND?
The Fund seeks current income with liquidity and stability of principal.
WHAT ARE THE PRIME MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in high quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit, bank obligations and deposit notes.
The Fund will concentrate in the financial services industry. The Fund will
comply with SEC rules applicable to all money market funds, including Rule 2a-7
under the Investment Company Act of 1940. For more information about the Prime
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE PRIME MONEY MARKET FUND?
The main risks of investing in the Prime Money Market Fund and the circumstances
likely to adversely affect your investment are described below. Before you
invest, please read "More About the Funds" and "Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets
in the securities of companies in the financial services industry.
Because of the Fund's greater exposure to that industry, economic,
political and regulatory developments affecting the financial services
industry will have a disproportionate impact on the Fund.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE PRIME MONEY MARKET FUND PERFORMED?
By showing the variability of the Prime Money Market Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE PRIME MONEY MARKET FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
3
<PAGE> 363
ONE GROUP PRIME MONEY MARKET FUND
- ------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
[GRAPH]
CLASS I SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.05% 7.90% 5.88% 3.58% 2.97% 4.09% 5.83% 5.20% 5.32% 5.30%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
- ------------------------------------------------------------------------------
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.32%.
Best Quarter: 2.34% 2Q 1989; Worst Quarter: 0.72% 2Q 1993.
4
<PAGE> 364
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/18/92)
- ------- ------ ------- ------------------
<S> <C> <C> <C>
One Group Prime Money Market Fund 4.72% 5.02% 4.35%
- ---------------------------------------------------------------------------------------------------------
LIFE
CLASS B 1 YEAR (SINCE 11/21/96)
- ------- ------ ----------------
One Group Prime Money Market Fund 3.94% 4.20%
- ---------------------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 8/1/85)(2)
- ------- ------ ------- -------- -----------------
One Group Prime Money Market Fund 4.98% 5.28% 5.27% 5.69%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund also offers Service Class Shares. Service Class Shares commenced
operations on April 16, 1999 and do not have a full calendar year of
investment returns as of the date of this Prospectus.
(2) Data for performance purposes begins on 1/1/87.
To obtain current yield information, call toll-free 1-800-480-4111.
5
<PAGE> 365
FEES AND EXPENSES OF THE PRIME MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales none 5.00% 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES
(expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% 1.00% .75% none
Other Expenses .19% .19% .19% .19% .19%
Total Annual fund Operating
Expenses .79% 1.54% 1.54% 1.29% .54%
Fee Waiver [and/or Expense
Reimbursement](3) (.02%) (.02%) (.02%) (.22%) (.02%)
Net Expenses .77% 1.52% 1.52% 1.07% .52%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, .52% for Class B
shares, 1.52% for Class C shares, 1.07% for Service Class shares and 0.52%
for Class I shares for the period beginning November 1, 1999 and ending on
October 31, 2000.
6
<PAGE> 366
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or if you continued
to hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C SERVICE CLASS(3) CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at the redemption redemption at the
end of each period end of each period
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 655 $ 155 $ 255 $ 109 $ 53
3 Years $250 $ 484 $ 784 $ 484 $ 484 $ 387 $171
5 Years $437 $ 838 $1,038 $ 838 $ 838 $ 686 $300
10 Years $976 $1,631 $1,631 $1,833 $1,833 $1,537 $675
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 81
Class B (no redemption) $157
Class B (with redemption) $657
Class C (no redemption) $157
Class C (with redemption) $257
Service Class $131
Class I $ 55
(2) Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 Years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
(3) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
7
<PAGE> 367
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND
WHAT IS THE GOAL OF THE U. S. TREASURY SECURITIES MONEY MARKET FUND?
The Fund seeks current income with liquidity and stability of principal.
WHAT ARE THE U. S. TREASURY SECURITIES MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests exclusively in short-term U. S. Treasury obligations including
repurchase agreements collateralized by such Treasury obligations and
when-issued securities, U. S. Treasury bills, notes and other securities issued
or backed by the U. S. Government. The Fund will comply with SEC rules
applicable to all money market funds including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the U. S. Treasury Securities
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE U. S. TREASURY SECURITIES MONEY
MARKET FUND?
The main risks of investing in the U. S. Treasury Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE U. S. TREASURY SECURITIES MONEY MARKET FUND PERFORMED?
By showing the variability of the U. S. Treasury Securities Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE U. S. TREASURY
SECURITIES MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
8
<PAGE> 368
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND
- -------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.80% 7.55% 5.51% 3.32% 2.81% 3.85% 5.62% 5.08% 5.13% 5.03%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
- -------------------------------------------------------------------------------
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.15%.
Best Quarter: 2.28% 2Q 1989; Worst Quarter: 0.69% 2Q 1993.
9
<PAGE> 369
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/18/92)
- ------- ------ ------- ---------------
<S> <C> <C> <C>
One Group U.S. Treasury Securities
Money Market Fund 4.37% 4.80% 4.14%
- -------------------------------------------------------------------------------------------------------------------
LIFE
CLASS B 1 YEAR (SINCE 11/21/96)
- ------- ------ ----------------
One Group U.S. Treasury Securities
Money Market Fund 3.60% 3.91%
- -------------------------------------------------------------------------------------------------------------------
LIFE
CLASS C 1 YEAR (SINCE 2/18/92)
- ------- ------ ---------------
One Group U.S. Treasury Securities 3.59% 3.73%
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 9/9/85)(2)
- ------- ------ ------- -------- ----------------
One Group U.S. Treasury Securities 4.63% 5.06% 5.02% 5.42%
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund also offers Service Class Shares. Service Class Shares commenced
operations on April 16, 1999 and do not have a full calendar year of
investment returns as of the date of this Prospectus.
(2) Data for performance purposes begins on January 1, 1987.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE 1-800-480-4111.
10
<PAGE> 370
FEES AND EXPENSES OF THE U.S. TREASURY SECURITIES FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales none 5.00% 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% 1.00% .75% none
Other Expenses .19% .19% .19% .19% .19%
Total Annual fund Operating
Expenses .79% 1.54% 1.54% 1.29% .54%
Fee Waiver and/or Expense
Reimbursement(3) (.02%) (.02%) (.02%) (.22%) (.02%)
Net Expenses .77% 1.52% 1.52% 1.07% .52%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, 1.07% for Service Class shares and .52%
for Class I shares for the period beginning November 1, 1999 and ending on
October 31, 2000.
11
<PAGE> 371
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or if you continued
to hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C SERVICE CLASS(3) CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at the redemption redemption at the
end of each period end of each period
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 655 $ 155 $ 255 $ 109 $ 53
3 Years $250 $ 484 $ 784 $ 484 $ 484 $ 387 $ 171
5 Years $437 $ 838 $1,038 $ 838 $ 838 $ 686 $ 300
10 Years $976 $1,631 $1,631 $1,833 $1,833 $1,537 $ 675
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 81
Class B (no redemption) $157
Class B (with redemption) $657
Class C (no redemption) $157
Class C (with redemption) $257
Service Class $131
Class I $ 55
(2) Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 Years" example for Class B shares
represents a combination of Class A and Class B operating expenses.
(3) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
12
<PAGE> 372
ONE GROUP MUNICIPAL MONEY MARKET FUND
WHAT IS THE GOAL OF THE MUNICIPAL MONEY MARKET FUND?
The Fund seeks as high a level of current interest income exempt from Federal
income tax as is consistent with liquidity and stability of principal.
WHAT ARE THE MUNICIPAL MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high quality, short-term money market instruments. These
instruments include short-term municipal securities, which provide tax-exempt
income. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Municipal Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MUNICIPAL MONEY MARKET FUND?
The main risks of investing in the Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
13
<PAGE> 373
HOW HAS THE MUNICIPAL MONEY MARKET FUND PERFORMED?
By showing the variability of the Municipal Money Market Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MUNICIPAL MONEY MARKET FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP MUNICIPAL MONEY MARKET FUND
- -------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.11% 5.77% 4.37% 2.49% 2.10% 2.54% 3.60% 3.13% 3.31% 3.10%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
- -------------------------------------------------------------------------------
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.35%.
Best Quarter: 1.58% 2Q 1989; Worst Quarter: 0.49% 1Q 1994.
14
<PAGE> 374
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 2/18/92)
- ------- ------ ------- ---------------
<S> <C> <C> <C> <C>
One Group Municipal Money Market Fund 2.63% 2.94% 2.63%
- ---------------------------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS 10 YEARS (SINCE 6/4/87)
- ------- ------ ------- -------- -----------------
One Group Municipal Money Market Fund 2.88% 3.19% 3.47% 3.76%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund also offers Service Class shares. Service Class shares commenced
operations on April 16, 1999 and do not have a full calendar year of
investment returns as of the date of this Prospectus.
To obtain current yield information, call toll-free 1-800-480-4111.
15
<PAGE> 375
FEES AND EXPENSES OF THE MUNICIPAL MONEY MARKET FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1) ------- ------- ------------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales none 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% none
Other Expenses .20% .20% .20% .20%
Total Annual fund Operating
Expenses .80% 1.55% 1.30% .55%
Fee Waiver and/or Expense
Reimbursement(3) (.08%) (.08%) (.28%) (.08%)
Net Expenses .72% 1.47% 1.02% .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, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .72% for Class A shares, 1.47% for Class C
shares, 1.02% for Service Class shares and .47% for Class I shares for the
period beginning November 1, 1999 and ending on October 31, 2000.
16
<PAGE> 376
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or if you continued
to hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 74 $ 150 $ 250 $ 104 $ 48
3 Years $247 $ 482 $ 482 $ 384 $168
5 Years $436 $ 837 $ 837 $ 686 $299
10 Years $982 $1,839 $1,839 $1,543 $682
- -----------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $ 56
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
17
<PAGE> 377
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND
WHAT IS THE GOAL OF THE MICHIGAN MUNICIPAL MONEY MARKET FUND?
The Fund seeks as high a level of current interest income exempt from Federal
income tax and Michigan personal income tax as is consistent with capital
preservation and stability of principal.
WHAT ARE THE MICHIGAN MUNICIPAL MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high quality, short-term money market instruments. These
include short-term municipal securities issued in the State of Michigan. The
Fund may also invest in municipal securities issued by other states. The Fund
will comply with SEC rules applicable to all money market funds, including Rule
2-a7 under the Investment Company Act of 1940. For more information about the
Michigan Municipal Money Market Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MICHIGAN MUNICIPAL MONEY MARKET
FUND?
The main risks of investing in the Michigan Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Large Positions/Geographic Concentration. As a single state money
market fund, this Fund is allowed by SEC rules to invest a large
portion of its assets in one issuer. Because of these rules and the
relatively small number of issuers of Michigan municipal securities,
the Fund's performance is affected to a greater extent by the success
of one or a few issuers than is the performance of a more diversified
fund. Moreover, because the Fund will concentrate in Michigan
issuances, certain factors particular to Michigan, including economic
conditions, constitutional amendments, legislative and executive
measures, and voter initiatives in Michigan, may have a
disproportionately negative impact on the Fund's investments.
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
18
<PAGE> 378
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
19
<PAGE> 379
HOW HAS THE MICHIGAN MUNICIPAL MONEY MARKET FUND PERFORMED?
By showing the variability of the Michigan Municipal Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MICHIGAN MUNICIPAL
MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1992 1993 1994 1995 1996 1997 1998
2.40% 1.83% 2.30% 3.32% 2.93% 3.00% 2.76%
- --------------------------------------------------------------------------------
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.21%.
Best Quarter: 0.97% 3Q 1991; Worst Quarter: 0.43% 1Q 1995.
20
<PAGE> 380
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 1/31/91)
- ------- ------ ------- ---------------
<S> <C> <C> <C>
One Group Michigan Municipal Money
Market Fund 2.57% 2.91% 2.77%
- -------------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS (SINCE 1/31/91)
- ------- ------ ------- ---------------
One Group Michigan Municipal Money
Market Fund 2.83% 3.06% 2.85%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund also offers Service Class Shares. Service Class Shares commenced
operations on April 16, 1999 and do not have a full calendar year of
investment returns as of the date of this Prospectus.
To obtain current yield information, call toll-free 1-800-480-4111.
20
<PAGE> 381
<TABLE>
<CAPTION>
FEES AND EXPENSES OF THE MICHIGAN MUNICIPAL MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
- ----------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales none 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% none
Other Expenses .29% .29% .29% .29%
Total Annual fund Operating
Expenses .89% 1.64% 1.39% .64%
Fee Waiver [and/or Expense
Reimbursement](3) (.14%) (.14%) (.34%) (.14%)
Net Expenses .75% 1.50% 1.05% .50%
- -----------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .75% for Class A shares, 1.50% for Class C
shares, 1.05% for Service Class Shares and .50% for Class I shares for the
period beginning November 1, 1999 and ending on October 31, 2000.
22
<PAGE> 382
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or if you continued
to hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 77 $ 153 $ 253 $ 107 $ 51
3 Years $ 270 $ 504 $ 504 $ 407 $191
5 Years $ 479 $ 879 $ 879 $ 728 $343
10 Years $1,083 $1,932 $1,932 $1,639 $785
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 91
Class C (no redemption) $167
Class C (with redemption) $267
Service Class $142
Class I $ 65
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
23
<PAGE> 383
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND
WHAT IS THE GOAL OF THE OHIO MUNICIPAL MONEY MARKET FUND?
The Fund 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.
WHAT ARE THE OHIO MUNICIPAL MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high quality, short-term money market instruments. These
include short-term municipal securities issued in the State of Ohio. The Fund
may also invest in municipal securities issued by other states. The Fund will
comply with SEC rules applicable to all money market funds, including Rule 2a-7
under the Investment Company Act of 1940. For more information about the Ohio
Municipal Money Market Fund's investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
WILL ANY PORTION OF MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE OHIO MUNICIPAL MONEY MARKET FUND?
The main risks of investing in the Ohio Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Large Positions/Geographically Concentrated. As a single state money
market fund, this Fund is allowed by SEC rules to invest a large
portion of its assets in one issuer. Because of these rules and the
relatively small number of issuers of Ohio municipal securities, the
Fund's performance is affected to a greater extent by the success of
one or a few issuers than is the performance of a more diversified
fund. Moreover, because the Fund will concentrate in Ohio issuances,
certain factors particular to Ohio, including economic conditions,
constitutional amendments, legislative and executive measures and voter
initiatives in Ohio, may have a disproportionately negative impact on
the Fund's investments.
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
24
<PAGE> 384
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
25
<PAGE> 385
HOW HAS THE OHIO MUNICIPAL MONEY MARKET FUND PERFORMED?
By showing the variability of the Ohio Municipal Money Market Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE OHIO MUNICIPAL MONEY MARKET
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
1994 1995 1996 1997 1998
2.53% 3.56% 3.13% 3.34% 3.14%
- --------------------------------------------------------------------------------
1 For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.34%.
Best Quarter: 0.92% 2Q 1995; Worst Quarter: 0.50% 1Q 1994.
26
<PAGE> 386
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ----------------------------------------------------------------------------------------------
LIFE
CLASS A 1 YEAR 5 YEARS (SINCE 1/26/93)
<S> <C> <C> <C>
One Group Ohio Municipal Money Market
Fund 2.62% 2.94% 2.75%
- ----------------------------------------------------------------------------------------------
LIFE
CLASS I 1 YEAR 5 YEARS (SINCE 6/9/63)
- ------- ------ ------- ---------------
One Group Ohio Municipal Money Market
Fund 2.88% 3.19% 3.02%
- ----------------------------------------------------------------------------------------------
</TABLE>
To obtain current yield information, call toll-free 1-800-480-4111.
27
<PAGE> 387
<TABLE>
<CAPTION>
FEES AND EXPENSES OF THE OHIO MUNICIPAL MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
- ----------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none
Imposed on Purchases (as a
percentage of offering price)
Maximum Deferred Sales none 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of redemption
proceeds, as applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% none
Other Expenses .25% .25% .25% 25%
Total Annual fund Operating
Expenses .85% 1.60% 1.35% .60%
Fee Waiver [and/or Expense
Reimbursement](3) (.15%) (.15%) (.35%) (.15%)
Net Expenses .70% 1.45% 1.00% .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, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
2 Expense Information has been restated to reflect current fees.
3 Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .70% for Class A shares, 1.45% for Class C shares, 1.00%
for Service Class Shares and .45% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
28
<PAGE> 388
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or if you continued
to hold them at the end of the period shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 72 $ 148 $ 248 $ 102 $ 46
3 Years $ 256 $ 490 $ 490 $ 393 $177
5 Years $ 457 $ 857 $ 857 $ 706 $320
10 Years $1,035 $1,888 $1,888 $1,593 $736
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 87
Class C (no redemption) $163
Class C (with redemption) $263
Service Class $137
Class I $ 61
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
29
<PAGE> 389
MORE ABOUT THE FUNDS
Each of the five funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors"). For more information about One Group and Banc One
Investment Advisors, please read "Management of One Group Mutual Funds" and the
Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The five mutual funds described in this Prospectus are designed to produce high
current income consistent with liquidity or capital preservation and stability
of principal. The principal investment strategies that are used to meet each
Fund's investment objective are described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are also described below.
- --------------------------------------------------------------------------------
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve "fundamental policies." A policy is
fundamental if it cannot be changed without the consent of a majority of the
outstanding shares of the Fund.
- --------------------------------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only in U.S. denominated
securities.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - The Fund invests exclusively in money market instruments. These include:
1. corporate notes
2. commercial paper
3. funding agreements
4. certificates of deposit
5. bank obligations and deposit notes
- - The Fund will invest at least 25% of its total assets in securities issued
by companies in the financial services industry, although the Fund may
invest less than 25% of its total assets in that industry if warranted due
to adverse economic conditions and if investing less than that amount
would be in the best interests of shareholders. The financial services
industry includes banks, broker-dealers, finance companies and other
issuers of asset-backed securities.
- - The Fund may lend its portfolio's securities.
- --------------------------------------------------------------------------------
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average of all the current maturities (that is,
the term of the securities) of the individual securities in a fund. Average
weighted maturity is important to investors as an indication of a fund's
sensitivity to changes in interest rates. The longer the average weighted
maturity, the more fluctuation in share price you can expect.
- --------------------------------------------------------------------------------
30
<PAGE> 390
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
ONE GROUP MUNICIPAL MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - As a matter of fundamental policy, the Fund will invest at least 80% of
its total assets in municipal securities.
- - The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from Federal personal income tax.
- - 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" in Appendix A.
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - The Fund invests at least 80% of its total assets in Michigan municipal
securities.
- - The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from Federal personal income tax and Michigan
personal income tax.
- - The Fund also may invest up to 20% of its total assets in non-Michigan
municipal securities, i.e., municipal securities issued by states,
territories and possessions of the United States, including the District
of Columbia, other than Michigan as well as their political subdivision,
agencies, instrumentalities and authorities that produce interest exempt
from Federal income tax.
- - The Fund has the ability, for temporary defensive purposes to invest as
much as 100% of its assets in non-Michigan municipal securities that
produce income that is 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.
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - The Fund will invest at least 80% of its total assets in Ohio municipal
securities.
- - The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from Federal personal 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, for temporary defensive purposes, 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.)
- - 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.
INVESTMENT RISKS. The main risks associated with investing in the Money Market
Funds are described in Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described below.
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.
31
<PAGE> 391
DIVERSIFICATION: The Ohio Municipal Money Market Fund and the Michigan Municipal
Money Market Fund may be less diversified than money market funds that are not
single state funds. This is because a single state fund may invest a
significantly greater portion of its assets in the securities of a single issuer
than can a "diversified" fund. In addition, each Fund's investments are
concentrated geographically. These concentrations increase the risk of loss to
each 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 each 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.
THE MICHIGAN ECONOMY: The Michigan Municipal Money Market Fund's investments are
concentrated in the State of Michigan. The Michigan economy is heavily dependent
on the automobile industry, a highly cyclical industry. This affects the revenue
streams of the State and local governments because of its impact on tax sources,
particularly sales taxes, income taxes, and Michigan single business taxes.
State and local revenues also are affected by statutory and constitutional
changes adopted in 1993 and 1994, which limit annual assessment increases and
transfer, in part, the financing of education costs from property taxes to sales
taxes.
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 the securities in the Fund, and the value of your investment in a Fund,
will increase and decrease as the value of a Fund's investments increase and
decrease.
DERIVATIVES. Funds other than the U. S. Treasury Securities Money Market Fund
invest in securities that are considered to be derivatives. These securities may
be more volatile than other investments. Derivatives present, to varying
degrees, market, credit, leverage, liquidity, and management risks.
- --------------------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that derive
their value from the performance of underlying assets or securities.
- --------------------------------------------------------------------------------
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of Additional Information.
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 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.
32
<PAGE> 392
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 (except that the Fund may concentrate its
investments in securities issued by companies in the financial services
industry). 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 regard to this
restriction as permitted by applicable law.
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 and The Michigan 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.
The Ohio 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 assets and revenues of a
non-governmental user will not be deemed to be Ohio municipal
securities.
The Michigan 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.
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.
PORTFOLIO QUALITY AND MATURITY. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short-term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, the remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
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TEMPORARY DEFENSIVE POSITIONS. To respond to unusual market conditions, the Ohio
Municipal Money Market Fund, the Michigan Municipal Money Market Fund, and the
Municipal Money Market Fund may take temporary defensive positions by:
- - investing all or most of their assets in CASH EQUIVALENTS (i.e.,
securities that are not municipal securities).
- - holding uninvested cash pending investment.
These investments may result in a lower yield than lower-quality or longer term
investments and may prevent the Funds from meeting their investment objectives.
- --------------------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. Government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, and bank money market deposit
accounts.
- --------------------------------------------------------------------------------
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HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve 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 12:00 noon, Eastern Time ("ET"), for the Municipal Money
Market Fund, the Ohio Municipal Money Market Fund and the Michigan
Municipal Money Market Fund; and
(ii) before 4:00 p.m., ET, for the Prime Money Market Fund, and the
U.S. Treasury Securities Money Market Fund.
- - In addition, the Funds' Custodian, State Street Bank and Trust Company,
must receive "federal funds" before the times listed above 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 the NYSE closes
before the times listed above, 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?
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.
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time, you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. This
plan allows participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
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<PAGE> 395
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - 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. 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:
(i) 12:00 noon and 4:00 p.m., ET for the Municipal Money Market Fund,
Ohio Municipal Money Market Fund and the Michigan Municipal Money
Market Fund; and
(ii) 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 p.m. ET. When the NYSE closes
before the times listed above, 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 per Fund ($100 for employees of Bank
One Corporation and its affiliates). The minimum initial investment for an
IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- Class B shares may be purchased only in connection with exchanges
from Class B Shares of another fund. This is because Class A shares
are offered with no sales charge and have lower expenses.
- 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 "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services
Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to
One Group are considered third party checks. All checks must be payable
to one of the following:
- One Group Mutual Funds,
- State Street Bank and Trust Company, or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
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<PAGE> 396
8. 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 to the
following wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Prime Money Market Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund, 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 five (5) calendar days.
- 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
MAY I WRITE CHECKS ON MY ACCOUNT?
Class A shareholders may write checks for $250 or more.
- - Checks may be payable to any person and your account will continue to
earn dividends until the check clears.
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<PAGE> 397
- - 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 Federal income 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 One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources. The
tables below show the charges for each class of shares and the percentage of
your investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
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
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
0-1 1.00%
After first year none
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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 net amount redeemed.
- A CDSC 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 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 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 One Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
One Group Mutual Funds 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 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% for each Fund.
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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
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. If you withdraw, on an annual basis, no more than 10% of the value of
your account. Shares received from dividend and capital gains
reinvestment are included in calculating amount eligible for this
waiver. You need to participate in the Systematic Withdrawal Plan to
take advantage of this waiver.
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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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I Pay A Sales Charge on an Exchange?
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I Pay A Sales Charge on an Exchange?
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. The waivers
described above will not continue indefinitely and may be discontinued at any
time without notice.
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 One Group Fund.
- 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 One Group Fund, 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 One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
- Service Class shares do not have exchange privileges.
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 the
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<PAGE> 400
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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:
(i) 12:00 noon ET, for the Municipal Money Market, the Ohio
Municipal Money Market and the Michigan Municipal Money Market.
(ii) 4:00 p.m., ET for the Prime Money Market Fund and the U.S.
Treasury Securities Money Market Fund.
- You have provided 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, 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.
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<PAGE> 401
- In addition, 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:
(i) 12:00 noon ET, for the Municipal Money Market, the Ohio
Municipal Money Market and the Michigan Municipal Money Market
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and the U. S.
Treasury Securities Money Market Fund
will be effective that day. On occasion, the NYSE will close
before 4:00 p.m. ET. When the NYSE closes before the times listed
above, redemption requests received after the NYSE closes will be
effective the following business 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:
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 participant in 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. 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. If you have wire
instructions on file, the Funds will attempt to honor requests for
same day payment if the request is received before the times listed
in When Can I Redeem Shares?. If redemption requests are received
after these times, the Funds will attempt to wire payment the next
business day.
- The Funds also will attempt to honor requests for payment in two
business days, if the redemption request is received after the time
listed above.
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WHAT WILL MY SHARES BE WORTH?
- If you own Class A and Class I shares and the Fund receives your
redemption request before the times listed in When Can I Redeem
Shares?, you will receive that day's NAV.
- If you own Class B or Class C shares and the Fund receives your
redemption request before the times listed in When Can I Redeem
Shares?, 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 The One Group Service
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.
- 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, 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. Shares received from dividend and capital gains
reinvestment are included in calculating the 10%. The
applicable Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually. Withdrawals in
excess of 10% will subject the entire annual withdrawal to the
applicable sales load.
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
- Generally, all redemptions will be for cash. However, if you redeem
shares worth 3% or more of a Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
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- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small investments, 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 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- 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 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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SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
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.
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. 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. You also may change the way you receive dividends
and distributions by calling The One Group Services Company at 1-800-480-4111.
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 SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may 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.
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 (generally, all
of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF DIVIDENDS--OHIO MUNICIPAL MONEY MARKET FUND, MICHIGAN MUNICIPAL
MONEY MARKET FUND AND MUNICIPAL MONEY MARKET FUND
Each Fund will distribute substantially all of its net investment income. 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
45
<PAGE> 405
and for federal 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--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 tax 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.
MICHIGAN TAXATION OF DIVIDENDS--MICHIGAN MUNICIPAL MONEY MARKET FUND
Dividends paid by the Michigan Municipal Money Market Fund that are derived from
interest attributable to tax-exempt Michigan Municipal Obligations will be
exempt from Michigan income tax and Michigan single business tax. Conversely, to
the extent that the Fund's dividends are derived from interest on obligations
other than Michigan Municipal Obligations or certain U.S. Government Obligations
(or are derived from short term or long term gains), such dividends may be
subject to Michigan income tax and Michigan single business tax, even though the
dividends may be exempt for Federal income tax purposes.
Except as noted above with respect to Michigan income taxation, distributions of
net income may be taxable to investors as dividend income under other state or
local laws even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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 of any money market funds, particularly the
Municipal, Michigan Municipal or Ohio Municipal Money Market Funds, 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, call
1-800-480-4111, or visit "www.onegroup.com".
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
46
<PAGE> 406
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rate:
<TABLE>
<CAPTION>
ANNUAL RATE AS PERCENTAGE
FUND OF AVERAGE DAILY NET ASSETS
- ---- ---------------------------
<S> <C>
One Group Prime Money Market Fund .32%
One Group U. S. Treasury Securities Money Market Fund .32%
One Group Municipal Money Market Fund .26%
One Group Michigan Municipal Money Market Fund * .22%
One Group Ohio Municipal Money Market Fund .24%
</TABLE>
*In March 1999, the Pegasus Funds and One Group Mutual Funds merged. The
investment advisory fee includes fees paid to First Chicago NBD Investment
Management Company, an affiliate of Banc One Investment Advisors, as advisor to
the Pegasus Funds.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
47
<PAGE> 407
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by ___________________ LLP, whose report, along with the Funds'
financial statements are included in the Statement of Additional Information.
ONE GROUP PRIME MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.053 0.051 0.054 0.052
Less Distributions:
Net investment income (0.053) (0.051) (0.054) (0.052)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 5.39% 5.20% 5.49% 5.34%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,616,698 $2,563,768 $2,186,562 $1,965,416
Ratio of expenses to average net assets 0.51% 0.48% 0.44% 0.41%
Ratio of net investment income to
average net assets 5.26% 5.08% 5.34% 5.27%
Ratio of expenses to average net assets* 0.58% 0.56% 0.55% 0.57%
Ratio of net investment income
average net assets* 5.19% 5.00% 5.23% 5.12%
</TABLE>
- ----------------
*During the period, certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.050 0.048 0.051 0.050
Less Distributions:
Net investment income (0.050) (0.048) (0.051) (0.050)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 5.13% 4.94% 5.22% 5.08%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $605,291 $332,646 $315,374 $201,968
Ratio of expenses to average net
assets 0.76% 0.73% 0.69% 0.67%
Ratio of net investment income
to average net assets 5.01% 4.83% 5.09% 5.02%
Ratio of expenses to average net
assets* 0.83% 0.91% 0.90% 0.92%
Ratio of net investment income
to average net assets* 4.94% 4.65% 4.88% 4.77%
</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 A Shares commenced offering on February 18, 1992. (b)Annualized.
48
<PAGE> 408
ONE GROUP PRIME MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED 1996 TO
JUNE 30, JUNE 30,
CLASS B 1999 1998 1997(a)
- ------- ---- ---------- ------------
<S> <C> <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 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.
CLASS C 1999
- ------- ----
NET ASSET VALUE, BEGINNING OF PERIOD
Investment Activities:
Net investment income
Less Distributions:
Net investment income
NET ASSET VALUE, END OF PERIOD
Total Return
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)
Ratio of expenses to average net assets
Ratio of net investment income to average net assets
Ratio of expenses to average net assets
Ratio of net investment income to average net assets
49
<PAGE> 409
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.051 0.050 0.052 0.050
Less Distributions:
Net investment income (0.051) (0.050)(a) (0.052) (0.050)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 5.19% 5.07% 5.34% 5.07%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period at (000) $3,025,608 $2,243,376 $1,844,590 $1,178,091
Ratio of expenses to average net assets .52% 0.46% 0.42% 0.41%
Ratio of net investment income to
average net assets 5.07% 4.95% 5.17% 4.96%
Ratio of expenses to average net assets* 0.60% 0.57% 0.56% 0.59%
Ratio of net investment income to
average net assets* 4.99% 4.84% 5.03% 4.78%
</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) Includes $.000002 short term capital gain.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.048 0.047 0.050 0.047
Less Distributions:
Net investment income (0.048) (0.047)(a) (0.050) (0.047)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 4.92% 4.81% 5.08% 4.81%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $861,350 $530,164 $110,864 $98,723
Ratio of expenses to average net
assets 0.77% 0.72% 0.67% 0.66%
Ratio of net investment income
to average net assets 4.82% 4.71% 4.92% 4.71%
Ratio of expenses to average net
assets* 0.86% 0.93% 0.91% 0.94%
Ratio of net investment income
to average net assets* 4.73% 4.50% 4.68% 4.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Includes $.000002 short term capital gain. (b) Class A Shares
commenced offering on February 18, 1992. (c) Annualized.
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED JUNE 30, 1996 TO
------------------- JUNE 30,
CLASS B 1999 1998 1997(a)
- ------- ---- ---- ------------
<S> <C> <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 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.
CLASS C
- -------
50
<PAGE> 410
ONE GROUP MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
Class I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.032 0.031 0.033 0.032
Less Distributions:
Net investment income (0.032) (0.031) (0.033) (0.032)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 3.27% 3.19% 3.34% 3.28%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $498,127 $467,420 $459,807 $437,743
Ratio of expenses to average net assets 0.45% 0.43% 0.41% 0.41%
Ratio of net investment income to
average net assets 3.22% 3.16% 3.29% 3.26%
Ratio of expenses to average net assets* 0.56% 0.55% 0.59% 0.59%
Ratio of net investment income to
average net assets* 3.11% 3.04% 3.11% 3.08%
</TABLE>
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.030 0.029 0.030 0.030
Less Distributions:
Net investment income (0.030) (0.029) (0.030) (0.030)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 3.01% 2.97% 3.08% 3.02%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $104,809 $48,185 $50,720 $56,518
Ratio of expenses to average net
assets 0.70% 0.68% 0.66% 0.66%
Ratio of net investment income
to average net assets 2.97% 2.91% 3.04% 3.01%
Ratio of expenses to average
net assets* 0.81% 0.90% 0.94% 0.94%
Ratio of net investment income
to average net assets* 2.86% 2.69% 2.76% 2.73%
</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.
CLASS C
- -------
51
<PAGE> 411
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
CLASS I 1999 1998 1997 1996(a)
- ------- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
Investment Activities:
Net investment income 0.0298 0.0321 0.0225
Net realized and unrealized gains
(losses) from investments and futures -- -- --
Total from Investment Activities 0.0298 0.0321 0.0225
Distributions:
Net investment income (0.0298) (0.0321) (0.0225)
Total Distributions (0.0298) (0.0321) (0.0225)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
Total Return 3.02% 3.26% 3.03%(b)
RATIO/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $110,833 $74,888 $49,521
Ratio of expenses to average net assets 0.50% 0.50% 0.59%(b)
Ratio of net investment income to
average net assets 2.97% 3.20% 3.02%(b)
Ratio of expenses to average net
assets* 0.54% 0.62%(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) For the period March 30, 1996 (initial offering date of Class I Shares)
through December 31, 1996. (b) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities:
Net investment income 0.0273 0.0296 0.0289 0.0329
Net realized and unrealized gains
(losses) from investments and futures -- -- -- --
Total from Investment Activities 0.0273 0.0296 0.0289 0.0329
Distributions:
Net investment income (0.0273) (0.0296) (0.0289) (0.0329)
Total Distributions (0.0273) (0.0296) (0.0289) (0.0329)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 2.76% 3.00% 2.93% 3.32%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $64,283 $29,202 $72,089 $122,057
Ratio of expenses to average net assets 0.75% 0.75% 0.74% 0.69%
Ratio of net investment income to
average net assets 2.72% 2.95% 2.87% 3.30%
Ratio of expenses to average net assets* 0.78% 0.79% 0.77% 0.76%
</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) For the period January 23, 1991 (commencement of operations) through
December 31, 1991. (b) Annualized.
CLASS C
- -------
52
<PAGE> 412
ONE GROUP(R) OHIO MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.033 0.032 0.033 0.032
Less Distributions:
Net investment income (0.033) (0.032) (0.032) (0.032)
In excess of net investment
income -- (0.001) -- --
Total Distributions (0.033) (0.032) (0.033) (0.032)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 3.31% 3.22% 3.34% 3.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $77,224 $56,442 $55,915 $51,806
Ratio of expenses to average
net assets 0.40% 0.40% 0.41% 0.41%
Ratio of net investment
income to average net assets 3.27% 3.17% 3.19% 3.13%
Ratio of expenses to average
net assets* 0.53% 0.53% 0.71% 0.60%
Ratio of net investment
income to average net assets* 3.14% 3.04% 2.89% 2.94%
</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>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.000 $1.000 $1.000 $1.000
Investment Activities:
Net investment income 0.030 0.029 0.030 0.029
Less Distributions:
Net investment income (0.030) (0.029) (0.029) (0.029)
In excess of net investment
income -- (0.001) -- --
Total Distributions (0.030) (0.029) (0.030) (0.029)
NET ASSET VALUE, END OF PERIOD $1.000 $1.000 $1.000 $1.000
Total Return 3.06% 2.96% 3.08% 2.98%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $30,479 $41,132 $35,790 $37,356
Ratio of expenses to average
net assets 0.65% 0.65% 0.66% 0.63%
Ratio of net investment
income to average net assets 2.98% 2.90% 2.94% 2.91%
Ratio of expenses to average
net assets* 0.78% 0.88% 1.06% 0.95%
Ratio of net investment income
to average net assets* 2.85% 2.67% 2.54% 2.59%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
CLASS C
- -------
53
<PAGE> 413
APPENDIX A
----------
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>
One Group Prime Money Market Fund 1
One Group U. S. Treasury Securities Money Market Fund 2
One Group Municipal Money Market Fund 3
One Group Michigan Municipal Money Market Fund 4
One Group Ohio Municipal Money Market Fund 5
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, 1-5 Market
and CUBES. The U.S. Treasury Securities Money Market
Fund does not buy STRIPS and CUBES.
TREASURY RECEIPTS: TRs, TIGRS, and CATS. 1, 3-5 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 1, 3-5 Market
by agencies and instrumentalities of the U.S. Credit
Government. These include Ginnie Mae, Fannie Mae, and
Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1, 3-5 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank 1, 3-5 Liquidity
in exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and 1-5 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security 1, 2 Market
and the simultaneous commitment to buy the security Leverage
back at an 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 Credit
Fund's total assets. In return the Fund will receive Market
cash, other securities and/or letters of credit as Leverage
collateral.
</TABLE>
54
<PAGE> 414
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1, 3-5 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other money 1, 3-5 Market
market mutual funds, including One Group money market funds
and shares of other money market funds 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.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes 1, 3-5 Market
which normally mature within a short period of time Credit
(e.g., 1 month) but which may be extended by the Liquidity
issuer for a maximum maturity of thirteen months.
BANKERS' ACCEPTANCES: Bills of exchange or time 1, 3-5 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1, 3-5 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days Market
to nine months.
FOREIGN SECURITIES: Commercial paper of foreign 1, 3-5 Market
issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered 1, 3-5 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1, 3-5 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 1, 3-5 Pre-payment
by real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
DEMAND FEATURES: Securities that are subject to puts 1, 3-5 Market
and standby commitments to purchase the securities at Liquidity
a fixed price (usually with accrued interest) within Management
a fixed period of time following demand by a Fund.
</TABLE>
55
<PAGE> 415
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
MUNICIPAL SECURITIES: Securities issued by a state 1, 3-5 Market
or political subdivision to obtain funds for various Credit
public purposes. Municipal securities include private Political
activity bonds and industrial development bonds, as Tax
well as General Obligation Notes, Tax Anticipation Regulatory
Notes, Bond Anticipation Notes, Revenue Anticipation
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 1 Market
banks and highly rated insurance companies such as Credit
Guaranteed Investment Contracts ("GICs") and Bank Liquidity
Investment Contracts ("BICs").
PARTICIPATION INTERESTS: Interests in municipal 1, 3-5 Credit
securities, including municipal leases, from Tax
financial institutions such as commercial and Market
investment banks, savings and loan associations and insurance companies. These
interests may take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows the
Funds to treat the income from the investment as exempt from Federal Income Tax.
ASSET-BACKED SECURITIES: Securities secured by 1, 3-5 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of receivables Regulatory
or other assets.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - 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 and liquidity 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
56
<PAGE> 416
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 lender has when a borrower defaults on
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.
57
<PAGE> 417
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
58
<PAGE> 418
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TREASURY PRIME MONEY MARKET FUND
ONE GROUP(R) U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 419
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Treasury Prime Money Market Fund
One Group U. S. Government Securities Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 420
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TREASURY PRIME MONEY MARKET FUND
WHAT IS THE GOAL OF THE TREASURY PRIME MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE TREASURY PRIME MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in U. S. Treasury bills, notes, and bonds. The Fund does not
engage in repurchase transactions . The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the Treasury Prime Money Market
Fund's investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY PRIME MONEY MARKET FUND?
The main risks of investing in the Treasury Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Interest Rate Risk. The yield paid by the Fund will increase or decrease
with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
HOW HAS THE TREASURY PRIME MONEY MARKET FUND PERFORMED?
The Treasury Prime Money Market Fund had not begun operations as of June 30,
1999. Therefore, the performance that normally would be provided in this Section
is unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-800-480-4111.
3
<PAGE> 421
FEES AND EXPENSES OF THE TREASURY PRIME MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price) none none none none
Maximum Deferred Sales
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable) none 1.00% none none
Redemption Fee none none none none
Exchange Fee none none none none
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% none
Other Expenses .20% .20% .20% .20%
Total Annual fund Operating
Expenses .80% 1.55% 1.30% .55%
Fee Waiver and/or Expense
Reimbursement(3) (.03%) (.03%) (.23%) (.03%)
Net Expenses .77% 1.52% 1.07% .52%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, a $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, 1.52% for Class C
shares, 1.07% for Service Class shares, and .52% for Class I shares, for the
period beginning November 1, 1999 and ending on October 31, 2000.
4
<PAGE> 422
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or continued to
hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 255 $ 109 $ 53
3 Years $252 $ 487 $ 487 $ 389 $ 173
5 Years $441 $ 842 $ 842 $ 691 $ 304
10 Years $987 $1,843 $1,843 $1,548 $ 686
- --------------------------------------------------------------------------------------
</TABLE>
1 Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $ 56
2 Because of the nature of the shares, investors are not expected to remain
in Service Class shares for more than a very limited period of time.
5
<PAGE> 423
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
WHAT IS THE GOAL OF THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND?
The Fund seeks high current income consistent with liquidity and stability of
principal.
WHAT ARE THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests in short-term securities issued or guaranteed by the U. S.
Government, its agencies or instrumentalities; and repurchase agreements
relating to such securities. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the U. S. Government Securities Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE U. S. GOVERNMENT SECURITIES MONEY
MARKET FUND?
The main risks of investing in the U. S. Government Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk. The yield paid by the Fund will increase or decrease
with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
HOW HAS THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND PERFORMED?
The U. S. Government Securities Money Market Fund had not begun operations as of
June 30, 1999. Therefore, the performance that normally would be provided in
this Section is unavailable. However, to obtain the Fund's current yield
information, please call toll-free 1-800-480-4111.
6
<PAGE> 424
FEES AND EXPENSES OF THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales none 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or
Service] (12b-1) Fees .25% 1.00% .75% none
Other Expenses .20% .20% .20% .20%
Total Annual fund Operating
Expenses 0.80% 1.55% 1.30% .55%
Fee Waiver and/or Expense
Reimbursement(3) (.03%) (.03%) (.23%) (.03%)
Net Expenses .77% 1.52% 1.07% .52%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, a $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, 1.52% for Class C
shares, 1.07% for Service Class shares, and .52% for Class I shares, for the
period beginning November 1, 1999 and ending on October 31, 2000.
7
<PAGE> 425
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or continued to
hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 255 $ 109 $ 53
3 Years $252 $ 487 $ 487 $ 389 $ 173
5 Years $441 $ 842 $ 842 $ 691 $ 304
10 Years $987 $1,843 $1,843 $1,548 $ 686
- --------------------------------------------------------------------------------------
</TABLE>
1 Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $ 56
2 Because of the nature of the shares, investors are not expected to remain
in Service Class shares for more than a very limited period of time.
8
<PAGE> 426
MORE ABOUT THE FUNDS
Each of the two funds described in this Prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of the Funds"
and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The two mutual funds described in this Prospectus are designed to produce high
current income consistent with liquidity or capital preservation and stability
of principal. The principal investment strategies that are used to meet each
Fund's investment objective are described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are also described below.
-----------------------------------------------------------
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve "fundamental
policies". A policy is fundamental if it cannot be changed
without the consent of a majority of the outstanding shares
of the Fund.
-----------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
-----------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current
maturities (that is, the term of the securities) of the
individual securities in a fund. Average weighted maturity
is important to investors as an indication of a fund's
sensitivity to changes in interest rates. The longer the
average weighted maturity, the more fluctuation in share
price you can expect.
-----------------------------------------------------------
ONE GROUP TREASURY PRIME MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the securities held
by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less
- The Fund will acquire only those securities that are issued or
guaranteed by the U. S. Treasury.
- The Fund does not invest in securities subject to repurchase
agreements.
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the securities held
by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less
- The Fund will acquire only those securities that are issued or
guaranteed by the U. S. Government or its agencies or
instrumentalities, some of which may be subject to repurchase
agreements.
INVESTMENT RISKS. The main risks associated with investing in the Money Market
Funds are described in Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described below.
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.
9
<PAGE> 427
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
DERIVATIVES. The U. S. Government Securities Money Market Fund invest in
securities that are considered to be DERIVATIVES. These securities may be more
volatile than other investments. Derivatives present, to varying degrees,
market, credit, leverage, liquidity, and management risks.
-----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
-----------------------------------------------------------
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of Additional Information.
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, with respect to 75% of a Fund's total assets, 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, except as otherwise permitted by applicable law or regulation.
This does not include securities issued or guaranteed by the United
States, its agencies and instrumentalities, and repurchase agreements
involving these securities.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net 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.
PORTFOLIO MATURITY. The maturity of money market funds are subject to SEC rules.
Maturity is limited both as to total portfolio average and as to each individual
security. With respect to portfolio average, the rules limit the Fund's average
weighted maturity to 90 days. With respect to each individual security, the
remaining maturity is restricted to 397 days at acquisition. Moreover, the SEC
rules limit exposure to a single issuer to 5% of a money market fund's assets
(although there is no limit on government securities).
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HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve, 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 2:00 p.m., ET, for the Treasury Prime Money Market Fund;
and
(ii) before 4:00 p.m., ET, for the U. S. Government Securities Money
Market Fund.
In addition, the Funds' Custodian, State Street Bank and Trust Company,
must receive "federal funds" before the times listed above 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 the NYSE
closes before the times listed above, 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?
One Group offers the following classes of shares:
- Class A 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.
- When deciding what class of shares to buy, you should consider the
amount of your investment, the length of time you intend to hold the
shares, and the sales charges and expenses applicable to each class of
shares.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
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HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - 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. 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:
(i) 2:00 p.m., ET, for the Treasury Prime Money Market Fund; and
(ii) 4:00 p.m., ET, for the U. S. Government Securities Money Market
Fund.
On occasion, the NYSE will close before 4 p.m. ET. When the NYSE closes
before the times listed above, 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). The minimum initial investment
for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual and endorsed to One Group
are considered third party checks. All checks must be payable to one of the
following:
- One Group Mutual Funds,
- State Street Bank and Trust Company, or
- The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
8. 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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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 "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 One Group Fund (ex: One Group Treasury Prime Money
Market Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 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.
- 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
MAY I WRITE CHECKS ON MY ACCOUNT?
Class A shareholders may write checks for $250 or more.
- - 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.
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- - 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.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
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 Contingent Deferred Sales Charge 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 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 C shares of an unrelated mutual fund for Class C
shares of 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 One Group shares you
receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds 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 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 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 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%
for each Fund.
4. There are no 12b-1 fees for Class I shares.
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<PAGE> 432
- - 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 Class A shares.
- - 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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund Shares you received in the
exchange. Please read Do I Pay a Sales Charge on an Exchange?
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. The waivers
described above will not continue indefinitely and may be discontinued at any
time without notice.
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 One Group Fund.
- 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 One Group Fund, but
only if you are eligible to purchase those shares.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
- Service Class shares do not have exchange privileges.
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 the
Systematic Exchange 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.
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<PAGE> 433
One Group does not charge a fee for this privilege. In addition, 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: (i) 4:00
p.m., ET.
- You have provided 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 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 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, 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, 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.
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<PAGE> 434
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:
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 participant in 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. 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. If you have wire instructions
on file, the Funds will attempt to honor requests for same day payment
if the request is received before 2:00 p.m., ET for the Treasury Prime
Money Market Fund and 4:00 p.m., ET for the U. S. Government
Securities Money Market Fund. If redemption requests are received
after these times, the Funds will attempt to wire payment the next
business day.
- The Funds also will attempt to honor requests for payment 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.
- 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?"
- If you own 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.
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<PAGE> 435
- Call your Shareholder Servicing Agent or The One Group Service 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.
- 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, 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 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. Shares received
from dividend and capital gains reinvestment are included in
calculating the 10%. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10%
annually. Withdrawals in excess of 10% will subject the entire
annual withdrawal to the applicable sales load.
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
- Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves
the right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small investments, 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 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
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<PAGE> 436
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> 437
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
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. You also may change the way you receive dividends
and distributions by calling The One Group Services Company at 1-800-480-4111.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may 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.
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 (generally, all
of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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.
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<PAGE> 438
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, call
1-800-480-4111, or visit "www.onegroup.com".
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
22
<PAGE> 440
FINANCIAL HIGHLIGHTS
ONE GROUP TREASURY 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, 1999, there are no Financial
Highlights for the Fund.
23
<PAGE> 441
ONE GROUP U. S. GOVERNMENT SECURITIES 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, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 442
APPENDIX A
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>
One Group Treasury Prime Money Market Fund 1
One Group U. S. Government Securities Money Market Fund 2
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds. 1-2 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 2 Market
by agencies and instrumentalities of the U.S. Government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and 2 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 2 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money 2 Market
market mutual funds, including One Group money market funds
and shares of other money market funds 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 2 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 2 Pre-payment
by real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
</TABLE>
25
<PAGE> 443
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 and liquidity 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.
- - 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.
- - 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.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on 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.
26
<PAGE> 444
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
27
<PAGE> 445
ONE GROUP(R) MUTUAL FUNDS
INSTITUTIONAL MONEY MARKET FUNDS PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) INSTITUTIONAL PRIME MONEY MARKET FUND
ONE GROUP(R) TREASURY ONLY MONEY MARKET FUND
ONE GROUP(R) GOVERNMENT MONEY MARKET FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 446
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Institutional Prime Money Market Fund
One Group Treasury Only Money Market Fund
One Group Government Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 447
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND
WHAT IS THE GOAL OF THE INSTITUTIONAL PRIME MONEY MARKET FUND?
The Fund seeks current income with liquidity and stability of principal.
WHAT ARE THE INSTITUTIONAL PRIME MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in high quality, short-term money market
instruments. These instruments include commercial paper, bank obligations and
deposit notes. The Fund will comply with Securities and Exchange ("SEC") rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. The Fund will concentrate its investments in the financial
services industry. For more information about the Institutional Prime Money
Market Fund's investment strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INSTITUTIONAL PRIME MONEY MARKET
FUND?
The main risks of investing in the Institutional Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets
in the securities of companies in the financial services industry.
Because of the Fund's greater exposure to that industry, economic,
political and regulatory developments affecting the financial services
industry will have a disproportionate impact on the Fund.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE INSTITUTIONAL PRIME MONEY MARKET FUND PERFORMED?
The Institutional Prime Money Market Fund began operations on April 19, 1999.
Therefore, the performance that normally would be provided in this section is
unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-877-691-1118.
3
<PAGE> 448
FEES AND EXPENSES OF THE INSTITUTIONAL PRIME MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your CLASS I CLASS S
investment)(1) ------- -------
<S> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering price) none none
Maximum Deferred Sales Charge
(Load)(as a percentage of original
purchase price of redemption none none
proceeds, as applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees .10% .10%
Distribution [and/or Service]
(12b-1) Fees none none
Other Expenses .15% .40%
Total Annual fund Operating .25% .50%(3)
Expenses
Fee Waiver and/or Expense
Reimbursement(4) (.07%) (.15%)
Net Expenses .18% .35%
- ---------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Class S shareholders pay a shareholder servicing fee equal to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
(4) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .18% for Class I shares and .35% for Class S shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
4
<PAGE> 449
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- ----------------------------------------------
CLASS I CLASS S
- ----------------------------------------------
1 Year(1) $ 18 $ 36
3 Years $ 73 $145
5 Years $134 $264
10 Years $311 $613
- ----------------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Class I shares would be
$26 and Class S shares would be $51.
5
<PAGE> 450
ONE GROUP TREASURY ONLY MONEY MARKET FUND
WHAT IS THE GOAL OF THE TREASURY ONLY MONEY MARKET FUND?
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.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE TREASURY ONLY MONEY MARKET FUND?
The Fund invests exclusively in short-term U.S. Treasury bills, notes, bonds.
The Fund will comply with SEC rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Treasury Only Money Market Fund's investment strategies,
please read "More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY ONLY MONEY MARKET FUND?
The main risks of investing in the Treasury Only Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE TREASURY ONLY MONEY MARKET FUND PERFORMED?
By showing the variability of the Treasury Only Money Market Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE TREASURY ONLY MONEY MARKET FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
6
<PAGE> 451
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
- --------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
4.02% 5.67% 5.20% 5.28% 5.08%
- --------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.21%.
BEST QUARTER: 1.43% 2Q 1995; WORST QUARTER: 0.77% 4Q 1993
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 4/16/93)
---------------
<S> <C> <C> <C>
One Group Treasury Only Money Market
Fund 4.69% 5.17% 4.78%
- ---------------------------------------------------------------------------------------
</TABLE>
To obtain current yield information, call toll-free 1-877-691-1118.
7
<PAGE> 452
FEES AND EXPENSES OF THE TREASURY ONLY MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your CLASS I CLASS S
investment)(1) ------- -------
<S> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a none none
percentage of offering price)
Maximum Deferred Sales Charge
(Load)(as a percentage of original
purchase price of redemption none none
proceeds, as applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees .08% .08%
Distribution [and/or Service]
(12b-1) Fees none none
Other Expenses .10% .35%(3)
Total Annual fund Operating .18% .43%
Expenses
Fee Waiver and/or Expense none (.08%)
Reimbursement(4)
Net Expenses .18% .35%
- ---------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Class S shareholders pay a shareholder servicing fee equal to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
(4) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .18% for Class I shares and .35% for Class S shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
8
<PAGE> 453
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- -------------------------------------------
CLASS I CLASS S
- -------------------------------------------
1 Year(1) $ 18 $ 36
3 Years $ 58 $130
5 Years $101 $233
10 Years $230 $534
- -------------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Class S shares would
be $44.
9
<PAGE> 454
ONE GROUP GOVERNMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE GOVERNMENT MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF THE GOVERNMENT MONEY MARKET FUND?
The Fund invests exclusively in high quality, short-term securities that are
issued or guaranteed by the U.S. government or by U.S. government agencies and
instrumentalities. Some of the securities purchased by the Fund may be subject
to repurchase agreements. The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Fund's investment strategies, please read
"More About The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE GOVERNMENT MONEY MARKET FUND?
The main risks of investing in the Government Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE GOVERNMENT MONEY MARKET FUND PERFORMED?
By showing the variability of the Government Money Market Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE GOVERNMENT MONEY MARKET FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
10
<PAGE> 455
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
- -------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
4.24% 5.87% 5.42% 5.56% 5.47%
- -------------------------------------------
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.41%.
BEST QUARTER: 1.47% 2Q 1995; WORST QUARTER: 0.81% 4Q 1993
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 6/14/93)
---------------
<S> <C> <C> <C>
One Group Government Money Market Fund 5.13% 5.45% 5.09%
- ---------------------------------------------------------------------------------
</TABLE>
To obtain current yield information, call toll-free 1-877-691-1118.
11
<PAGE> 456
FEES AND EXPENSES OF THE GOVERNMENT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your CLASS I CLASS S
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a none none
percentage of offering price)
Maximum Deferred Sales Charge
(Load)(as a percentage of original
purchase price of redemption none none
proceeds, as applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees .08% .08%
Distribution [and/or Service] none none
(12b-1) Fees
Other Expenses .10% .35%(3)
Total Annual fund Operating .18% .43%
Expenses
Fee Waiver and/or Expense none (.08%)
Reimbursement(4)
Net Expenses .18% .35%
- ---------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Class S shareholders pay a shareholder servicing fee equal to .25% of the
average daily net assets of such shares. The services provided may include
providing reports and other information related to the maintenance of
shareholder accounts.
(4) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .18% for Class I shares and .35% for Class S shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
12
<PAGE> 457
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- ---------------------------------------------
CLASS I CLASS S
- ---------------------------------------------
1 Year(1) $ 18 $ 36
3 Years $ 58 $130
5 Years $101 $233
10 Years $230 $534
- ---------------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Class S shares would be
$44.
13
<PAGE> 458
MORE ABOUT THE FUNDS
Each of the three Funds described in this Prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of the Funds"
and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The three mutual funds described in this Prospectus are designed to produce high
current income consistent with liquidity and stability of principal. The
principal investment strategies that are used to meet each Fund's investment
objective are described in Fund Summaries: Investments, Risk & Performance in
the front of this Prospectus. They are also described below.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND. The Fund invests only
in U.S. dollar denominated securities.
- The average maturity on a dollar-weighted basis of the securities
held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present minimal
credit risks.
- The Fund invests exclusively in money market instruments. These
include, but are not limited to,:
1. U.S. Treasury obligations and obligations issued or
guaranteed by U.S. agencies or instrumentalities.
2. mortgage backed securities.
3. commercial paper.
4. bank obligations and deposit notes.
5. notes/bonds.
6. medium term notes.
7. funding agreements.
8. domestic or Yankee or Euro certificates of deposit.
- The Fund will invest at least 25% of its total assets in securities
issued by companies in the financial services industry, although the
Fund may invest less than 25% of its total assets in that industry
if warranted due to adverse economic conditions and if investing
less than that amount would be in the best interests of
shareholders. The financial services industry includes banks,
broker-dealers, finance companies and other issuers of asset-backed
securities.
- The Fund may lend its portfolio's securities.
ONE GROUP TREASURY ONLY MONEY MARKET FUND. The Fund invests only in U.S.
dollar denominated securities.
- The average maturity on a dollar-weighted basis of the securities
held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present minimal
credit risks.
- The Fund may lend its portfolio's securities.
14
<PAGE> 459
ONE GROUP GOVERNMENT MONEY MARKET FUND. The Fund invests only in U.S.
dollar denominated securities.
- The average maturity on a dollar-weighted basis of the securities
held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present minimal
credit risks.
- In addition to fixed rate government securities, the Fund also will
invest in government securities that are:
1. variable and floating rate instruments.
2. mortgage backed securities.
3. other money market funds that have similar investment
policies and objectives. These money market fund must only
invest in securities with short-term ratings equivalent to
or higher than in which the Fund invests.
- The Fund may lend its portfolio's securities.
------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all
the current maturities (that is, the term of the
securities) of the individual securities in a
fund. Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates. The
longer the average weighted maturity, the more
fluctuation in yield you can expect.
------------------------------------------------
INVESTMENT RISKS
The main risks associated with investing in the Institutional Money Market Funds
are described in the Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described below.
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.
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.
PREPAYMENT AND CALL RISK: As part of its investment strategy, the Institutional
Prime Money Market Fund invests in mortgage-backed and asset-backed securities
and the Government Money Market Fund may invest in mortgage-backed securities.
These securities are subject to prepayment and all risks. The issuers of these
securities may be able to repay principal early, especially when interest rates
fall. Changes in prepayment rates can affect the return on investment and yield
of mortgage-backed and asset-backed securities volatile. When obligations are
prepaid, the Fund may have to reinvest in securities with lower yields. The Fund
may fail to recover premiums paid for the securities, resulting in an unexpected
capital loss.
DERIVATIVES. The Institutional Prime Money Market Fund and the Government Money
Market Fund may invest in securities that are considered to be DERIVATIVES.
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks.
15
<PAGE> 460
------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like
futures and options) that derive their value from
the performance of underlying assets or
securities.
------------------------------------------------
For more information about risks associated with the types of investments that
the Institutional Money Market Funds purchase, please read the Fund Summaries:
Investments, Risk & Performance, Appendix A and the Statement of Additional
Information.
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:
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 regard to this
restriction as permitted by applicable law.
Policies of Specific Funds
The Institutional Prime Money Market Fund:
1. 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.
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 (except that the Fund may concentrate its
investments in securities issued by companies in the financial services
industry.) This does not include obligations issued or guaranteed by
the U. S. government or its agencies or 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.
The Treasury Only and Government Money Market Funds:
1. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net assets.
2. 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.
3. 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.
The Treasury Only Money Market Fund:
1. Will not purchase securities other than U.S. Treasury bills and notes.
16
<PAGE> 461
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.
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 Board of Trustees of
One Group Mutual Funds in determining whether an investment is illiquid.
PORTFOLIO QUALITY AND MATURITY. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
17
<PAGE> 462
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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:
- - Institutional investors and other accredited 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.
- - If you have questions about eligibility, please call The One Group
Services Company at 1-877-691-1118.
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, Christmas Eve 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 3:00 p.m. ET for the Treasury Only Money Market
Fund; and
(ii) before 5:00 p.m. ET for the Institutional Prime and
Government Money Market Funds.
- - 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.
- - 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.
18
<PAGE> 463
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We refer to these entities as "Intermediaries".
- - Class S shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional services.
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 3:00 p.m. ET for the Treasury
Only and at 5:00 p.m. ET for all of the Institutional Prime Money
Market Fund and the Government Money Market Fund.
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. You also must
maintain a minimum account balance of $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 authorize a bank transfer or
initiate a wire transfer payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
5. 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.
6. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-877-691-1118.
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 1-877-691-1118 to relay your purchase instructions.
19
<PAGE> 464
- - Authorize a bank transfer or initiate a wire transfer payable to "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 One Group Fund (ex:One Group Institutional Prime Money Market Fund)
Your Account Number (ex:123456789)
Your Account Registration (ex:ABC Corporation)
- - 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, 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 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 Fund described in this
prospectus.
- - One Group may change the terms and conditions of your exchange
privileges upon 60 days written notice.
- - One Group Funds offers 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 the Systematic Exchange Privilege, please select it on
your account application. To learn more about it, please call The One
Group Services Company at 1-877-691-1118.
- - 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 3:00 p.m.
ET.
- - You have provided 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.
20
<PAGE> 465
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, 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, 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
3:00 p.m. ET for the Treasury Only Money Market Fund and 5:00 p.m. ET
for the Institutional Prime and Government Money Market Funds, 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
- - You may request redemption forms by calling The One Group Services
Company at 1-877-691-1118
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in 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. Your Shareholder Servicing Agent.
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<PAGE> 466
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Funds will attempt to honor requests for same day payment
if the request is received before 3:00 p.m. ET for the Treasury Only
Money Market Fund and 5:00 p.m. ET for the Institutional Prime and
Government Money Market Funds. If redemption requests are received
after those times, the Funds will attempt to wire payment the next
business day.
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 The One Group Services Company
at 1-877-691-1118 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.
- - 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, 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
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth 3% or more of a Fund's assets, the Fund reserves the right
to pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund
will value the securities selected in the same manner in which it
computes its NAV. This process minimizes the effect of large
redemptions on the Fund and its remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - 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.
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<PAGE> 467
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
Dividends payable on Class I shares will be more than those payable on Class S
shares. This is because Class S shares have higher expenses.
The Funds generally declare dividends each business day. Dividends are
distributed on the first business day of the next month after they are declared.
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 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. You may change the way you receive dividends and
distributions by calling The One Group Services Company at 1-877-691-1118.
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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund will be taxable to you, whether reinvested or
received in cash. Dividends from a Fund's net investment income (generally all
of the Fund's net investment income), if any, will be taxable as ordinary
income.
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 eligible taxpayers in January details dividends
and their federal tax category. Even though the Funds provide 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
23
<PAGE> 468
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, call
1-877-691-1118 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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<PAGE> 469
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to One
Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentages of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates.
ANNUAL RATE AS PERCENTAGE
OF AVERAGE DAILY NET ASSETS
---------------------------
One Group Institutional Prime Money Market Fund .00%
One Group Treasury Only Money Market Fund .08%
One Group Government Money Market Fund .08%
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
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<PAGE> 470
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are incorporated in the Statement of Additional
Information, which is available upon request.
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND Financial Highlights
26
<PAGE> 471
ONE GROUP TREASURY ONLY MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1999 1998 1997 1996 1995(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities:
Net investment income 0.052 0.051 0.052 0.051
Distributions:
Net investment income (0.052) (0.051) (0.052) (0.051)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.30% 5.24% 5.38% 5.22%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $719,570 $480,860 $415,961 $288,697
Ratio of expenses to
average net assets 0.15% 0.15% 0.17% 0.20%
Ratio of net investment
income to average net
assets 5.18% 5.12% 5.23% 5.14%
Ratio of expenses to
average net assets* 0.15% 0.15% 0.17% 0.21%
Ratio of net investment
income to average
net assets* 5.18% 5.12% 5.23% 5.13%
</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.
27
<PAGE> 472
ONE GROUP GOVERNMENT MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1999 1998 1997 1996 1995(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
Investment Activities:
Net investment income 0.055 0.053 0.055 0.053
Distributions:
Net investment income (0.055) (0.053) (0.055) (0.053)
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
Total Return 5.64% 5.43% 5.61% 5.41%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $3,712,252 $1,083,438 $855,613 $720,699
Ratio of expenses to
average net assets 0.15% 0.14% 0.18% 0.21%
Ratio of net investment
income to average net assets 5.48% 5.31% 5.46% 5.28%
Ratio of expenses to
average net assets* 0.15% 0.14% 0.18% 0.22%
Ratio of net investment
income to average net assets* 5.48% 5.31% 5.46% 5.27%
</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..
28
<PAGE> 473
APPENDIX A
----------
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>
One Group Institutional Prime Money Market Fund 1
One Group Treasury Only Money Market Fund 2
One Group Government Money Market Fund 3
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. 1-3 Market
TREASURY RECEIPTS: TRs, TIGRS, and CATS. 1 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and 1,3 Market
instrumentalities of the U.S. Government. These include Ginnie Mae, Credit
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. 1 Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange 1 Liquidity
for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous 1,3 Credit
commitment to return the security to the seller at an agreed upon price Market
on an agreed upon date. This is treated as a loan. Liquidity
REVERSE REPURCHASE AGREEMENTS: The sale of a security and the simultaneous 1-3 Market
commitment to buy the security back at an agreed upon price on an agreed Leverage
upon date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the Fund's total 1-3 Credit
assets. In return the Fund will receive cash, other securities, Market
and/or letters of credit. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-3 Market
contract to purchase securities at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money market mutual funds, 1,3 Market
including One Group money market funds and shares of other money
market mutual funds 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.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes which normally mature 1 Market
within a short period of time (e.g., 1 month) but which may be extended Credit
by the issuer for a maximum maturity of thirteen months. Liquidity
</TABLE>
29
<PAGE> 474
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted 1 Credit
by a commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes 1 Credit
issued by corporations and other entities. Maturities generally vary Liquidity
from a few days to nine months. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and obligations 1 Market
of foreign banks, overseas branches of U.S. banks and Political
supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act 1 Liquidity
of 1933, such as privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with interest rates 1, 3 Market
which are reset daily, weekly, quarterly or some other period and Credit
which may be payable to the Fund on demand. Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans 1, 3 Pre-Payment
and pools of loans. These include collateralized mortgage obligations ("CMOs") Market
and Real Estate Mortgage Investment Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments 1 Market
to purchase the securities at a fixed price (usually with accrued interest) Liquidity
within a fixed period of time following demand by a Fund. Management
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain 1 Market
funds for various public purposes. Municipal securities include private Credit
activity bonds and industrial development bonds, as well as General Obligation Political
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Tax
Notes, other short-term tax-exempt obligations, municipal leases, and Regulatory
obligations of municipal housing authorities and single family revenue bonds.
SHORT-TERM FUNDING AGREEMENTS: Agreements issued by banks and highly 1 Market
rated insurance companies such as Guaranteed Investment Contracts Credit
("GICs") and Bank Investment Contracts ("BICs"). Liquidity
PARTICIPATION INTERESTS: Interests in municipal securities, including municipal leases, 1 Credit
from financial institutions such as commercial and investment banks, savings and Tax
loan associations and insurance companies. These interests may take the Market
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 receivables, 1 Pre-payment
home equity loans, truck and auto loans, leases, credit card receivables Market
and other securities backed by other types of receivables Credit
or other assets. Regulatory
</TABLE>
30
<PAGE> 475
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 and liquidity of a security
can be adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - 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.
- - 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.
- - 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.
- - 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 lender has when a borrower defaults on
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.
31
<PAGE> 476
- - 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.
32
<PAGE> 477
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
33
<PAGE> 478
ONE GROUP(R) MUTUAL FUNDS
CASH MANAGEMENT MONEY MARKET FUNDS COMBINED PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) CASH MANAGEMENT MONEY MARKET FUND
ONE GROUP(R) TREASURY CASH MANAGEMENT MONEY MARKET FUND
ONE GROUP(R) TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND
ONE GROUP(R) U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
ONE GROUP(R) MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 479
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Cash Management Money Market Fund
One Group Treasury Cash Management Money Market Fund
One Group Treasury Prime Cash Management Money Market Fund
One Group U. S. Government Securities Cash Management Money Market Fund
One Group Municipal Cash Management Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 480
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE CASH MANAGEMENT MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE CASH MANAGEMENT MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in short-term, high quality money market obligations, including
securities that are issued or guaranteed by the U. S. Government or its agencies
and instrumentalities, certificates of deposit, variable and floating rate
instruments, mortgage-backed securities, puts, municipal securities and other
short-term obligations. Some of these securities are subject to repurchase
agreements. The Fund may concentrate in the financial services sector, including
asset-backed commercial paper programs. This means that at least 25% of the
Fund's total assets could be invested in the financial services industry. The
Fund will comply with SEC rules applicable to all money market funds, including
Rule 2a-7 under the Investment Company Act of 1940. The Fund may also engage in
securities lending. For more information about the Cash Management Money Market
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE CASH MANAGEMENT MONEY MARKET FUND?
The main risks of investing in the Cash Management Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Derivatives. The Fund invests in securities that are considered to be
derivatives. The value of derivative securities (like certain types of
mortgage-related securities) is dependent upon the performance of
underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your
investment in the Fund declines. Generally, derivatives are more
volatile and are riskier in terms of both liquidity and value than
traditional investments.
Concentration: The Cash Management Money Market Fund may invest a
significant portion of its assets in the securities of companies in the
financial services industry. This increases the Fund's risk of loss if
the financial services industry experiences economic or other
difficulties that either increase the industry's default rate or lowers
the value of securities issued by the industry.
Net Asset Value and Credit Risk: There is no assurance that the Fund
will meet its investment objective of maintaining a net asset value of
$1.00 per share on a continuous basis. Credit risk is very low because
the Fund only invests in high quality obligations and limits its
average maturity to 90 days. Nonetheless, if an issuer fails to pay
interest or to repay principal, the value of your investment in the
Fund could decline. Because 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 also decrease if the value of the
securities in the portfolio decreases in response to declining credit
quality of a credit enhancement provider.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
3
<PAGE> 481
HOW HAS THE CASH MANAGEMENT MONEY MARKET FUND PERFORMED?
By showing the variability of the Cash Management Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE CASH MANAGEMENT
MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND
[GRAPHIC]
TOTAL RETURN (per calendar year)1
CLASS I SHARES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
3.27% 4.06% 5.72% 5.83% 5.41% 5.36%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.35%.
Best Quarter: 1.41% 1Q 1995; Worst Quarter: 0.79% 4Q 1993.
4
<PAGE> 482
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 7/30/92)
---------------
<S> <C> <C> <C>
One Group Cash Management Money
Market Fund 5.02% 5.28% 4.74%
- -------------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS A ------ (SINCE 1/17/95)
- ------- ---------------
One Group Cash Management Money
Market Fund 4.75% 5.10%
- -------------------------------------------------------------------------------------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE 1-877-691-1118.
5
<PAGE> 483
FEES AND EXPENSES OF THE CASH MANAGEMENT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS I
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load) NONE NONE
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales NONE NONE
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee NONE NONE
Exchange Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees 0.20% 0.20%
Distribution [and/or 0.25% NONE
Service] (12b-1) Fees
Other Expenses 0.20% 0.20%
Total Annual fund Operating 0.65% 0.40%
Expenses
Fee Waiver and/or Expense (0.05%) (0.05%)
Reimbursement(3)
Net Expenses 0.60% 0.35%
- ----------------------------- --------------------- --------------- ------------------
</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
may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .60% for Class A shares and .35% for Class I shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
6
<PAGE> 484
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU HELD ALL OF YOUR SHARES FOR THE PERIOD. THE EXAMPLES
ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER
THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS A CLASS I
- -------------------- ------------------ ------------------- ------------------
<S> <C> <C>
1 Year $ 61 $ 36
3 Years $203 $123
5 Years $357 $219
10 Years $806 $500
- --------------------------------------- ------------------- ------------------
</TABLE>
1 Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $66
Class I $41
7
<PAGE> 485
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE TREASURY CASH MANAGEMENT MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE TREASURY CASH MANAGEMENT MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests exclusively in U. S. Treasury bills, notes, bonds and other U.
S. obligations issued or guaranteed by the U. S. Treasury, some of which are
subject to repurchase agreements. The Fund will comply with SEC rules applicable
to all money market funds, including Rule 2a-7 under the Investment Company Act
of 1940. For more information about the Treasury Cash Management Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY CASH MANAGEMENT MONEY
MARKET FUND?
The main risks of investing in the Treasury Cash Management Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value: There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE TREASURY CASH MANAGEMENT MONEY MARKET FUND PERFORMED?
By showing the variability of the Treasury Cash Management Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE TREASURY CASH
MANAGEMENT MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
8
<PAGE> 486
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND
[GRAPHIC]
TOTAL RETURN (PER CALENDAR YEAR)1
CLASS I SHARES
1998 5.20%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.22%.
Best Quarter: 1.33% 4Q 1997; Worst Quarter: 1.17% 4Q 1998.
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated. 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 for more than one year tend to smooth out
variations in a Fund's total return and are not the same as actual year-by-year
results.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS I 1 YEAR LIFE
- ------- ------ (SINCE 9/12/97)
---------------
<S> <C> <C>
One Group Treasury Cash Management
Money Market Fund 4.79% 5.06%
- --------------------------------------- ------------------- ------------------
1 YEAR LIFE
CLASS A ------ (SINCE 9/12/97)
- ------- ---------------
One Group Treasury Cash Management
Money Market Fund 4.53% 4.79%
- --------------------------------------- ------------------- ------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE 1-877-691-1118.
9
<PAGE> 487
FEES AND EXPENSES OF THE TREASURY CASH MANAGEMENT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS I
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load) NONE NONE
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales NONE NONE
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee NONE NONE
Exchange Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees 0.20% 0.20%
Distribution [and/or 0.25% NONE
Service] (12b-1) Fees
Other Expenses 0.23% 0.23%
Total Annual fund Operating 0.68% 0.43%
Expenses
Fee Waiver and/or Expense (0.08%) (0.08%)
Reimbursement(3)
Net Expenses 0.60% 0.35%
- ----------------------------- --------------------- --------------- ------------------
</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
may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .60% for Class A shares and .35% for Class I shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
10
<PAGE> 488
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU HELD ALL OF YOUR SHARES FOR THE PERIOD. THE EXAMPLES
ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER
THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS A CLASS I
- -------------------- ------------------ ------------------- ------------------
<S> <C> <C>
1 Year(1) $ 61 $ 36
3 Years $210 $130
5 Years $371 $233
10 Years $839 $534
- --------------------------------------- ------------------- ------------------
</TABLE>
1 Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $69
Class I $44
11
<PAGE> 489
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests in U. S. Treasury bills, notes, bonds and other U. S.
obligations issued or guaranteed by the U. S. Treasury. The Fund does not invest
in repurchase agreements. The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Treasury Prime Cash Management Money Market
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY PRIME CASH MANAGEMENT MONEY
MARKET FUND?
The main risks of investing in the Treasury Prime Cash Management Money Market
Fund and the circumstances likely to adversely affect your investment are
described below. Before you invest, please read "More About the Funds" and
"Investment Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value: There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND PERFORMED?
By showing the variability of the Treasury Prime Cash Management Money Market
Fund's performance from year to year, the charts below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE TREASURY
PRIME CASH MANAGEMENT MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW
THE FUND WILL PERFORM IN THE FUTURE.
12
<PAGE> 490
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C>
4.86% 4.90% 4.76%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.12%.
Best Quarter: 1.32% 2Q 1995; Worst Quarter: 1.04% 4Q 1998.
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated. 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 for more than one year tend to smooth out
variations in a Fund's total return and are not the same as actual year-by-year
results.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS I 1 YEAR LIFE
- ------- ------ (SINCE 3/22/95)
---------------
<S> <C> <C>
One Group Treasury Prime Cash
Management Money Market Fund 4.42% 4.86%
- --------------------------------------- ------------------- ------------------
1 YEAR LIFE
CLASS A ------ (SINCE 3/22/95)
- ------- ---------------
One Group Treasury Prime Cash
Management Money Market Fund 4.16% 4.60%
- --------------------------------------- ------------------- ------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE 1-877-691-1118.
13
<PAGE> 491
FEES AND EXPENSES OF THE TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS I
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load) NONE NONE
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales NONE NONE
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee NONE NONE
Exchange Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees 0.20% 0.20%
Distribution [and/or 0.25% NONE
Service] (12b-1) Fees
Other Expenses 0.22% 0.22%
Total Annual fund Operating 0.67% 0.42%
Expenses
Fee Waiver and/or Expense (0.07%) (0.07%)
Reimbursement(3)
Net Expenses 0.60% 0.35%
- ----------------------------- --------------------- --------------- ------------------
</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
may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .60% for Class A shares and .35% for Class I for the
period beginning November 1, 1999 and ending on October 31, 2000.
14
<PAGE> 492
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU HELD ALL OF YOUR SHARES FOR THE PERIOD. THE EXAMPLES
ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER
THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS A CLASS I
- -------------------- ------------------ ------------------- ------------------
<S> <C> <C>
1 Year(1) $ 61 $ 36
3 Years $207 $128
5 years $366 $228
10 Years $828 $523
- --------------------------------------- ------------------- ------------------
</TABLE>
1 Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $68
Class I $43
15
<PAGE> 493
ONE GROUP U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET
FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND'S
MAIN INVESTMENT STRATEGIES?
The Fund invests in short-term securities issued or guaranteed by the U. S.
Government, its agencies or instrumentalities; and repurchase agreements
relating to such securities. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. The Fund may also engage in securities lending. For more information about
the U. S. Government Securities Cash Management Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE U. S. GOVERNMENT SECURITIES CASH
MANAGEMENT MONEY MARKET FUND?
The main risks of investing in the U. S. Government Securities Cash Management
Money Market Fund and the circumstances likely to adversely affect your
investment are described below. Before you invest, please read "More About the
Funds" and "Investment Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value: There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
PERFORMED?
By showing the variability of the U. S. Government Securities Cash Management
Money Market Fund's performance from year to year, the charts below help show
the risk of investing in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF
THE U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
16
<PAGE> 494
ONE GROUP U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
[GRAPHICS]
TOTAL RETURN (PER CALENDAR YEAR)1
CLASS I SHARES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
3.04% 3.97% 5.65% 5.15% 5.34% 5.26%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.28%.
Best Quarter: 1.40% 1Q 1995; Worst Quarter: 0.72% 4Q 1993.
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated. 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 for more than one year tend to smooth out
variations in a Fund's total return and are not the same as actual year-by-year
results.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 6/2/92)
--------------
<S> <C> <C> <C>
One Group U. S. Government Securities
Cash Management Money Market Fund 4.89% 5.21% 4.61%
- --------------------------------------- ------------------- ------------------ ------------------
1 YEAR LIFE
CLASS A ------ (SINCE 1/17/95)
- ------- ---------------
One Group U. S. Government Securities
Cash Management Money Market Fund 4.63% 5.02%
- --------------------------------------- ------------------- ------------------ ------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE 1-877-691-1118.
17
<PAGE> 495
FEES AND EXPENSES OF THE U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY
MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS I
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load) NONE NONE
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales NONE NONE
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee NONE NONE
Exchange Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES (expenses that
are deducted from Fund assets)(2)
Investment Advisory Fees 0.20% 0.20%
Distribution [and/or 0.25% NONE
Service] (12b-1) Fees
Other Expenses 0.19% 0.19%
Total Annual fund Operating 0.64% 0.39%
Expenses
Fee Waiver and/or Expense (0.04%) (0.04%)
Reimbursement(3)
Net Expenses 0.60% 0.35%
- ----------------------------- --------------------- --------------- ------------------
</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
may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .60% for Class A shares and .35% for Class I shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
18
<PAGE> 496
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU HELD ALL OF YOUR SHARES FOR THE PERIOD. THE EXAMPLES
ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER
THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS A CLASS I
- -------------------- ------------------ ------------------- ------------------
<S> <C> <C>
1 Year(1) $ 61 $ 36
3 Years $201 $121
5 Years $353 $215
10 Years $795 $489
- --------------------------------------- ------------------- ------------------
</TABLE>
1 Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $65
Class I $40
19
<PAGE> 497
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND
WHAT IS THE GOAL OF THE MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND?
The Fund seeks high current income exempt from Federal income tax with liquidity
and stability of principal.
WHAT ARE THE MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in short-term, high quality 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, as well as engage in securities
lending. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Municipal Cash Management Money Market Fund's investment
strategies, please read "More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MUNICIPAL CASH MANAGEMENT MONEY
MARKET FUND?
The main risks of investing in the Municipal Cash Management Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk: The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Derivatives. The Fund invests in securities that are considered to be
derivatives. The value of derivative securities (like certain types of
mortgage-related securities) is dependent upon the performance of
underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative security and your
investment in the Fund declines. Generally, derivatives are more
volatile and are riskier in terms of both liquidity and value than
traditional investments.
Net Asset Value and Credit Risk: There is no assurance that the Fund
will meet its investment objective of maintaining a net asset value of
$1.00 per share on a continuous basis. Credit risk is very low because
the Fund only invests in high quality obligations and limits its
average maturity to 90 days. Nonetheless, if an issuer fails to pay
interest or to repay principal, the value of your investment in the
Fund could decline. Because 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 also decrease if the value of the
securities in the portfolio decreases in response to declining credit
quality of a credit enhancement provider.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND PERFORMED?
By showing the variability of the Municipal Cash Management Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF
20
<PAGE> 498
THE MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND
[GRAPHIC]
TOTAL RETURN (PER CALENDAR YEAR)1
CLASS I SHARES
1998 3.20%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.39 %.
Best Quarter: 0.86% 4Q 1997; Worst Quarter: 0.74% 2Q 1999.
21
<PAGE> 499
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated. 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 for more than one year tend to smooth out
variations in a Fund's total return and are not the same as actual year-by-year
results.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS I 1 YEAR LIFE
- ------- ------ (SINCE 8/18/97)
---------------
<S> <C> <C>
One Group Municipal Cash Management 2.97% 3.15%
Money Market Fund
- --------------------------------------- ------------------- ------------------
1 YEAR LIFE
CLASS A ------ (SINCE 8/18/97)
- ------- ---------------
One Group Municipal Cash Management 2.71% 2.90%
Money Market Fund
- --------------------------------------- ------------------- ------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE 1-877-691-1118.
22
<PAGE> 500
FEES AND EXPENSES OF THE MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS I
investment)(1)
<S> <C> <C>
Maximum Sales Charge (Load) NONE NONE
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales NONE NONE
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee NONE NONE
Exchange Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(2)
Investment Advisory Fees 0.20% 0.20%
Distribution [and/or 0.25% NONE
Service] (12b-1) Fees
Other Expenses 0.23% 0.23%
Total Annual fund Operating 0.68% 0.43%
Expenses
Fee Waiver and/or Expense (0.08%) (0.08%)
Reimbursement(3)
Net Expenses 0.60% 0.35%
- ----------------------------- --------------------- --------------- -----------------
</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
may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .60% for Class A shares and .35% for Class I shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
23
<PAGE> 501
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU HELD ALL OF YOUR SHARES FOR THE PERIOD. THE EXAMPLES
ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S
OPERATING EXPENSES REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER
THAN THOSE SHOWN BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------- ------------------
CLASS A CLASS I
- -------------------- ------------------ ------------------- ------------------
<S> <C> <C>
1 Year(1) $ 61 $ 36
3 Years $210 $130
5 years $371 $233
10 Years $839 $534
- --------------------------------------- ------------------- ------------------
</TABLE>
1 Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $69
Class I $44
24
<PAGE> 502
MORE ABOUT THE FUNDS
Each of the five funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of the Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes five mutual funds that are designed to seek high
current income with liquidity and stability of principal. The principal
investment strategies that are used to meet each Fund's investment objective are
described in Fund Summaries: Investment, Risk & Performance.
- --------------------------------------------------------------------------------
FUNDAMENTAL POLICIES
Each Fund's investment strategy may involve "fundamental policies". A
policy is fundamental if it cannot be changed without the consent of a
majority of the outstanding shares of the Fund.
- --------------------------------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objective. Please note that each Fund also may use strategies that are not
described in the Fund Summaries, but which are described in the Statement of
Additional Information.
INVESTMENT RISKS. The risks associated with investing in all five of the Cash
Management Money Market Funds are described in the Fund Summaries in the front
of this Prospectus. Risks associated with certain cash management funds are
described further below.
Derivatives: The Cash Management Money Market Fund, the U.S. Government
Securities Cash Management Money Market Fund and the Municipal Cash
Management Money Market Fund may invest in securities that are
considered to be DERIVATIVES. These securities may be more volatile
than other investments. Derivatives present, to varying degrees,
market, credit, leverage, liquidity and management risks.
- --------------------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like certain types of
mortgage-related securities) that derive their value from the
performance of underlying assets or securities.
- --------------------------------------------------------------------------------
For more information about risks associated with the types of investments that
the Cash Management Money Market Funds purchase, please read the Risk/Return
Summaries, Appendix A and the Statement of Additional Information.
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:
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
25
<PAGE> 503
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 regard to this restriction
as permitted by applicable law.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net 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.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Securities will be purchased by the Funds only if: i) the
securities satisfy Securities and Exchange Commission regulations intended to
restrict these Funds to short-term, high-quality investments; and ii) they
present minimal credit risk under guidelines adopted by the One Group Board of
Trustees. For more information about ratings, please see "Description of
Ratings" in the Statement of Additional Information.
26
<PAGE> 504
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve, and
Christmas.
- - Purchase requests received by The One Group Services Company before 12:00
p.m. Eastern Time ("ET") for the Municipal Cash Management Money Market
Fund, 2:00 p.m. ET for the Treasury Prime Cash Management Money Market
Fund, and 3:00 p.m. ET for the other Funds (Cash Management Money Market
Fund, Treasury Cash Management Money Market Fund, and U. S. Government
Securities Cash Management Money Market Fund) will be effective that day.
On occasion, the NYSE will close before 4:00 p.m. ET. When the NYSE closes
before the times listed above, purchase requests received after the NYSE
closes will be effective the following business day.
- - Purchase orders may be cancelled if the Fund's Custodian, State Street
Bank and Trust Company, 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
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?
One Group offers the following classes of shares:
- - Class A 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."
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV"), which, under normal
circumstances, will equal $1.00.
- - 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 as of
12:00 p.m. ET for the Municipal Cash Management Money Market Fund, 2:00
p.m. ET for the Treasury Prime Cash Management Money Market and 3:00 p.m.
ET for the Cash Management Money Market Fund, Treasury Cash Management
Money Market Fund and U. S. Government Securities Cash Management Money
Market Fund. On occasion, the NYSE will close before 4:00 p.m. ET. When the
NYSE closes before the times listed above, NAV will be calculated as of the
time the NYSE closes.
27
<PAGE> 505
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and authorize a bank transfer or
initiate a wire transfer payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
5. 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.
6. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-877-691-1118.
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 1-877-691-1118 to relay your purchase instructions.
- Authorize a bank transfer or initiate a wire transfer payable to "One
Group" to State Street Bank and Trust Company at the following wire
address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Cash Management Money Market Fund)
Your Account Number (ex: 123456789)
Your Account Registration (ex: ABC Corporation)
- 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, 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
28
<PAGE> 506
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 fees. 12b-1 fees are paid by
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 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. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees help The One Group Services Company sell Class A 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.
- - 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).
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may exchange your shares for shares of any other Fund described in this
prospectus. You may also exchange your shares for shares of any institutional
money market fund that One Group may offer.
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 the
Systematic Exchange Privilege, please select it on your account application.
To learn more about it, please call The One Group Services Company at
1-877-691-1118.
One Group does not charge a fee for this privilege.
One Group does not charge a fee for this privilege. In addition, 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 12:00 p.m.
ET.
- You have provided 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 classes of shares of the same Fund is not taxable
for Federal income tax purposes.
29
<PAGE> 507
- 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, 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, 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:
- 12:00 p.m. ET for the Municipal Cash Management Money
Market Fund;
- 2:00 p.m. ET for the Treasury Prime Cash Management Money
Market Fund;
- 3:00 p.m. ET for the Cash Management Money Market Fund,
Treasury Cash Management Money Market Fund and U. S.
Government Securities Cash Management Money Market Fund
(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 One Group
P.O. Box 8528
Boston, MA 02266-8528
- You may request redemption forms by calling The One Group Services
Company at 1-877-691-1118.
- State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in 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. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
30
<PAGE> 508
- Your redemption proceeds will be paid ordinarily within seven days
after receipt of the redemption request. However, the Funds will
attempt to honor requests for same day payment on redemptions, if the
request is received before the time listed in "When Can I Redeem
Shares?" If the request is received after the time listed in "When Can
I Redeem Shares?", then the Funds will attempt to honor requests for
payments in the next business day.
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 The One Group Service Company
at 1-877-691-1118 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.
- 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, 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. However, if you redeem shares worth
3% or more of a Fund's assets, the Fund reserves the right to pay part
or all of your redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the Fund will value
the securities selected in the same manner in which it computes its
NAV. This process minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- 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 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.
31
<PAGE> 509
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, votes 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 Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of the 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.
Dividends payable on Class I shares will be more than those payable on Class A
shares. This is because Class A 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 may 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. You also may call The One Group Services Company
at 1-877-691-1118 to make this change.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may produce either a taxable gain
or a loss. You are responsible for any tax liabilities generated by your
transactions. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS - ALL FUNDS OTHER THAN ONE GROUP MUNICIPAL CASH
MANAGEMENT MONEY MARKET FUND
Each Fund will distribute substantially all of its net investment income.
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 (generally all
of the Fund's net investment income), if any, will be taxable as ordinary
income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF DISTRIBUTIONS - ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET
FUND
The Fund will distribute substantially all of its net investment income.
Distributions you receive from the Fund, whether reinvested or received in cash,
will be taxable to you except as discussed below. The Fund expects to pay much
or all of its dividends in the form of "exempt-interest dividends." It will be
able to do so if at least 50% of the value of the Fund's 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 result in
liability for Federal alternative minimum tax and for state and local taxes,
both for individual and corporate shareholders. Corporate shareholders will be
required to take the interest on municipal securities into account in
32
<PAGE> 510
determining their alternative minimum taxable income. Dividends from a Fund's
net investment income that do not qualify as "exempt-interest dividends" will be
taxable as ordinary income and distributions, if any, of gains from investments
that the Fund has held for more than one year 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 year.
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, call
1-877-691-1118 or visit "www.onegroup.com".
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
33
<PAGE> 511
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
<TABLE>
<CAPTION>
FUND ANNUAL RATE AS PERCENTAGE
- ---- OF AVERAGE DAILY NET ASSETS
---------------------------
<S> <C>
One Group Cash Management Money Market Fund .15%
One Group Treasury Cash Management Money Market Fund .13%
One Group Treasury Prime Cash Management Money Market Fund .13%
One Group U. S. Government Securities Cash Management Money Market Fund .17%
One Group Municipal Cash Management Money Market fund .14%
</TABLE>
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
34
<PAGE> 512
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate than
an investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by______________________, whose report, along with the Funds'
financial statements are included in the Statement of Additional Information,
which is available upon request.
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30 YEAR ENDED DECEMBER 31 YEAR ENDED JUNE 30
- ---------------------------------------------------------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1996(a) 1995(b)
- ------- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $0.9997 $0.9998 $0.9996 $0.9994 $0.9993
Investment Activities:
Net investment income 0.0523 0.0528 0.0508 0.0277 0.0507
Net realized and unrealized gains
(losses) from investments -- (0.0001) 0.0002 0.0002 (0.0059)
Total from Investment Activities 0.0523 0.0527 0.0510 0.0279 0.0448
Distributions:
Net investment income (0.0523) (0.0528) (0.0508) (0.0277) (0.0507)
Increase due to capital
contribution from an affiliate
of the investment adviser -- -- -- -- 0.0060
Total Distributions (0.0523) (0.0528) (0.0508) (0.0277) (0.0507)
NET ASSET VALUE, END OF PERIOD $0.9997 $0.9997 $0.9998 $0.9996 $0.9994
Total Return 5.36% 5.41% 5.23% 2.80%(e) 5.19(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(000) $1,076,045 $705,270 $885,946 $389,127 $319,214
Ratio of expenses to average
net assets 0.35% 0.35% 0.35% 0.35%(d) 0.35%
Ratio of net investment income
to average net assets 5.21% 5.36% 5.19% 5.51%(d) 5.11%
Ratio of expenses to average
net assets* 0.39% 0.38% 0.42% 0.43%(d) 0.44%
</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) For the period July 1, 1995 through December 31,
1995. Effective July 1, 1995 the Fund changed its fiscal year end from
June 30 to December 31. (b) If the Fund had not had a capital
contribution by an affiliate of the Investment Adviser during the
period, the total return would have been 4.51%. (c) Annualized. (d) Not
annualized.
35
<PAGE> 513
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PERIOD ENDED JUNE 30 ----------------------- --------
CLASS A 1999 1998 1997 1996 1995(a) 1995(b)
- ------- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $0.9999 $0.9998 $0.9996 $0.9994 $1.0000
Investment Activities:
Net investment income 0.0499 0.0508 0.0484 0.0264 0.0245
Net realized and unrealized gains
(losses) from investments -- 0.0001 0.0002 0.0002 (0.0006)
Total from Investment Activities 0.0499 0.0504 0.0486 0.0266 0.0239
Distributions:
Net investment income (0.0499) (0.0503) (0.0484) (0.0264) (0.0245)
Increase due to capital
contribution from an affiliate
of the investment adviser -- -- -- -- --
Total Distributions (0.0499) (0.0503) (0.0484) (0.0264) (0.0245)
NET ASSET VALUE, END OF PERIOD $0.9999 $0.9999 $0.9998 $0.9996 $0.9994
Total Return 5.10% 5.15% 4.98% 2.68%(c) 2.47%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $1,521,827 $992,763 $232,249 $121,750 $11,372
Ratio of expenses to average
net assets 0.60% 0.60% 0.60% 0.60%(d) 0.60%(d)
Ratio of net investment income
to average net assets 5.04% 5.11% 4.94% 5.25%(d) 5.46%(d)
Ratio of expenses to average
net assets* 0.64% 0.63% 0.67% 0.69%(d) 0.71%(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) For the period July 1, 1995 through December 31,
1995. Effective July 1, 1995 the Fund changed its fiscal year end from
June 30 to December 31. (b) For the period January 17, 1995 (initial
offering date of Class A Shares) through June 30, 1995. (c) Not
Annualized. (d) Annualized.
36
<PAGE> 514
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30 ------------
CLASS I 1999 1998 1997(a)
- ------- ---- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.0000 $ 1.0000
Investment Activities:
Net investment income 0.0508 0.0159
Net realized and unrealized gains (losses)
from investments -- --
Total from Investment Activities 0.0508 0.0159
Distributions:
Net investment income (0.0508) (0.0159)
Total Distributions (0.0508) (0.0159)
NET ASSET VALUE, END OF PERIOD $ 1.0000 $ 1.0000
Total Return 5.20% 5.29%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $ 32,196 $ 850
Ratio of expenses to average net assets 0.35% 0.35%(b)
Ratio of net investment income to average
net assets 4.97% 5.28%(b)
Ratio of expenses to average net assets* 0.40% 0.41%(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) For the period September 12, 1997 (commencement of
operations) through December 31, 1997. (b) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30 ------------
CLASS A 1999 1998 1997(a)
- --------- ---- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000
Investment Activities:
Net investment income 0.0482 0.0152
Net realized and unrealized gains (losses)
from investments -- --
Total from Investment Activities 0.0482 0.0152
Distributions:
Net investment income (0.0482) (0.0152)
Total Distributions (0.0482) (0.0152)
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000
Total Return 4.94% 5.04%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $331,015 $205,722
Ratio of expenses to average net assets 0.60% 0.60%(b)
Ratio of net investment income to average
net assets 4.82% 5.03%(b)
Ratio of expenses to average net assets* 0.65% 0.66%(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) For the period September 12, 1997 (commencement of
operations) through December 31, 1997. (b) Annualized.
37
<PAGE> 515
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED JUNE 30 -----------------------
CLASS I 1999 1998 1997 1996 1995(a)
- --------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $0.9999 $0.9999 $1.0000 $1.0000
Investment Activities:
Net investment income 0.0467 0.0479 0.0474 0.0399
Net realized and unrealized
gains (losses) from
investments -- -- (0.0001) --
Total from Investment Activities 0.0467 0.0479 0.0473 0.0399
Distributions:
Net investment income (0.0467) (0.0479) (0.0474) (0.0399)
Total Distributions (0.0467) (0.0479) (0.0474) (0.0399)
NET ASSET VALUE, END OF PERIOD $0.9999 $0.9999 $0.9999 $1.0000
Total Return 4.76% 4.90% 4.86% 4.06%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(000) $189,630 $90,813 $70,120 $14,008
Ratio of expenses to average
net assets 0.35% 0.35% 0.35% 0.35%(c)
Ratio of net investment
income to average net assets 4.55% 4.79% 4.84% 5.16%(c)
Ratio of expenses to average
net assets* 0.40% 0.40% 0.46% 1.23%(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) For the period March 22, 1995 (commencement of
operations) through December 31, 1995. (b) Not Annualized. (c)
Annualized.
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30 YEAR ENDED DECEMBER 31,
-----------------------
CLASS A 1999 1998 1997 1996 1995(a)
- --------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000
Investment Activities:
Net investment income 0.0441 0.0454 0.0449 0.0380
Net realized and unrealized
gains (losses) from
investments -- -- -- --
Total from Investment Activities 0.0441 0.0454 0.0449 0.0380
Distributions:
Net investment income (0.0441) (0.0454) (0.0449) (0.0380)
Total Distributions (0.0441) (0.0454) (0.0449) (0.0380)
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000 $1.0000 $1.0000
Total Return 4.50% 4.64% 4.60% 3.86%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
(000) $469,443 $233,590 $215,040 $130,559
Ratio of expenses to average
net assets 0.60% 0.60% 0.60% 0.60%(c)
Ratio of net investment income
to average net assets 4.35% 4.54% 4.59% 4.72%(c)
Ratio of expenses to average
net assets* 0.65% 0.65% 0.71% 0.74%(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) For the period March 22, 1995 (commencement of
operations) through December 31, 1995. (b) Not Annualized. (c)
Annualized.
38
<PAGE> 516
ONE GROUP U. S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30 YEAR ENDED DECEMBER 31, PERIOD ENDED MAY 31,
----------------------- --------------------
CLASS I 1999 1998 1997 1996 1996 1995
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $0.9992 $0.9988 $0.9990 $0.9989 $0.9999
Investment Activities:
Net investment income 0.0513 0.0521 0.0502 0.0320 0.0492
Net realized and unrealized gains
(losses) from investments -- 0.0004 (0.0002) 0.0001 (0.0010)
Total from Investment Activities 0.0513 0.0525 0.0500 0.0321 0.0482
Distributions:
Net investment income (0.0513) (0.0521) (0.0502) (0.0320) (0.0492)
Total Distributions (0.0513) (0.0521) (0.0502) (0.0320) (0.0492)
NET ASSET VALUE, END OF PERIOD $0.9992 $0.9992 $0.9988 $0.9990 $0.9989
Total Return 5.26% 5.34% 5.15% 3.24%(b) 5.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $1,017,830 $534,364 $369,163 $489,395 $475,248
Ratio of expenses to average net
assets 0.35% 0.35% 0.35% 0.35%(c) 0.34%
Ratio of net investment income
to average net assets 5.11% 5.27% 5.09% 5.46%(c) 4.94%
Ratio of expenses to average
net assets* 0.37% 0.36% 0.43% 0.42%(c) 0.41%
</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) For the period June 1,1995 through December 31, 1995.
Effective June 1, 1995, the Fund changed its fiscal year end from May
31 to December 31. (b) Not Annualized. (c) Annualized. (d) For the
period January 17, 1993 (commencement of operations) through May 31,
1993.
<TABLE>
<CAPTION>
PERIOD ENDED
PERIOD ENDED JUNE 30 YEAR ENDED DECEMBER 31, MAY 31,
----------------------- -------
CLASS A 1999 1998 1997 1996 1995(a) 1995(b)
- ------- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $0.9997 $0.9995 $0.9990 $0.9989 $1.0000
Investment Activities:
Net investment income 0.0490 0.0496 0.0478 0.0305 0.0199
Net realized and unrealized gains
(losses) from investments -- 0.0002 0.0005 0.0001 (0.0011)
Total from Investment Activities 0.0490 0.0498 0.0483 0.0306 0.0188
Distributions:
Net investment income (0.0490) (0.0496) (0.0478) (0.0305) (0.0199)
Total Distributions (0.0490) (0.0496) (0.0478) (0.0305) (0.0199)
NET ASSET VALUE, END OF PERIOD $0.9997 $0.9997 $0.9995 $0.9990 $0.9989
Total Return 5.00% 5.08% 4.89% 3.09%(c) 2.01%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $559,770 $357,663 $207,046 $56,000 $16,702
Ratio of expenses to average net
assets 0.60% 0.60% 0.60% 0.60%(d) 0.57%(d)
Ratio of net investment income to
average net assets 4.87% 5.02% 4.84% 5.17%(d) 5.48%(d)
Ratio of expenses to average net
assets* 0.62% 0.61% 0.68% 0.69%(d) 0.66%(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) For the period June 1, 1995 through December 31,
1995. Effective June 1, 1995, the Fund changed its fiscal year end from
May 31 to December 31. (b) For the period January 17, 1995 (initial
offering date of Class A Shares) through May 31, 1995. (c) Not
Annualized. (d) Annualized.
39
<PAGE> 517
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED JUNE 30 DECEMBER 31,
CLASS I 1999 1998 1997(a)
- ------- ---- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000
Investment Activities:
Net investment income 0.0316 0.0125
Net realized and unrealized gains (losses)
from investments -- --
Total from Investment Activities 0.0316 0.0125
Distributions:
Net investment income (0.0316) (0.0125)
Total Distributions (0.0316) (0.0125)
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000
Total Return 3.20% 3.39%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $588,602 $201,705
Ratio of expenses to average net assets 0.35% 0.35%(b)
Ratio of net investment income to average net assets 3.12% 3.37%(b)
Ratio of expenses to average net assets* 0.39% 0.41%(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) For the period August 18, 1997 (commencement of
operations) through December 31, 1997. (b) Annualized.
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD ENDED JUNE 30 DECEMBER 31,
CLASS A 1999 1998 1997(a)
- --------- ---- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.0000 $1.0000
Investment Activities:
Net investment income 0.0291 0.0116
Net realized and unrealized gains (losses)
from investments -- --
Total from Investment Activities 0.0291 0.0116
Distributions:
Net investment income (0.0291) (0.0116)
Total Distributions (0.0291) (0.0116)
NET ASSET VALUE, END OF PERIOD $1.0000 $1.0000
Total Return 2.95% 3.14%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $61,243 $56,534
Ratio of expenses to average net assets 0.60% 0.60%(b)
Ratio of net investment income to average net assets 2.90% 3.12%(b)
Ratio of expenses to average net assets* 0.64% 0.66%(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) For the period August 18, 1997 (commencement of
operations) through December 31, 1997. (b) Annualized.
40
<PAGE> 518
APPENDIX A
----------
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>
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND 1
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND 2
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND 3
ONE GROUP U.S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND 4
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND 5
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes and bonds 1-5 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 1, 4, 5 Market
by agencies and instrumentalities of the U.S. Credit
Government. These include Ginnie Mae, Fannie Mae, and
Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and 1, 2, 4, 5 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1, 4, 5 Market
Purchase or contract to purchase securities at a fixed Leverage
price for delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money market 1, 4, 5 Market
mutual funds, including One Group money market funds
and shares of other money market mutual funds 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.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes with 1 Market
a maximum stated maturity of thirteen months which, on Credit
a designated day each month, may be extended by the Liquidity
purchaser for an additional thirteen months. The note'
maturity cannot be extended beyond the tenth anniversary
of its issuance.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1, 4, 5 Market
interest rates which are reset daily, weekly, quarterly Credit
or some other period and which may be payable to the Fund Liquidity
on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 1, 4, 5 Pre-Payment
by real estate loans and pools of loans. These Market
include collateralized mortgage obligations ("CMOs") Credit
and Real Estate Mortgage Investment Conduits ("REMICs"). Regulatory
</TABLE>
41
<PAGE> 519
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
CERTIFICATES OF DEPOSIT: Negotiable instruments with 1,5 Market
a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a 1,5 Liquidity
bank in exchange for the deposit of funds. Credit
Market
BANKERS' ACCEPTANCES: Bills of exchange or time drafts 1,5 Credit
drawn on and accepted by a commercial bank. Maturities Liquidity
are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1,5 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days to Market
nine months.
DEMAND FEATURES: Securities that are subject to puts and 1,5 Market
standby commitments to purchase the securities at a Liquidity
fixed price (usually with accrued interest) within a Management
fixed period of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state or 1,5 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 Tax
General Obligation Notes, Tax Anticipation Notes, Bond Regulatory
Anticipation Notes, Revenue Anticipation 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 1 Market
banks and highly rated insurance companies such as Credit
Guaranteed Investment Contracts ("GICs") and Bank Liquidity
Investment Contracts ("BICs").
RESTRICTED SECURITIES: Securities not registered under 1,5 Liquidity
the Securities Act of 1933, such as privately placed Credit
commercial paper and Rule 144A securities. Market
FOREIGN SECURITIES: U. S. dollar-denominated commercial paper 1 Market
of foreign issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign
PARTICIPATION INTERESTS: Interests in municipal 1,5 Credit
securities, including municipal leases, from financial Tax
institutions such as commercial and investment banks, Market
savings and loan associations and insurance companies.
These interests may take the form of participations,
beneficial interests in a trust, partnership interests
or any form of indirect ownership that allows the Funds
to treat the income from the investments as exempt from
Federal Income Tax.
ASSET-BACKED SECURITIES: Securities secured by company 1,5 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities Credit
backed by other types of receivables or other assets. Regulatory
</TABLE>
42
<PAGE> 520
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 and liquidity of a security
can be adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - 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.
- - 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.
- - 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.
- - 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 lender has when a borrower defaults on
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.
- - 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.
43
<PAGE> 521
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
44
<PAGE> 522
ONE GROUP(R) MUTUAL FUNDS
INVESTOR FUNDS ONE GROUP(R) INVESTOR GROWTH FUND
PROSPECTUS ONE GROUP(R) INVESTOR GROWTH & INCOME FUND
NOVEMBER 1, 1999 ONE GROUP(R) INVESTOR BALANCED FUND
ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate
or complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 523
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Investor Growth Fund
One Group Investor Growth & Income Fund
One Group Investor Balanced Fund
One Group Investor Conservative Growth
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
The Fund Manager
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: UNDERLYING FUNDS
APPENDIX B: INVESTMENT PRACTICES
-2-
<PAGE> 524
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP INVESTOR GROWTH FUND
WHAT IS THE GOAL OF ONE GROUP INVESTOR GROWTH FUND?
The Fund seeks long-term capital appreciation by investing primarily in a
diversified group of One Group mutual funds which invest primarily in equity
securities.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF ONE GROUP INVESTOR GROWTH FUND?
One Group Investor Growth Fund is a "Fund of Funds". The Fund's investment
strategy is to invest in a diversified group of other One Group mutual funds.
Because this is a growth fund, the majority of the Fund's assets will be
invested in One Group equity funds, although a portion of its assets also will
be invested in One Group bond and money market funds. The Fund's 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. For more information about the Fund's investment
strategies, please read "More About The Funds" and "Principal Investment
Strategies."
WHO SHOULD INVEST IN ONE GROUP INVESTOR GROWTH FUND?
Shares are available for long-term investors, including tax-advantaged
retirement accounts; the Funds should not be used for short-term trading
purposes.
WHAT ARE THE MAIN RISKS OF INVESTING IN ONE GROUP INVESTOR GROWTH FUND?
The main risks of investing in the One Group Investor Growth Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of One Group Investor Growth Fund will change every day in
response to market conditions. You may lose money if you invest in One Group
Investor Growth Fund.
INVESTMENTS IN MUTUAL FUNDS. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's
net asset value will change 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, 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.
EQUITY FUNDS: Equity funds invest primarily in equity securities (such
as stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a companies
financial condition. Equity securities also are subject to "stock
market risk", meaning that stock prices in general may decline over
short or extended periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of your investment
in One Group Investor Growth Fund will be affected.
FIXED INCOME FUNDS: Bond funds invest primarily in fixed income
securities. These securities 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 One Group Investor Growth Fund will change as the value
of investments of the underlying One Group funds increase and decrease.
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
-1-
<PAGE> 525
managed fund may not do so. If the value of securities that are heavily
weighted on an index change, you can expect a greater risk of loss than
would be the case a fund were not fully invested in such securities.
FOREIGN SECURITIES. Funds investing in foreign securities are subject
to special risks in addition to those of U.S. investments. These risks
include political and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less stringent investor
protection and disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and potentially less
liquid than U.S. investments.
EMERGING MARKETS. The risks associated with foreign securities are
magnified in countries in "emerging markets." These countries may have
relatively unstable governments and less established market economies
than developed countries. Emerging markets may face greater social,
economic, regulatory, and political uncertainties. These risks make
emerging market securities more volatile and less liquid than
securities issued in more developed countries.
NOT FDIC INSURED. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ONE GROUP INVESTOR GROWTH FUND PERFORMED?
By showing the variability of the One Group Investor Growth Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INVESTOR GROWTH FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
[GRAPHIC]
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
25.07% 21.76%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.34%.
BEST QUARTER: 19.73% 4Q 1998; WORST QUARTER: -9.92% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-2-
<PAGE> 526
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR LIFE
- ------- ------ (SINCE 12/10/96)
----------------
<S> <C> <C>
One Group Investor Growth Fund 10.27% 18.83%
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 12/10/96)
----------------
One Group Investor Growth Fund 10.57% 19.69%
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 7/1/97)
--------------
One Group Investor Growth Fund 14.65% 19.01 %
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS I 1 YEAR LIFE
------- ------ (SINCE 12/10/96)
----------------
One Group Investor Growth Fund 16.84% 21.43%
S&P 1500 Index(1)
Lipper Mix(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) S&P 1500 Index is an unmanaged index generally representative of the
performance of large and small companies in the U.S. stock market. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By contrast, the performance of the
One Group Investor Growth Fund reflects the deduction of these value-added
services as well as the deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and Class C shares.
(2) The Lipper Mix for the classes consists of the average monthly returns of
the Lipper General Equity Funds Universe (75%), the Lipper International Funds
Universe (10%), and the Lipper Intermediate U.S. Government Bond Funds Universe
(15%). The Lipper Universe consists of the equally weighted average monthly
returns for all the funds within the category.
-3-
<PAGE> 527
FEES AND EXPENSES OF THE INVESTOR GROWTH FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .23% .23% .23% .23%
Total Annual Fund Operating .63% 1.28% 1.28% .28%
Expenses(4)
Fee Waiver [and/or Expense (.18%) (.08%) (.08%) (.08%)
Reimbursement]
Net Expenses(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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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) The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the fund with
those of the underlying funds, the estimated average weighted expense ratio
would be 1.30% For Class A shares, 2.05% For Class B shares, 2.05% For Class C
shares, and 1.05% For Class I shares.
(5) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .45% for Class A shares, 1.20% for Class B shares, 1.20%
for Class C shares, and .20% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-4-
<PAGE> 528
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $569 $122 $622 $122 $222 $20
3 Years $699 $396 $696 $396 $396 $80
5 Years $841 $690 $890 $690 $690 $145
10 Years $1,254 $1,351 $1,351 $1,528 $1,528 $336
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $586
Class B (no redemption) $129
Class B (with redemption) $629
Class C (no redemption) $129
Class C (with redemption) $229
Class I $28
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-5-
<PAGE> 529
ONE GROUP INVESTOR GROWTH & INCOME FUND
WHAT IS THE GOAL OF ONE GROUP INVESTOR GROWTH & INCOME FUND?
The Fund seeks long-term capital appreciation and growth by investing primarily
in a diversified group of One Group mutual funds which invest primarily in
equity securities.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF ONE GROUP INVESTOR GROWTH & INCOME
FUND?
One Group Investor Growth & Income Fund is a "Fund of Funds". The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a growth and income fund, the majority of the
Fund's assets will be invested in One Group equity funds, although a portion of
its assets also will be invested in One Group bond and money market funds. The
Fund's 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. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE GROUP INVESTOR GROWTH & INCOME FUND?
Shares are available for long-term investors, including tax-advantaged
retirement accounts; the Funds should not be used for short-term trading
purposes.
WHAT ARE THE MAIN RISKS OF INVESTING IN ONE GROUP INVESTOR GROWTH & INCOME FUND?
The main risks of investing in the One Group Investor Growth & Income Fund and
the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Growth & Income Fund will change
every day in response to market conditions. You may lose money if you invest in
One Group Investor Growth & Income Fund.
INVESTMENTS IN MUTUAL FUNDS. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's
net asset value will change 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, 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.
EQUITY FUNDS: Equity funds invest primarily in equity securities (such
as stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a companies
financial condition. Equity securities also are subject to "stock
market risk", meaning that stock prices in general may decline over
short or extended periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of your investment
in One Group Investor Growth & Income Fund will be affected.
FIXED INCOME FUNDS: Bond funds invest primarily in fixed income
securities. These securities 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 One Group Investor Growth & Income Fund will change as
the value of investments of the underlying One Group funds increase and
decrease.
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. If the value of securities that are
heavily weighted on an index change, you can expect a greater risk of
loss than may be the case a fund were not fully invested in such
securities.
-6-
<PAGE> 530
FOREIGN SECURITIES. Funds investing in foreign securities are subject
to special risks in addition to those of U.S. investments. These risks
include political and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less stringent investor
protection and disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and potentially less
liquid than U.S. investments.
EMERGING MARKETS. The risks associated with foreign securities are
magnified in countries in "emerging markets." These countries may have
relatively unstable governments and less established market economies
than developed countries. Emerging markets may face greater social,
economic, regulatory, and political uncertainties. These risks make
emerging market securities more volatile and less liquid than
securities issued in more developed countries.
NOT FDIC INSURED. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ONE GROUP INVESTOR GROWTH & INCOME FUND PERFORMED?
By showing the variability of the One Group Investor Growth & Income Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INVESTOR GROWTH &
INCOME FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I
<TABLE>
<CAPTION>
1997 1998
<S> <C>
20.87% 19.10%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 6.21%.
BEST QUARTER: 14.92% 4Q 1998; WORST QUARTER: -6.52% 3Q 1998
--------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-7-
<PAGE> 531
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR LIFE
- ------- ------ (SINCE 12/10/96)
----------------
<S> <C> <C>
One Group Investor Growth & Income 7.68% 15.45%
Fund
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE 12/10/96)
----------------
One Group Investor Growth & Income 7.93% 16.09%
Fund
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 7/1/97)
-------------
One Group Investor Growth & Income 11.94% 16.00%
Fund
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS I 1 YEAR LIFE
------- ------ (SINCE 12/10/96)
---------------
One Group Investor Growth & Income 14.11% 17.89%
Fund
S&P 1500 Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
</TABLE>
- ----------------
(1) S&P 1500 Index is an unmanaged index generally representative of the
performance of large and small companies in the U.S. stock market. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By contrast, the performance of the
One Group Investor Growth & Income Fund reflects the deduction of these
value-added services as well as the deduction of sales charges on Class A shares
and contingent deferred sales charges on Class B and Class C shares.
(2) The Lipper Mix for the classes consists of the average monthly returns of
the Lipper General Equity Funds Universe (60%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S. Government Bond Funds Universe
(35%). The Lipper Universe consists of the equally weighted average monthly
returns for all the funds within the category.
-8-
<PAGE> 532
FEES AND EXPENSES OF THE INVESTOR GROWTH & INCOME FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .22% .22% .22% .22%
Total Annual Fund Operating .62% 1.27% 1.27% .27%
Expenses(4)
(.17%) (.07%) (.07%) (.07%)
Fee Waiver [and/or Expense
Reimbursement]
Net Expenses(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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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) The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund with
those of the underlying funds, the estimated average weighted expense ratio
would be 1.28% for Class A shares, 2.03% for Class B shares, 2.03% for Class C
shares, and 1.03% for Class I shares.
(5) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .45% for Class A shares, 1.20% for Class B shares, 1.20%
for Class C shares, and .70% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-9-
<PAGE> 533
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $569 $122 $622 $122 $222 $20
3 Years $697 $396 $696 $396 $396 $80
5 Years $837 $690 $890 $690 $690 $145
10 Years $1,243 $1,348 $1,348 $1,528 $1,528 $336
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $585
Class B (no redemption) $129
Class B (with redemption) $629
Class C (no redemption) $129
Class C (with redemption) $229
Class I $ 28
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-10-
<PAGE> 534
ONE GROUP INVESTOR BALANCED FUND
WHAT IS THE GOAL OF ONE GROUP INVESTOR BALANCED FUND?
The Fund seeks high total return consistent with the preservation of capital by
investing primarily in a diversified group of One Group mutual funds which
invest primarily in equity and fixed income securities.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF ONE GROUP INVESTOR BALANCED FUND?
One Group Investor Balanced Fund is a "Fund of Funds". The Fund's investment
strategy is to invest in a diversified group of other One Group mutual funds.
Because this is a balanced fund, approximately half of the Fund's assets will be
invested in One Group equity funds and approximately half will be invested in
One Group bond funds, although a portion of One Group Balanced Fund's assets
also will be invested in a One Group market fund. The Fund's 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. For more information about the Fund's investment strategies, please
read "More About The Funds" and "Principal Investment Strategies."
WHO SHOULD INVEST IN ONE GROUP INVESTOR BALANCED FUND?
Shares are available for long-term investors, including tax-advantaged
retirement accounts; the Funds should not be used for short-term trading
purposes.
WHAT ARE THE MAIN RISKS OF INVESTING IN ONE GROUP INVESTOR BALANCED FUND?
The main risks of investing in the One Group Investor Balanced Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of One Group Investor Balanced Fund will change every day in
response to market conditions. You may lose money if you invest in One Group
Investor Balanced Fund.
INVESTMENTS IN MUTUAL FUNDS. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's
net asset value will change 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, 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.
EQUITY FUNDS: Equity funds invest primarily in equity securities (such
as stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a companies
financial condition. Equity securities also are subject to "stock
market risk", meaning that stock prices in general may decline over
short or extended periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of your investment
in One Group Investor Balanced Fund will be affected.
FIXED INCOME FUNDS: Bond funds invest primarily in fixed income
securities. These securities 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 One Group Investor Balanced Fund will change as the value
of investments of the underlying One Group funds increase and decrease.
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. If the value of securities that are
heavily weighted on an index change, you can expect a greater risk of
loss than may be the case a fund were not fully invested in such
securities.
-11-
<PAGE> 535
FOREIGN SECURITIES. Funds investing in foreign securities are subject
to special risks in addition to those of U.S. investments. These risks
include political and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less stringent investor
protection and disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and potentially less
liquid than U.S. investments.
NOT FDIC INSURED. An investment in the Fund is not a deposit of BANK
ONE CORPORATION or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ONE GROUP INVESTOR BALANCED FUND PERFORMED?
By showing the variability of the One Group Investor Balanced Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INVESTOR BALANCED FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
1. For the period from January 1, 1999 through June 30, 1999, the Fund's
total return was 4.23%.
[GRAPHIC]
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
16.93% 16.25%
</TABLE>
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 4.23%.
BEST QUARTER: 10.33% 4Q 1998; WORST QUARTER: -3.34% 3Q 1998
--------------------------------------------------------------
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
-12-
<PAGE> 536
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------
CLASS A 1 YEAR LIFE
- ------- ------ (SINCE 12/10/96)
----------------
<S> <C> <C>
One Group Investor Balanced Fund 4.85% 11.70%
Lehman Brothers Intermediate
Aggregate Bond Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS B 1 YEAR LIFE
------ (SINCE 12/10/96)
One Group Investor Balanced Fund 5.01% 12.45%
Lehman Brothers Intermediate
Aggregate Bond Index(1)
Lipper Mix(2)
- -------------------- ------------------ ------------------- ------------------ ------------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 7/1/97)
--------------
One Group Investor Balanced Fund 9.04% 12.84%
Lehman Brothers Intermediate
Aggregate Bond Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
CLASS I 1 YEAR LIFE
------- ------ (SINCE 12/10/96)
---------------
One Group Investor Balanced Fund 11.16% 14.44%
Lehman Brothers Intermediate
Aggregate Bond Index(1)
Lipper Mix(2)
- --------------------------------------- ------------------- ------------------ ------------------
</TABLE>
- ----------------
(1) Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
comprised of U.S. Government, mortgage, corporate and asset-backed securities
with maturities of one to ten years. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
management fees. By contrast, the performance of the One Group Investor Balanced
Fund reflects the deduction of these value-added services as well as the
deduction of sales charges on Class A shares and contingent deferred sales
charges on Class B and Class C shares.
(2) The Lipper Mix for the classes consists of the average monthly returns of
the Lipper General Equity Funds Universe (40%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S. Government Bond Funds Universe
(55%). The Lipper Universe consists of the equally weighted average monthly
returns for all the funds within the category.
-13-
<PAGE> 537
FEES AND EXPENSES OF THE INVESTOR BALANCED FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .20% .20% .20% .20%
Total Annual Fund Operating .60% 1.25% 1.25% .25%
Expenses(4)
(.15%) (.05%) (.05%) (.05%)
Fee Waiver [and/or Expense
Reimbursement]
Net Expenses(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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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) The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund with
those of the underlying funds, the estimated average weighted expense ratio
would be 1.23% for Class A shares, 1.98% for Class B shares, 1.98% for Class C
shares, and .98% for Class I shares.
(5) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .45% for Class A shares, 1.20% for Class B shares, 1.20%
for Class C shares, and .20% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-14-
<PAGE> 538
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $583 $122 $622 $122 $222 $20
3 Years $676 $392 $692 $392 $392 $76
5 Years $777 $682 $882 $682 $682 $136
10 Years $1,016 $1,327 $1,327 $1,507 $1,507 $317
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $569
Class B (no redemption) $127
Class B (with redemption) $627
Class C (no redemption) $127
Class C (with redemption) $227
Class I $26
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-15-
<PAGE> 539
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND
WHAT IS THE GOAL OF ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND?
The Fund seeks income and capital appreciation by investing primarily in a
diversified group of One Group mutual funds which invest primarily in fixed
income and equity securities.
WHAT ARE THE MAIN INVESTMENT STRATEGIES OF ONE GROUP INVESTOR CONSERVATIVE
GROWTH FUND?
One Group Investor Conservative Growth Fund is a "Fund of Funds". The Fund's
investment strategy is to invest in a diversified group of other One Group
mutual funds. Because this is a conservative growth fund, the majority of the
Fund's assets will be invested in One Group bond funds, although a portion of
its assets also will be invested in One Group equity and money market funds. The
Fund's 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. For more information about the Fund's
investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND?
Shares are available for long-term investors, including tax-advantaged
retirement accounts; the Funds should not be used for short-term trading
purposes.
WHAT ARE THE MAIN RISKS OF INVESTING IN ONE GROUP INVESTOR CONSERVATIVE GROWTH
FUND?
The main risks of investing in the One Group Investor Conservative Growth Fund
and the circumstances likely to adversely affect your investment are described
below. The share price of One Group Investor Conservative Growth Fund will
change every day in response to market conditions. You may lose money if you
invest in One Group Investor Conservative Growth Fund.
INVESTMENTS IN MUTUAL FUNDS. The Fund's investments are concentrated in
underlying One Group funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's
net asset value will change 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, 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.
EQUITY FUNDS: Equity funds invest primarily in equity securities (such
as stocks) that are more volatile and carry more risks than some other
forms of investment. The price of equity securities may rise or fall
because of economic or political changes or changes in a companies
financial condition. Equity securities also are subject to "stock
market risk", meaning that stock prices in general may decline over
short or extended periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of your investment
in One Group Investor Conservative Growth Fund will be affected.
FIXED INCOME FUNDS: Bond funds invest primarily in fixed income
securities.. These securities 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 One Group Investor Conservative Growth Fund will change
as the value of investments of the underlying One Group funds increase
and decrease.
-16-
<PAGE> 540
NOT FDIC INSURED. An investment in the Fund is not a deposit of BANK
ONE CORPORATION or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
HOW HAS THE ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND PERFORMED?
By showing the variability of the One Group Investor Conservative Growth Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INVESTOR
CONSERVATIVE GROWTH FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
[GRAPHIC]
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I
<TABLE>
<CAPTION>
1997 1998
<S> <C>
12.50% 11.71%
</TABLE>
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.18%.
BEST QUARTER: 6.21% 2Q 1997; WORST QUARTER: -0.28% 3Q 1998
-17-
<PAGE> 541
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in a Fund's total return and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ------------------------------------------------------------------------------------------------
CLASS A 1 YEAR LIFE
- ------- ------ (SINCE
12/10/96)
---------
<S> <C> <C>
One Group Investor Conservative Growth Fund 1.18% 7.38%
Lehman Brothers Intermediate Aggregate Bond Index(1)
Lipper Mix(2)
- --------------------------------------------------- -------------------- ------ ----------------
CLASS B 1 YEAR LIFE
- ------- ------ (SINCE
12/10/96)
---------
One Group Investor Conservative Growth Fund 1.10% 7.96%
Lehman Brothers Intermediate Aggregate Bond Index(1)
Lipper Mix(2)
- ------------------------------------------------------ ------------ ---------- ----------------
CLASS C 1 YEAR LIFE
- ------- ------ (SINCE 7/1/97)
--------------
One Group Investor Conservative Growth
Fund 5.00% 8.72%
----- -----
Lehman Brothers Intermediate
Aggregate Bond Index(1)
Lipper Mix(2)
- --------------------------------------------------- -------------------- ------ ----------------
CLASS I 1 YEAR LIFE
------- ------ (SINCE
12/10/96)
---------
One Group Investor Conservative Growth Fund 7.01% 10.11%
Lehman Brothers Intermediate Aggregate Bond Index(1)
Lipper Mix(2)
- ------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
comprised of U.S. Government, mortgage, corporate and asset-backed securities
with maturities of one to ten years. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such as
management fees. By contrast, the performance of the One Group Investor
Conservative Growth Fund reflects the deduction of these value-added services as
well as the deduction of sales charges on Class A shares and contingent deferred
sales charges on Class B and Class C shares.
(2) The Lipper Mix for the classes consists of the average monthly returns of
the Lipper General Equity Funds Universe (20%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S. Government Bond Funds Universe
(75%). The Lipper Universe consists of the equally weighted average monthly
returns for all the funds within the category.
-18-
<PAGE> 542
FEES AND EXPENSES OF THE INVESTOR CONSERVATIVE GROWTH FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% None None None
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales None(2) 5.00% 1.00% None
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
None None None None
Redemption Fee
None None None None
Exchange Fee
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
Distribution [and/or .35% 1.00% 1.00% None
Service] (12b-1) Fees
Other Expenses .25% .25% .25% .25%
Total Annual Fund Operating .65% 1.30% 1.30% .30%
Expenses(4)
Fee Waiver [and/or Expense (.20%) (.10%) (.10%) (.10%)
Reimbursement]
Net Expenses(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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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) The Fund indirectly pays a portion of the expenses incurred by the
underlying funds. After combining the total operating expenses of the Fund with
those of the underlying funds, the estimated average weighted expense ratio
would be 1.17% for Class A shares, 1.92% for Class B shares, 1.92% for Class C
shares, and .92% for Class I shares.
(5) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .45% for Class A shares, 1.20% for Class B shares, 1.20%
for Class C shares, and .20% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
-19-
<PAGE> 543
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $569 $122 $622 $122 $222 $20
3 Years $693 $402 $702 $402 $402 $87
5 Years $828 $703 $903 $703 $703 $159
10 Years $1,222 $1,380 $1,380 $1,559 $1,559 $376
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $583
Class B (no redemption) $132
Class B (with redemption) $632
Class C (no redemption) $132
Class C (with redemption) $232
Class I $31
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
-20-
<PAGE> 544
MORE ABOUT THE FUNDS
Each of the four funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. For
more information about One Group and Banc One Investment Advisors, please read
"Management of the Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The mutual funds described in this Prospectus are designed to provide
diversification across the three major asset classes: stocks, bonds and cash or
cash equivalents. Diversification is achieved by investing in other One Group
mutual funds. A brief description of these underlying One Group funds can be
found in Appendix A. The Funds attempt to take advantage of the most attractive
types of stocks and bonds by shifting their asset allocation to favor mutual
funds that focus on the most promising securities. The principal investment
strategies that are used to meet each Fund's investment objective are described
in Fund Summaries: Investments, Risk & Performance in the front of this
Prospectus. They are also described below.
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund also may use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP INVESTOR GROWTH FUND.
- The Fund is diversified between stocks and bonds, with a heavy
emphasis on stocks.
1. From 80% to 100% of the Fund's total assets are invested
in One Group equity funds.
2. Up to 20% of its total assets are invested in One Group
bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
- The Fund also is diversified across a variety of mutual funds,
which in turn invest in different industries, economic sectors and
geographic regions. The Fund invests its assets in the underlying
mutual funds within the following ranges:
Percentage of
Fund Name Fund Holdings
--------- -------------
One Group Prime Money Market Fund 0-10%
One Group Short-Term Bond Fund 0-20%
One Group Intermediate Bond Fund 0-20%
One Group Income Bond Fund 0-20%
One Group Bond Fund 0-20%
One Group High Yield Bond Fund 0-20%
One Group Government Bond Fund 0-20%
One Group Ultra Short-Term Bond Fund 0-20%
One Group Mid Cap Value Fund 0-40%
One Group Mid Cap Growth Fund 0-40%
One Group International Equity Index Fund 0-40%
One Group Diversified International Fund 0-40%
One Group Large Cap Growth Fund 0-50%
One Group Large Cap Value Fund 0-60%
One Group Diversified Mid Cap Fund 0-40%
One Group Diversified Equity Fund 0-50%
One Group Small Cap Growth Fund 0-40%
One Group Small Cap Value Fund 0-40%
One Group Equity Income Fund 0-50%
One Group Equity Index Fund 0-50%
One Group Real Estate Fund 0-40%
- The Fund also may hold cash and cash equivalents.
ONE GROUP INVESTOR GROWTH & INCOME FUND.
- The Fund is diversified between stocks and bonds, with an
emphasis on stocks.
1. From 60% to 80% of the Fund's total assets are invested
in One Group equity funds.
-21-
<PAGE> 545
2. From 20% to 40% of its total assets are invested in One
Group bond funds.
3. Up to 10% of its total assets are invested in a One Group
money market fund.
- The Fund also is diversified across a variety of mutual funds,
which in turn invest in different industries, economic sectors and
geographic regions. The Fund invests its assets in the underlying
mutual funds within the following ranges:
Percentage of
Fund Name Fund Holdings
--------- -------------
One Group Prime Money Market Fund 0-10%
One Group Short-Term Bond Fund 0-30%
One Group Intermediate Bond Fund 0-30%
One Group Income Bond Fund 0-30%
One Group Bond Fund 0-30%
One Group High Yield Bond Fund 0-30%
One Group Government Bond Fund 0-30%
One Group Ultra Short-Term Bond Fund 0-30%
One Group Mid Cap Value Fund 0-40%
One Group Mid Cap Growth Fund 0-40%
One Group International Equity Index Fund 0-40%
One Group Diversified International Fund 0-40%
One Group Large Cap Growth Fund 0-50%
One Group Large Cap Value Fund 0-60%
One Group Diversified Mid Cap Fund 0-40%
One Group Diversified Equity Fund 0-60%
One Group Small Cap Growth Fund 0-40%
One Group Small Cap Value Fund 0-40%
One Group Equity Income Fund 0-60%
One Group Equity Index Fund 0-60%
One Group Real Estate Fund 0-40%
- The Fund also may hold cash and cash equivalents.
ONE GROUP INVESTOR BALANCED FUND.
- The Fund invests in both stock and bond mutual funds - stock
funds for long-term growth potential and bond funds for principal
stability and current income.
1. From 40% to 60% of the Fund's total assets are invested in
One Group equity funds.
2. From 40% to 60% of its total assets are invested in One
Group bond funds.
3. Up to 10% of its total assets are invested in a One Group
money market fund.
- The Fund also is diversified across a variety of mutual funds,
which in turn invest in different industries, economic sectors and
geographic regions. The Fund invests its assets in the underlying
mutual funds within the following ranges:
Percentage of
Fund Name Fund Holdings
--------- -------------
One Group Prime Money Market Fund 0-10%
One Group Short-Term Bond Fund 0-50%
One Group Intermediate Bond Fund 0-50%
One Group Income Bond Fund 0-50%
One Group Bond Fund 0-50%
One Group High Yield Bond Fund 0-30%
One Group Government Bond Fund 0-50%
One Group Ultra Short-Term Bond Fund 0-50%
One Group Mid Cap Value Fund 0-30%
One Group Mid Cap Growth Fund 0-30%
One Group International Equity Index Fund 0-30%
One Group Diversified International Fund 0-30%
One Group Large Cap Growth Fund 0-40%
One Group Large Cap Value Fund 0-50%
One Group Diversified Mid Cap Fund 0-30%
-22-
<PAGE> 546
One Group Diversified Equity Fund 0-40%
One Group Small Cap Growth Fund 0-30%
One Group Small Cap Value Fund 0-30%
One Group Equity Income Fund 0-40%
One Group Equity Index Fund 0-40%
One Group Real Estate Fund 0-30%
- Fund also invests in cash and cash equivalents.
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND.
- The Fund is diversified between stocks and bonds, with an
emphasis on bonds.
1. From 20% to 40% of the Fund's total assets are invested in One
Group equity funds.
2. From 60% to 80% of its total assets are invested in One Group
bond funds.
3. Up to 10% of its total assets are invested in a One Group
money market fund.
- The Fund also is diversified across a variety of mutual funds,
which in turn invest in different industries, economic sectors and
geographic regions. The Fund invests its assets in the underlying
mutual funds within the following ranges:
Percentage of
Fund Name Fund Holdings
--------- -------------
One Group Prime Money Market Fund 0-10%
One Group Short-Term Bond Fund 0-70%
One Group Intermediate Bond Fund 0-70%
One Group Income Bond Fund 0-70%
One Group Bond Fund 0-70%
One Group High Yield Bond Fund 0-15%
One Group Government Bond Fund 0-70%
One Group Ultra Short-Term Bond Fund 0-70%
One Group Mid Cap Value Fund 0-20%
One Group Mid Cap Growth Fund 0-20%
One Group International Equity Index Fund 0-20%
One Group Diversified International Fund 0-20%
One Group Large Cap Growth Fund 0-20%
One Group Large Cap Value Fund 0-20%
One Group Diversified Mid Cap Fund 0-20%
One Group Diversified Equity Fund 0-20%
One Group Small Cap Growth Fund 0-20%
One Group Small Cap Value Fund 0-20%
One Group Equity Income Fund 0-20%
One Group Equity Index Fund 0-20%
One Group Real Estate Fund 0-20%
- Fund also invests in cash and cash equivalents.
INVESTMENT RISKS
The main risks of investing in the Funds are described in the Fund Summaries.
Additional risks are described below.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
______________________________________________________________________________
| WHAT IS A DERIVATIVE? |
| |
| Derivatives are securities or contracts (like futures and |
| options) that derive their value from the performance of underlying assets or|
| securities. |
|______________________________________________________________________________|
-23-
<PAGE> 547
JUNK BONDS: One Group High Yield Bond and One Group Income Bond Fund invest in
debt securities that are considered to be speculative. These securities are
issued by companies which are highly leveraged, less creditworthy or financially
distressed. While these investments generally provide a higher yield than higher
rated debt securities, the high degree of risk involved in these investments can
result in substantial or total losses. The market price of these securities can
change suddenly and unexpectedly.
CREDIT RISK. There is a risk that issuers and counterparties will not make
payments on securities and repurchase agreements held by the underlying funds.
Such default could result in losses to the underlying funds and to the Fund. In
addition, the credit quality of securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit quality may lead to greater
volatility in the price of a security and in shares of the Fund. Lower credit
quality also may affect liquidity and make it difficult for the Fund to sell the
security
PREPAYMENT AND CALL RISK: Some of the underlying funds may invest a portion of
their assets in mortgage-backed securities. These securities are subject to
prepayment and call risk. The issuers of mortgage-backed and other callable
securities may be able to repay principal in advance, especially when interest
rates fall. Changes in prepayment rates can affect the return on investment and
yield of mortgage-backed securities. When mortgages are prepaid, a fund may have
to reinvest in securities with a lower yield. A fund also may fail to recover
premiums paid for the securities, resulting in unexpected capital loss.
INTERNATIONAL FUNDS: 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. Since the underlying funds may
invest in securities denominated in foreign currencies, changes in exchange
rates also may affect the value of investments in the underlying funds.
EMERGING MARKETS. The risks associated with foreign securities are magnified in
countries in "emerging markets." These countries may have relatively unstable
governments and less established market economies than developed countries.
Emerging markets may face greater social, economic, regulatory, and political
uncertainties. These risks make emerging market securities more volatile and
less liquid than securities issued in more developed countries.
SMALLER COMPANIES. Investments by funds in smaller, newer companies may be
riskier than investments in larger, more established companies. Securities of
smaller companies tend to be less liquid than securities of large companies. In
addition, small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact on smaller
companies, there may be greater and more frequent changes in their debt
securities and/or stock price. This may cause unexpected and frequent decreases
in the value of underlying funds investing in small companies, and may affect
your investment in the funds.
REAL ESTATE SECURITIES: The Real Estate Fund's investments in real estate
securities are subject to the same risks as direct investments in real estate.
Real estate values rise and fall in response to many factors, including local,
regional and national economic conditions, the demand for rental property, and
interest rates. When economic growth is slowing, demand for property decreases
and prices may fall. Rising interest rates, which drive up mortgage and
financing costs, can inhibit construction, purchases, and sales of property.
Property values could decrease because of overbuilding, extended vacancies,
increase in property taxes and operating expenses, zoning laws, environmental
regulations, clean-up of and liability for environmental hazards, uninsured
casualty or condemnation losses, or a general decline in neighborhood values.
The Fund's investments and your investment may decline in response to declines
in property values or other adverse changes to the real estate market.
REIT RISK. In addition to the risks facing real estate securities, the Real
Estate Fund's investments in REITs involve unique risks. REITs may have limited
financial resources, may trade less frequently and in limited volume and may be
more volatile than other securities.
-24-
<PAGE> 548
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
the 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 are set forth in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION For liquidity and to respond to unusual market
conditions, the Funds may invest all or most of their assets in short-term fixed
income securities for temporary defensive purposes. These types of securities
are known as "cash equivalents". These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Funds from
meeting their investment objectives.
_______________________________________________________________________________
| WHAT IS A CASH EQUIVALENT? |
| |
| Cash Equivalents are highly liquid, high quality instruments with |
| maturities of three months or less on the date they are purchased. They |
| include securities issued by the U.S. Government, its agencies and |
| instrumentalities, repurchase agreements (other than equity repurchase |
| agreements), certificates of deposit, bankers' acceptances, commercial |
| paper (rated in one of the two highest rating categories), variable rate |
| master demand notes, and bank money market deposit accounts. |
|______________________________________________________________________________|
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, 1999 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.
-25-
<PAGE> 549
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve, 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 if the Fund's Custodian, State Street
Bank and Trust Company, 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?
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."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. 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. Sales
charges are discussed in this section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA 403(b). One Group offers retirement plans. These plans
allow participants to defer taxes while their retirement savings grow. 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.
-26-
<PAGE> 550
- - 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 per Fund- ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
($25 for employees of Bank One Corporation and its affiliates).
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides information
that can help you choose the appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
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 must be in U.S. dollars. One Group does not accept "third party
checks". Checks made payable to any individual and endorsed to One Group
are considered third party checks. All checks must be payable to one of the
following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
8. 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?
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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 to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Investor Growth Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund, but
minimum automatic additions are only $25 per Fund. 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 five (5) calendar days.
- 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 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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- 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 One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the sales charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 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 and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
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:
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
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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.
- No CDSC is imposed on share appreciation, nor is a CDSC 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
the shares acquired through dividend reinvestment followed by 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 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 One
Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees. . These fees are called 12b-1 FEES.
12b-1 fees are paid by 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 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.
- Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
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<PAGE> 554
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:
- - 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 One Group and
their subsidiaries and affiliates.
- - An investment sub-advisor of a fund of 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 Accounts which participate in select affinity programs with
Bank One Corporation and its affiliates and subsidiaries.
- - 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.
- - Certain 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 One Group Fund 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
One Group Fund, for which a sales charge was paid, but only if the purchase
is made within 60 days of the sale or distribution.
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<PAGE> 555
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 One Group Fund.
8. Bought with assets of 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.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating the amounts eligible for this waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read the Do I Pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating the amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read the Do I Pay a Sales Charge on an Exchange?.
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.
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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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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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 One Group Fund.
- - 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 One Group Fund, 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 One
Group Fund.
- - Class C shares of a Fund may be exchanged for Class C shares of another One
Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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.
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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, 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, 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:
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 participant in 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 bank; or
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2. 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 will be paid within seven
days after receipt of the redemption request. If you have wire
instructions on file, the Funds will attempt to honor requests for
same day payment if the request is received by 4:00 p.m. ET. If
redemption requests are received after 4:00 p.m. ET, the Funds will
attempt to wire payment the next business day.
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 The One Group Service 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.
- 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, 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. Shares received from dividend and capital gains
reinvestment are included in calculating the 10% The
applicable Class B and Class C sales charge is waived provided
your withdrawals do not exceed 10% annually. Withdrawals in
excess of 10% will subject the entire annual withdrawal to the
applicable sales charge.
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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
- Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves
the right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the dame
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small investments, 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 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- 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 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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SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends quarterly. The Investor Conservative
Growth Fund, however, declares dividends monthly. Dividends are distributed on
the first business day of the next month after they are declared. 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. You also may call The One Group Services Company
at 1-800-480-4111 to make this change.
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 SHAREHOLDERS
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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
A Fund's use of a fund-of-funds structure could affect the amount, timing and
character of distributions to shareholders. See "Additional Tax Information
Concerning the Funds of Funds" in the Statement of Additional Information.
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Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
-39-
<PAGE> 563
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of BANK ONE CORPORATION, managed
over $126 billion in assets.
THE SUB-ADVISORS
Banc One High Yield Partners, LLC, 8044 Montgomery Road, Suite 382, Cincinnati,
Ohio 45236, is the sub-advisor to the High Yield Bond Fund. Banc One High Yield
Partners was formed in June, 1998 to provide investment advisory services
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. As of June 30, 1999, Banc One
High Yield Partners had approximately $126 million in assets under management.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
FUND ANNUAL RATE AS PERCENTAGE
- ---- OF AVERAGE DAILY NET ASSETS
---------------------------
One Group Investor Growth Fund .03%
One Group Investor Growth & Income Fund .05%
One Group Investor Balanced Fund .04%
One Group Investor Conservative Growth Fund .03%
THE FUND MANAGERS
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.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be
-40-
<PAGE> 564
sufficient to avoid any material adverse impact on One Group, although there
can be no assurances. The costs or consequences of incomplete or untimely
resolution of the Year 2000 Issue are unknown to Banc One Investment Advisors
and One Group's other service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One Investment Advisors, The
One Group Services Company and One Group's other service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
-41-
<PAGE> 565
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1999 1998 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)
From 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.
-42-
<PAGE> 566
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1999 1998 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)
From 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.
-43-
<PAGE> 567
<TABLE>
<CAPTION>
DECEMBER 10,
1996
THROUGH
JUNE 30,
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1999 1998 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.
-44-
<PAGE> 568
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS C 1999 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)
From net realized gains (0.35)
Total Distributions (0.38)
NET ASSET VALUE, END OF PERIOD $ 13.34
Total Return (Excludes Sales Charge) 22.42%
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.
-45-
<PAGE> 569
ONE GROUP INVESTOR GROWTH & INCOME FUND Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1999 1998 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.
-46-
<PAGE> 570
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1999 1998 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.
-47-
<PAGE> 571
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1999 1998 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.
-48-
<PAGE> 572
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
CLASS C 1999 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.
-49-
<PAGE> 573
ONE GROUP INVESTOR BALANCED FUND Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1999 1998 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.
-50-
<PAGE> 574
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1999 1998 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.
-51-
<PAGE> 575
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1999 1998 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.
-52-
<PAGE> 576
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
CLASS C 1999 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.
-53-
<PAGE> 577
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1999 1998 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.
-54-
<PAGE> 578
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1999 1998 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.
-55-
<PAGE> 579
<TABLE>
<CAPTION>
DECEMBER 10,
1996
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1999 1998 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.
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<PAGE> 580
<TABLE>
<CAPTION>
JUNE 30,
CLASS C 1999 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.
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<PAGE> 581
APPENDIX A
INVESTMENT PRACTICES
The following is a brief description of the principal investment policies of
each of the underlying funds.
ONE GROUP PRIME MONEY MARKET FUND
One Group 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.
ONE GROUP SHORT-TERM BOND FUND
One Group Short-Term 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 four highest investment grade
categories at the time of investment, or if unrated, determined by Banc One
Investment Advisors to be of comparable quality, 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 ordinarily will be three years taking into account expected
amortization and prepayment of principal on certain investments, although for
temporary defensive purposes the effective average weighted maturity may exceed
three 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. This Fund was formerly called The One Group Limited Volatility Bond
Fund.
ONE GROUP INTERMEDIATE BOND FUND
One Group 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 four 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.
ONE GROUP INCOME BOND FUND
One Group 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.
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<PAGE> 582
ONE GROUP BOND FUND
One Group Bond Fund seeks to maximize total return by investing primarily in
a diversified portfolio of intermediate and long-term debt securities. The Fund
invests in all types of debt securities rated as investment grade, as well as
convertible securities, preferred stock, and loan participations. The Fund's
average weighted maturity will normally range between four and twelve years,
although the Fund may shorten its weighted average if deemed appropriate for
temporary defensive purposes. The Fund invests at least 65% of its total assets
in debt securities of all types with intermediate to long maturities. 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.
ONE GROUP 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.
ONE GROUP GOVERNMENT BOND FUND
One Group 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 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.
ONE GROUP ULTRA SHORT-TERM BOND FUND
One Group Ultra Short-Term Bond 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. This Fund was formerly
called The One Group Ultra Short-Term Income Fund.
ONE GROUP MID CAP VALUE FUND
One Group Mid Cap 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
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<PAGE> 583
futures transactions. The balance of the fund's assets will be held in cash
equivalents. This Fund was formerly called The One Group Disciplined Value Fund.
ONE GROUP INTERNATIONAL EQUITY INDEX FUND
One Group 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, Australasia 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.
ONE GROUP DIVERSIFIED INTERNATIONAL FUND
One Group Diversified International Fund seeks long-term capital growth by
investing primarily in equity securities of foreign issuers. The Fund invests
primarily in the securities of companies located in Europe, Asia and Latin
America. The Fund also will invest in other regions and countries that present
attractive investment opportunities, including developing countries. In
selecting a country for investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the securities markets of
selected countries. In selecting individual securities, Banc One Investment
Advisors selects a representative sampling of the companies comprising the
individual country's stock market index. Banc One Investment Advisors uses its
best judgment, experience and certain quantitative techniques to determine the
countries in which the Fund will invest, as well as the amount invested in each
country. Fund assets will be invested in at least three countries. The Fund will
invest at least 65% of its total assets in foreign equity securities, consisting
of common stocks (including American Depository Receipts), preferred stocks,
rights, warrants, convertible securities, foreign currencies and options on
foreign currency, and other equity securities. Up to 20% of the Fund's total
assets may be invested in U.S. government securities, other investment grade
fixed income securities, cash and cash equivalents.
ONE GROUP LARGE CAP GROWTH FUND
One Group Large Cap 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 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.
This Fund was formerly called The One Group Large Company Growth Fund.
ONE GROUP LARGE CAP VALUE FUND
One Group Large Cap 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.
This Fund was formerly called The One Group Large Company Value Fund.
(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) "S&P 500" is a registered trademark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
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<PAGE> 584
ONE GROUP MID CAP GROWTH FUND
One Group Mid Cap Growth 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. This Fund was
formerly called The One Group Growth Opportunities Fund.
ONE GROUP DIVERSIFIED MID CAP FUND
One Group Diversified Mid Cap Fund seeks long-term capital growth by
investing primarily in equity securities of companies with intermediate
capitalizations. The Fund invests primarily in equity securities of companies
with market capitalizations of $500 million to $5 billion. Banc One Investment
Advisors believes that there are many companies of this size with strong growth
potential, stable market share, and an ability to quickly respond to new
business opportunities, all of which increase their likelihood of obtaining
superior levels of profitability and investment returns. The Fund normally
invests at least 65% of its total assets in common and preferred stock, rights,
warrants, convertible securities, and other equity securities. While the Fund
invests primarily in securities of U.S. companies, up to 25% of its total assets
may be invested in equity securities of foreign issuers. Up to 20% of the Fund's
total assets may be invested in U.S. Government Securities, other investment
grade fixed income securities, cash and cash equivalents.
ONE GROUP DIVERSIFIED EQUITY FUND
One Group Diversified Equity 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. This Fund was formerly called The One Group Value Growth Fund.
ONE GROUP SMALL CAP GROWTH FUND
One Group Small Cap Growth Fund seeks long-term capital growth primarily by
investing in a portfolio of equity securities of small-capitalization and
emerging growth companies. The Fund invests primarily in a portfolio of common
stocks, debt securities, preferred stocks, convertible securities, warrants and
other equity securities of small capitalization companies. Generally, Banc One
Investment Advisors selects a portfolio of companies with a capitalization
equivalent to the median market capitalization of the S&P Small-Cap 600
Index,(3) although the Fund may occasionally hold securities of companies whose
market capitalizations are considerably larger if doing so contributes to the
Fund's investment objective. At least 65% of the value of the Fund's total
assets normally will be invested in securities with the characteristics
described above. Up to 35% of its total assets may be held in cash or invested
in U.S. Government Securities, other investment grade fixed-income securities
and cash equivalents. This Fund was formerly called The One Group Small
Capitalization Fund.
ONE GROUP SMALL CAP VALUE FUND
One Group Small Cap Value Fund seeks long-term capital growth by investing
primarily in equity securities of companies with small capitalizations. The Fund
invests primarily in equity securities of small domestic issuers with market
capitalizations of $100 million to $2 billion. In reviewing investment
opportunities, Banc One Investment Advisors looks for high quality management, a
dominant position in a major product line, significant equity ownership
positions by management, a sound financial position, and a relatively high rate
of return on invested capital. The Fund also will invest in companies that
demonstrate a potential for earnings growth due to management changes, new
products, or a changing marketplace. The Fund normally invests at least 65% of
its total assets in common and preferred stocks, rights, warrants, convertible
securities, and other equity securities of companies described above.
(3) "S&P 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.
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<PAGE> 585
While the Fund invests primarily in securities of U.S. companies, up to 25% of
its total assets may be invested in equity securities of foreign issuers. Up to
20% of the Fund's total assets may be invested in U.S. Government Securities,
other investment grade fixed income securities, cash and cash equivalents.
ONE GROUP EQUITY INCOME FUND
One Group Equity Income 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. This Fund was formerly
called The One Group Income Equity Fund.
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<PAGE> 586
ONE GROUP EQUITY INDEX FUND
One Group 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.
ONE GROUP REAL ESTATE FUND
One Group Real Estate Fund seeks to provide current income and long-term growth
of capital. The Fund invests in equity securities of companies operating in the
real estate industry. "Real estate companies" are companies that earn at least
50% of their revenues from owning, constructing, financing, managing or selling
different types of real estate (i.e., commercial, residential or industrial). It
also includes companies that have at least 50% of their assets in real estate.
These companies include real estate investment trusts or REITs.
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<PAGE> 587
APPENDIX B
INVESTMENT PRACTICES
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of the securities and techniques utilized by the Funds, as
well as the risks inherent in their use. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
FUND NAME
<TABLE>
<CAPTION>
FUND CODE
<S> <C>
One Group Prime Money Market Fund 1
One Group Short-Term Bond Fund 2
One Group Intermediate Bond Fund 3
One Group Income Bond Fund 4
One Group Bond Fund 5
One Group High Yield Bond Fund 6
One Group Government Bond Fund 7
One Group Ultra Short-Term Bond Fund 8
One Group Mid Cap Value Fund 9
One Group International Equity Index Fund 10
One Group Diversified International Fund 11
One Group Large Cap Growth Fund 12
One Group Large Cap Value Fund 13
One Group Mid Cap Growth Fund 14
One Group Diversified Mid Cap Fund 15
One Group Diversified Equity Fund 16
One Group Small Cap Growth Fund 17
One Group Small Cap Value Fund 18
One Group Equity Income Fund 19
One Group Equity Index Fund 20
One Group Real Estate Fund 21
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. 1-21 Market
TREASURY RECEIPTS: TRs, TIGRs, and CATS. 1-21 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies 1-21 Market
and instrumentalities of the U.S Government. These include Ginnie Credit
Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. 1-6, 8-21 Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1-6, 8-21 Liquidity
exchange for the deposit of funds. Credit
COMMON STOCK: Shares of ownership of a company. 6, 9-21 Market
REPURCHASE AGREEMENTS: The purchase of a security and the 1-21 Credit
simultaneous commitment to return the security to the seller at an Market
agreed upon price on an agreed upon date. This is treated as a loan. Liquidity
</TABLE>
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<PAGE> 588
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
REVERSE REPURCHASE AGREEMENTS: The sale of a security and the 1-21 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of a Fund's 1-21 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 1-21 Market
contract to purchase securities at a fixed price for delivery Leverage
at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1-6, 8-21 Market
including One Group money market funds and shares of other
money market mutual funds for which Banc One Investment
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 3-6, 8-21 Market
to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the right 3-21 Management
to buy, and obligates the seller of the option to sell, a Liquidity
security at a specified price. A put option gives the buyer the Credit
right to sell, and obligates the seller of the option to buy, a Market
security at a specified price. The Funds will sell only covered Leverage
call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the future 2-21 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment 2-21 Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-6, 8, 9, 12-21 Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory 1-6, 8, 9, 12-21 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Stocks or debt issued by foreign 1-6, 8-21 Market
companies, as well as commercial paper of foreign issuers and Political
obligations of foreign banks, overseas branches of U.S. banks Liquidity
and supranational entities. Includes American Depository Receipts. Foreign
Investment
</TABLE>
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<PAGE> 589
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
RESTRICTED SECURITIES: Securities not registered under the 1-6, 8-21 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities. Credit
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1-9, 11-21 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on demand. Liquidity
WARRANTS: Securities, typically issued with preferred stock 1, 4, 6, 10-13, Market
or bonds, that give the holder the right to buy a proportionate 15, 17-19, 21 Credit
amount of common stock at a specified price.
PREFERRED STOCK: A class of stock that generally pays a 2-6, 10, 11, Market
dividend at a specified rate and has preference over common 13, 15, 17-19, 21
stock in the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-8, 15, 18, 21 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), Real Estate Investment Conduits Credit
("REMICs"), and Stripped Mortgage-Backed Securities ("SMBS"). Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby 1-6, 8, 15, 18 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1-6, 8, 15, 18, 21 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivable or other assets. Regulatory
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells 2-8, 21 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage 2-8, 21 Pre-payment
pool which provide for a fixed initial mortgage interest rate Market
for a specified period of time, after which the rate may be Credit
subject to periodic adjustments. Regulatory
CORPORATE DEBT SECURITIES: Corporate bonds and non-convertible 3-6, 8, 21 Market
debt securities. Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into these transactions 2-21 Market
to manage its exposure to changing interest rates and other Management
factors. Swaps involve an exchange of obligations by two parties. Credit
Caps and floors entitle a purchaser to a principal amount from Liquidity
the seller of the cap or floor to the extent that a specified
index exceeds or falls below a predetermined interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts, and 3-21 Management
other financial products continue to be developed and the Fund may Credit
invest in such options, contracts and products. Market
Liquidity
</TABLE>
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<PAGE> 590
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
STRUCTURED INSTRUMENTS: Debt securities issued by agencies and 3-8 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign
Investment
MUNICIPAL SECURITIES: Securities issued by a state or political 2-6, 8 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 Notes, Tax
Tax Anticipation Notes, Bond Anticipation Notes, Revenue Regulatory
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 10, 11 Credit
agencies who are chartered to promote economic development and Foreign
are supported by various governments and governmental agencies. Investment
CURRENCY FUTURES AND RELATED OPTIONS: The Fund may engage in 10, 11 Management
transactions in financial futures and related options, which are Liquidity
generally described above. The Fund will enter into these Credit
transactions in foreign currencies and for hedging purposes only. Market
Political
Leverage
Foreign
Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement 10, 11 Management
to purchase or sell one specified currency for another currency Liquidity
at a specified future date and price. The Fund will enter Credit
into forward foreign exchange transactions for hedging purposes only. Market
Political
Leverage
Foreign
Investment
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay no 2-6, 8 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the Zero Coupon
difference between their issue price and their maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero-coupon debt securities which 2-6, 8 Credit
convert on a specified date to interest-bearing debt securities. Market
Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class mortgage 3-8 Pre-payment
securities usually structured with two classes of shares that Market
receive different proportions of the interest and principal from Credit
a pool of mortgage backed obligations. These include IOs and POs. Regulatory
INVERSE FLOATING RATE INSTRUMENTS: Leveraged variable rate debt 3-8 Market
instruments with interest rates that reset in the opposite direction Leverage
from the market rate of interest to which the inverse floater Credit
is indexed.
</TABLE>
-67-
<PAGE> 591
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 2-6, 8 Credit
assignments of all or a portion of loans to corporations Political
or to governments of the less developed countries ("LDCs"). Foreign
Investment
Market
Liquidity
FIXED RATE MORTGAGE LOANS: Investments in fixed rate mortgage 2-6, 8 Credit
loans or mortgage pools which bear simple interest at fixed Pre-payment
annual rates and have short to long final maturities. Regulatory
Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term funding 1-6, 8 Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts (GICs) and Market
Bank Investment Contracts (BICs).
INDEX SHARES: Ownership in unit investment trusts and other 9, 12-20 Market
pooled investment vehicles that hold a portfolio of securities or
stocks designed to track the price performance and dividend yield
of a particular index, such as Standard and Poor's Depository
Receipts ("SPDR's") and NASDAQ 100's.
</TABLE>
-68-
<PAGE> 592
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 and liquidity 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 in vestments 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.
-69-
<PAGE> 593
- - 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 lender has when a borrower defaults on
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.
-70-
<PAGE> 594
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
-71-
<PAGE> 595
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) EQUITY INDEX FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 596
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Equity Index Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 597
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP EQUITY INDEX FUND
WHAT IS THE GOAL OF THE EQUITY INDEX FUND?
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").1
WHAT ARE THE EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures. Banc One Investment Advisors attempts to
track the performance of the S&P 500 Index to achieve a correlation of 0.95
between the performance of the Fund and that of the S&P 500 Index without taking
into account the Fund's expenses. For more information about the Equity Index
Fund's investment strategies, please read "More About One Group Mutual Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INDEX FUND?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market conditions.
You may lose money if you invest in the Equity Index Fund.
Index Investing. The Fund attempts to track the performance of
the S&P 500 Index. Therefore, securities may be purchased,
retained and sold by the Fund at times when an actively managed
fund would not do so. If the value of securities that are heavily
weighted in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully invested
in such securities
Market Risk. The Fund invests in equity securities (such as
stocks) that are more volatile and carry more risks than some
other forms of investment. The price of equity securities may
rise or fall because of economic or political changes or changes
in a company's financial condition. Equity securities are also
subject to "stock market risk" meaning that stock prices in
general (or S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of
Bank One Corporation or any of its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
HOW HAS THE EQUITY INDEX FUND PERFORMED?
By showing the variability of the Equity Index Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- --------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
3
<PAGE> 598
ONE GROUP EQUITY INDEX FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1992 1993 1994 1995 1996 1997 1998
6.86% 9.37% 0.75% 37.07% 22.59% 33.00% 28.24%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 12.21%.
BEST QUARTER: 21.26% 4Q 1998; WORST QUARTER: - 9.96% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ----------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
15.82% 25.80% 18.94%
One Group Equity Index Fund
S&P 500 Index(1)
- ----------------------------------- ------------------------- ------------------ ----------------------
1 YEAR 5 YEARS LIFE
------ ------ (SINCE 1/14/94)
CLASS B ------------------
16.32% 26.05% 22.40%
One Group Equity Index Fund
S&P 500 Index(1)
</TABLE>
4
<PAGE> 599
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C -------- (SINCE 11/4/97)
------- ---------------
<S> <C> <C>
One Group Equity Index Fund 20.52% 26.33%
S&P 500 Index(1)
- --------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------- ------ ------- (SINCE 7/2/91)
--------------
One Group Equity Index Fund 22.50% 27.50% 20.00%
S&P 500 Index(1)
- --------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
1 The S&P 500 Index is a widely recognized, unmanaged index generally
representative of the performance of large companies in the U.S. stock market.
Investors are unable to purchase the index directly, although they can invest
in the underlying securities. The performance of the index does not reflect
the deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A Shares and applicable contingent deferred sales charges on Class B and Class C
Shares.
5
<PAGE> 600
FEES AND EXPENSES OF THE EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your
investment)(1) CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 5.25% none none none
Maximum Deferred Sales Charge (Load)(as a
percentage of original purchase price of
redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .30% .30% .30% .30%
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating Expenses .91% 1.56% 1.56% .56%
Fee Waiver and/or Expense Reimbursement(4) (.26%) (.16%) (.16%) (.16%)
Net Expenses .65% 1.40% 1.40% .40%
- -------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .65% for Class A shares, 1.40% for Class B shares, 1.40
for Class C shares, and .40% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
6
<PAGE> 601
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Assuming no Assuming redemption Assuming no Assuming redemption at
redemption at the end redemption the end of each period
of each period
1 Year(1) $654 $143 $543 $143 $243 $41
3 Years $698 $477 $777 $477 $477 $163
5 Years $845 $835 $1,035 $835 $835 $297
10 Years $1,270 $1,668 $1,668 $1,843 $1,843 $686
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $588
Class B (no redemption) $159
Class B (with redemption) $659
Class C (no redemption) $159
Class C (with redemption) $259
Class I $ 57
2. Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
7
<PAGE> 602
MORE ABOUT THE FUND
The fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that attempts to track the performance
of a specified index. Unlike an actively managed fund, the Equity Index Fund
purchases and sells securities based on changes in the applicable index. The
principal investment strategies that are used to meet the Fund's investment
objective are described in the Fund Summary: Investments, Risk, & Performance
and below. There can be no assurance that the Fund will achieve its investment
objective. Please note that the Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the S&P 500
Index. (The Fund also invests in stock index futures.) Banc One Investment
Advisors seeks to achieve a correlation of 0.95% between the performance of the
Fund and that of the S&P 500 Index. The Fund may hold up to 10% of its net
assets in cash or cash equivalents.
- --------------------------------------------------------------------------------
HOW INDEX INVESTING WORK IN THE EQUITY INDEX FUND?
- The percentage of stock that the Fund holds will be approximately
the same percentage that the stock represents in the S&P 500
Index.
- Banc One Investment Advisors generally picks stock in the order of
their weightings in the S&P 500 Index, starting with the heaviest
weighted stock.
- The Fund attempts to achieve a correlation between the performance
of its Fund and that of the S&P 500 Index of at least 0.95,
without taking into account Fund expenses. Perfect correlation
would be 1.00.
- --------------------------------------------------------------------------------
INVESTMENT RISKS.The risks associated with investing in the Equity Index Fund
are described below and in the Fund Summary: Investments, Risk, & Performance.
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.
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.
For more information about risks associated with the types of investments that
the Equity Index Fund purchases, please read the Fund Summary, Appendix A and
the Statement of Additional Information.
INVESTMENT POLICIES
- --------------------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
8
<PAGE> 603
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 Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the
United States, its agencies or instrumentalities, and repurchase
agreements involving these securities. This restriction applies with
respect to 75% of 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.
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.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE EQUITY INDEX FUND'S SECURITIES
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 that present attractive opportunities
and are rated in the lowest investment grade category. These corporate
bonds are usually riskier than higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest all or most of its assets in CASH AND CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Fund from
meeting its investment objective. The Fund may temporarily invest only 10% of
its total assets in cash and cash equivalents.
- --------------------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its
agencies and instrumentalities, repurchase agreements (other than
equity repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest
rating categories), variable rate master demand notes, and bank
money market deposit accounts.
- --------------------------------------------------------------------------------
9
<PAGE> 604
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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. The portfolio
turnover rate for the Fund for the fiscal year ended June 30, 1999 is shown on
the Financial Highlights. To the extent portfolio turn over results in
short-term capital gains, such gains will generally be taxed at ordinary income
tax rates.
10
<PAGE> 605
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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, Christmas Eve,
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 if the Fund's Custodian, State Street
Bank and Trust Company 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?
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."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. 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. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
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.
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<PAGE> 606
- - 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 per Fund ($100 for
employees of Bank One Corporation and its affiliates). The minimum
initial investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases
of $250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services Company
at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to One
Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed
above will be returned to the address provided on the
account application.
6. 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).
7. 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.
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<PAGE> 607
8. 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 "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 One Group Fund (ex: One Group Equity Index Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund. 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 five (5) calendar days.
- 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 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).
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<PAGE> 608
- 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 One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 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 and
0.50% of the purchase price if you redeem within two years of
purchase, unless The One Group Services Company receives notice
before you invest indicating that your Shareholder Servicing
Agent is waiving its commission.
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:
14
<PAGE> 609
<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.
- No CDSC is imposed on share appreciation, nor is a CDSC 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
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 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 One Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds 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 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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
15
<PAGE> 610
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:
- 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 One
Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which participate in
select affinity programs with Bank One Corporation and its
affiliates and subsidiaries.
- 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.
- Certain 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.
16
<PAGE> 611
5. Bought with proceeds from the sale of Class I shares of a One Group Fund
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 One Group Fund, 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 One Group Fund.
8. Bought with assets of 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.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
17
<PAGE> 612
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group
Fund.
- 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 One Group
Fund, 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 One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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.
18
<PAGE> 613
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, 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, 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:
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
participant in 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.
19
<PAGE> 614
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. 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 The One Group Service
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.
- 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, 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 12% of
your account value annually, measured from the date you
begin participating in the Plan. The applicable Class B
or Class C sales charge is waived provided your
withdrawals do not exceed 12% annually; withdrawals in
excess of that amount will subject the entire annual
withdrawal to the applicable sales load.
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.
20
<PAGE> 615
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
- Generally all redemptions will be for cash. However, if you
redeem shares worth $500,000 or more of a Fund's assets, the
Fund reserves the right to pay part or all of your redemption
proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes its
NAV. this process minimizes the effect of large redemptions on
the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group
has not yet received payment on the check, One Group will delay
forwarding your redemption proceeds until payment has been
collected from your bank.
- Because of the high cost of handling small investments, 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 per Fund. The sub-minimum
account fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- 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 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.
21
<PAGE> 616
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Equity Index Fund generally declares dividends on the last business day of
each quarter. Dividends for the Equity Index Fund are distributed on the first
business day of the next month. Capital gains, if any, for the Equity Index Fund
are distributed at least annually.
The Equity Index 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.
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.
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, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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
22
<PAGE> 617
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, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
23
<PAGE> 618
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Fund. For the most recent fiscal year, the
Funds paid advisory fees at the following rates.
ANNUAL RATE AS PERCENTAGE
OF AVERAGE DAILY NET ASSETS
Equity Index Fund .14%
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
24
<PAGE> 619
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are included in the Statement of Additional
Information.
ONE GROUP EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32
Net realized and
unrealized gains
(losses) from
investments 5.98 5.27 3.16 2.59
Total from Investment
Activities 6.31 5.62 3.49 2.91
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29)
In excess of net
investment income -- -- (0.01) (0.02)
From net realized gains (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.95) (0.48) (0.86) (0.47)
NET ASSET VALUE, END
OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03
Total Return 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $671,422 $480,819 $321,058 $234,895
Ratio of expenses
to average net assets 0.35% 0.30% 0.30% 0.33%
Ratio of net investment
income to average
net assets 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to
average net assets* 0.62% 0.61% 0.59% 0.66%
Ratio of net investment
income to average
net assets* 1.10% 1.56% 1.89% 2.24%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
</TABLE>
25
<PAGE> 620
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.81 $ 16.67 $ 14.02 $ 11.59
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29
Net realized and
unrealized gains (losses)
from investments 5.97 5.28 3.18 2.58
Total from Investment
Activities 6.23 5.57 3.45 2.87
Distributions:
From net investment income (0.26) (0.28) (0.27) (0.28)
In excess of net
investment income -- -- (0.01) --
From net realized gains (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.89) (0.43) (0.80) (0.44)
NET ASSET VALUE, END
OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02
Total Return (Excludes
Sales Charge) 29.33% 33.94% 25.16% 25.43%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $ 218,518 $ 98,338 $ 32,186 $ 3,003
Ratio of expenses
to average net assets 0.60% 0.55% 0.55% 0.56%
Ratio of net investment
income to average
net assets 1.11% 1.59% 1.93% 2.38%
Ratio of expenses to
average net assets* 0.96% 0.95% 0.94% 1.01%
Ratio of net investment
income to average
net assets* 0.75% 1.19% 1.54% 1.94%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
</TABLE>
26
<PAGE> 621
<TABLE>
<CAPTION>
ONE GROUP EQUITY INDEX FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.80 $ 16.68 $ 14.05 $ 11.61
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18
Net realized and
unrealized gains
(losses) from
investments 5.97 5.27 3.16 2.61
Total from Investment
Activities 6.07 5.43 3.32 2.79
Distributions:
From net investment
income (0.11) (0.16) (0.16) (0.19)
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)
NET ASSET VALUE,
END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05
Total Return (Excludes
Sales Charge) 28.47% 32.93% 24.05% 24.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of period
(000) $ 351,624 $ 168,699 $ 38,538 $ 1,408
Ratio of expenses
to average net assets 1.35% 1.30% 1.30% 1.34%
Ratio of net investment
income to average
net assets 0.36% 0.83% 1.18% 1.60%
Ratio of expenses
to average net assets* 1.61% 1.61% 1.59% 1.67%
Ratio of net investment
income to average
net assets* 0.10% 0.52% 0.89% 1.27%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated. (a) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
</TABLE>
27
<PAGE> 622
<TABLE>
<CAPTION>
ONE GROUP EQUITY INDEX FUND Financial Highlights
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 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:
From net investment income (0.08)
From 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%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated. (a) Period from commencement of operations. (b) 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>
28
<PAGE> 623
APPENDIX A
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>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an 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% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
</TABLE>
29
<PAGE> 624
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of other money market funds
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 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
</TABLE>
30
<PAGE> 625
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a 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 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued Market
by agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign Foreign Investment
currency exchange rates, interest rates, or
one or more other referenced indices.
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRs"): Market
Ownership interests in unit investment trusts and
other pooled investment vehicles that hold a portfolio
of securities or stocks designed to track the price
and dividend yield of the S&P 500.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - 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.
31
<PAGE> 626
- - 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.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
32
<PAGE> 627
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 by writing the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
33
<PAGE> 628
ONE GROUP(R) MUTUAL FUNDS
INDEX FUND PROSPECTUS ONE GROUP(R) EQUITY INDEX FUND
NOVEMBER 1, 1999 ONE GROUP(R) MARKET EXPANSION INDEX FUND
ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or complete.
Anyone who tells you otherwise is
committing a crime.
For use by Wingspan Investment Services, Inc.
<PAGE> 629
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Equity Index Fund
One Group Market Expansion Index Fund
One Group International Equity Index Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 630
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP EQUITY INDEX FUND
WHAT IS THE GOAL OF THE EQUITY INDEX FUND?
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").(1)
WHAT ARE THE EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures. Banc One Investment Advisors attempts to
track the performance of the S&P 500 Index to achieve a correlation of 0.95
between the performance of the Fund and that of the S&P 500 Index without taking
into account the Fund's expenses. For more information about the Equity Index
Fund's investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INDEX FUND?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market conditions.
You may lose money if you invest in the Equity Index Fund.
Index Investing. The Fund attempts to track the performance of
the S&P 500 Index. Therefore, securities may be purchased,
retained and sold by the Fund at times when an actively managed
fund would not do so. If the value of securities that are heavily
weighted in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully invested
in such securities
Market Risk. The Fund invests in equity securities (such as
stocks) that are more volatile and carry more risks than some
other forms of investment. The price of equity securities may
rise or fall because of economic or political changes or changes
in a company's financial condition. Equity securities are also
subject to "stock market risk" meaning that stock prices in
general (or S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of
Bank One Corporation or any of its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
HOW HAS THE EQUITY INDEX FUND PERFORMED?
By showing the variability of the Equity Index Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
- --------
(1) "S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
3
<PAGE> 631
ONE GROUP EQUITY INDEX FUND
Total Return (per calendar year)(1)
CLASS I SHARES
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
6.86% 9.37% 0.75% 37.07% 22.59% 33.00% 28.24%
<FN>
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total return was 12.21%.
</TABLE>
BEST QUARTER: 21.26% 4Q 1998; WORST QUARTER: - 9.96% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results.
4
<PAGE> 632
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------- ------ ------- (SINCE 7/2/91)
--------------
<S> <C> <C> <C>
One Group Equity Index Fund 22.50% 27.50% 20.00%
S&P 500 Index(1)
- ----------------------------- -------------------------------- ------------------------------ ------------------------------
</TABLE>
(1) The S&P 500 Index is a widely recognized, unmanaged index generally
representative of the performance of large companies in the U.S. stock market.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction of
these value-added services.
5
<PAGE> 633
FEES AND EXPENSES OF THE EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------- ---------------------------
SHAREHOLDER FEES (fees paid directly from your investment)(1) CLASS I
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) none
Maximum Deferred Sales Charge (Load)(as a
percentage of original purchase price of
redemption proceeds, as applicable) none
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)(2)
Investment Advisory Fees .30%
Distribution [and/or Service] (12b-1) Fees none
Other Expenses .26%
Total Annual Fund Operating Expenses .56%
Fee Waiver and/or Expense Reimbursement(3) (.16%)
Net Expenses .40%
<FN>
- ---------------------------------------------------------------------------------- ---------------------------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .40% for Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
</TABLE>
6
<PAGE> 634
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- --------------------------- -------------------------
CLASS I SHARES
1 Year(1) $41
3 Years $163
5 Years $297
10 Years $686
- --------------------------- -------------------------
(1) Without contractual fee waivers, 1 Year expenses for Class I Shares
would be $57.
7
<PAGE> 635
ONE GROUP MARKET EXPANSION INDEX FUND
WHAT IS THE GOAL OF THE MARKET EXPANSION INDEX FUND?
The Fund seeks to provide a return which substantially duplicates the price and
yield performance of domestically traded common stocks in the small and mid
capitalization equity markets, as represented by a market capitalization
weighted combination of the Standard & Poor's Small Cap 600 Index ("S&P Small
Cap 600") and the Standard & Poor's Mid Cap 400 Index ("S&P Mid Cap 400").(1)
WHAT ARE THE MARKET EXPANSION INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in a representative sampling of stocks of medium-sized and
small U.S. companies that are included in the S&P Small Cap 600 and S&P Mid Cap
400 and which trade on the New York and American Stock Exchanges as well as
over-the-counter stocks that are part of the National Market System. (Not all of
the stocks in the indices are included in the Fund). The Fund uses a sampling
methodology to determine which stocks to purchase or sell in order to closely
replicate the performance of the combined indices. The Fund seeks to achieve a
correlation between its portfolio and that of the indices of at least 0.95,
without taking into account expenses. For more information about the Market
Expansion Index Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MARKET EXPANSION INDEX FUND?
The main risks of investing in the Market Expansion Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the Market Expansion Index Fund and its yield will change
every day in response to economic and other market conditions. You may lose
money if you invest in the Market Expansion Index Fund.
Index Investing. The Fund attempts to track the performance of
the S&P Small Cap 600 Index and the S&P Mid Cap 400 Index.
Therefore, securities may be purchased, retained and sold by the
Fund at times when an actively managed fund would not do so. If
the value of securities that are heavily weighted in the index
changes, you can expect a greater risk of loss than would be the
case if the Fund were not fully invested in such securities.
Market Risk. The Fund invests in equity securities (such as
stocks) which are more volatile and carry more risks than some
other forms of investment. The price of equity securities may
rise or fall because economic or political changes or changes in
a company's financial condition. Equity securities are also
subject to "stock market risk" meaning that stock prices in
general (or small cap and mid cap stock prices in particular) may
decline over short or extended periods of time. When the value of
the Fund's securities goes down, your investment in the Fund
decreases in value.
Smaller Companies. The Fund's investments in smaller, newer
companies may be riskier than investments in larger, more
established companies. Securities of smaller companies tend to be
less liquid than securities of larger companies. In addition,
small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact
on smaller companies, there may be greater and more frequent
changes in their stock price. This may cause unexpected and
frequent decreases in the value of your investment in the Fund.
- --------
(1) "S&P Small Cap 600" and "S&P Mid Cap 400" are registered service marks of
Standard & Poor's corporation, which does not sponsor and is in no way
affiliated with the Fund.
8
<PAGE> 636
Not FDIC insured. An investment in the Fund is not a deposit of
Bank One Corporation or any of its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
This Section would normally include a bar chart and average annual total return
table. The Market Expansion Index Fund began operations on July 31, 1998 and did
not have a full calendar year of investment returns as of the date of this
prospectus.
FEES AND EXPENSES OF THE MARKET EXPANSION INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------- ---------------------------
SHAREHOLDER FEES (fees paid directly from your investment)(1) CLASS I
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) none
Maximum Deferred Sales Charge (Load)(as a
percentage of original purchase price of
redemption proceeds, as applicable) none
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)(2)
Investment Advisory Fees .35%
Distribution [and/or Service] (12b-1) Fees none
Other Expenses .73%
Total Annual Fund Operating Expenses 1.08%
Fee Waiver and/or Expense Reimbursement(3) (.51%)
Net Expenses .57%
- ---------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .57% for Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
9
<PAGE> 637
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- --------------------------- -------------------------
CLASS I
1 Year(1) $58
3 Years $293
5 Years $546
10 Years $1,271
- --------------------------- -------------------------
(1) Without contractual fee waivers, 1 Year expenses for Class I Shares would be
$110.
10
<PAGE> 638
ONE GROUP INTERNATIONAL EQUITY INDEX FUND
WHAT IS THE GOAL OF THE INTERNATIONAL EQUITY INDEX FUND?
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.(1)
WHAT ARE THE INTERNATIONAL EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in foreign stocks included in the MSCI EAFE GDP Index.
The Fund may also invest in stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP Index to achieve a
correlation of 0.90 between the performance of the Fund and that of the MSCI
EAFE GDP Index, without taking into account the Fund's expenses. As part of its
investment strategy, the Fund may invest in securities of emerging international
markets such as Mexico, Chile and Brazil. The Sub-Advisor selects securities of
emerging markets that are included in the Morgan Stanley Emerging Market Free
Index based on size, risk and the ease of investing in the country's market
(e.g., reasonable settlement procedures). Most of the Fund's assets will be
denominated in foreign currencies. For more information about the International
Equity Index Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE INTERNATIONAL EQUITY INDEX FUND?
The main risks of investing in the International Equity Index Fund and the
circumstances likely to adversely affect your investment are described below.
The share price of the International Equity Index Fund will change every day in
response to market conditions. You may lose money if you invest in the
International Equity Index Fund.
Index Investing. The Fund attempts to track the performance of
the MSCI EAFE GDP Index. Therefore, securities may be purchased,
retained and sold by the Fund at times when an actively managed
fund would not do so. If the value of securities that are heavily
weighted in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully invested
in such securities.
Foreign Securities. Investments in foreign securities involve
risks in addition to those of U.S. investments. These risks
include political and economic risks, currency fluctuations,
higher transaction costs, delayed settlement, and less stringent
investor protection and disclosure standards of some foreign
markets. These risks can make foreign investments more volatile
and potentially less liquid than U.S. investments.
Emerging Market Risk. The Fund may invest up to 10% of its net
assets in securities of emerging international markets. The risks
associated with foreign securities are magnified in countries in
"emerging markets." These countries may have relatively unstable
governments and less established market economies than developed
countries. Emerging markets may face greater social, economic,
regulatory, and political uncertainties. These risks make
emerging market securities more volatile and less liquid than
securities issued in more developed countries.
Market Risk. The Fund invests in equity securities (such as
stocks) that are more volatile and carry more risks than some
other forms of investment. The price of equity securities may
rise or fall because of economic or political changes or changes
in a company's financial condition. Equity securities are also
subject to "stock market risk" meaning that stock prices in
general (or stocks comprising the MSCI EAFE GDP Index in
particular) may decline over short or extended periods of time.
When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
- ----------------------
1 Gross Domestic Product Weighted Morgan Stanley Capital International Europe,
Australasia 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.
11
<PAGE> 639
Not FDIC insured. An investment in the Fund is not a deposit of
Bank One Corporation or any of its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
HOW HAS THE INTERNATIONAL EQUITY INDEX FUND PERFORMED?
By showing the variability of the International Equity Index Fund's performance
from year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE INTERNATIONAL EQUITY INDEX FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP INTERNATIONAL EQUITY INDEX FUND
Total Return (per calendar year)(1)
CLASS I SHARES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
29.60% 3.90% 10.20% 6.61% 5.68% 21.57%
</TABLE>
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 8.00%.
BEST QUARTER: 20.46% 4Q 1998; WORST QUARTER: -14.47% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ---------------------------------------------------- -------------------- -------------------- ------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 10/28/92)
----------------
<S> <C> <C> <C>
One Group International Equity Index Fund 11.27% 10.12% 12.61%
</TABLE>
12
<PAGE> 640
Morgan Stanley EAFE/ GDP Index(1)
- --------------------------------------------------------------------------------
- --------
1 The Morgan Stanley Capital International EAFE/ GDP Index is an unmanaged index
generally representative of the performance of international stock markets.
Investors are unable to purchase the index directly, although they can invest in
the underlying securities. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services.
13
<PAGE> 641
FEES AND EXPENSES OF THE INTERNATIONAL EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------- ---------------------------
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)(1) CLASS I
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) none
Maximum Deferred Sales Charge (Load)(as a
percentage of original purchase price of
redemption proceeds, as applicable) none
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)(2)
Investment Advisory Fees .55%
Distribution [and/or Service] (12b-1) Fees none
Other Expenses .40%
Total Annual Fund Operating Expenses .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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
14
<PAGE> 642
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- --------------------------- -------------------------
CLASS I
1 Year $97
3 Years $303
5 Years $525
10 Years $1,166
- --------------------------- -------------------------
15
<PAGE> 643
MORE ABOUT THE FUNDS
Each of the three funds described in this Prospectus is a series of One Group
Mutual Funds and is managed by Banc One Investment Advisors Corporation. The
Funds also offer Class A, Class B, and Class C shares through a separate
prospectus. For more information on these share classes, please contact your
Shareholder Servicing Agent or call The One Group Services Company at
1-800-480-4111. For more information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual Funds" and the Statement
of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes three mutual funds that attempt to track the
performance of a specified index or indices. Unlike an actively managed fund,
these Funds purchase and sell securities based on changes in the applicable
index or indices. The principal investment strategies that are used to meet each
Fund's investment objective are described in the Fund Summaries: Investments,
Risk, & Performance. They are also described below. There can be no assurance
that the Funds will achieve their investment objectives. Please note that each
Fund may also use strategies that are not described below, but which are
described in the Statement of Additional Information.
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the
S&P 500 Index. (The Fund also invests in stock index futures.) Banc One
Investment Advisors seeks to achieve a correlation of 0.95% between the
performance of the Fund and that of the S&P 500 Index. The Fund may
hold up to 10% of its net assets in cash or cash equivalents.
----------------------------------------------------------------------
HOW DOES INDEX INVESTING WORK IN THE EQUITY INDEX FUND?
- The percentage of stock that the Fund holds will be approximately
the same percentage that the stock represents in the S&P 500
Index.
- Banc One Investment Advisors generally picks stock in the order
of their weightings in the S&P 500 Index, starting with the
heaviest weighted stock.
- The Fund attempts to achieve a correlation between the
performance of its Fund and that of the S&P 500 Index of at least
0.95, without taking into account Fund expenses. Perfect
correlation would be 1.00.
----------------------------------------------------------------------
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests in stocks
included in the S&P Small Cap 600 Index and S&P Mid Cap 400 Index.
- The Fund may also invest up to 25% of its total assets in foreign
securities through Depository Receipts.
- Up to 5% of the Fund's total assets may be held in cash and cash
equivalents.
- Up to 5% of the Fund's total assets may be invested in futures
contracts and related options.
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund invests in stocks
included in the MSCI EAFE GDP Index. (The Fund also invests in stock
index futures.) Banc One Investment Advisors seeks to achieve a
correlation between the performance of the Fund and that of the MSCI
EAFE GDP Index of at least 0.90, without taking into account expenses.
Perfect correlation would be 1.00.
16
<PAGE> 644
- At least 65% of the Fund's total assets will be invested 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.
- Up to 10% of the Fund's net assets may be invested in securities
of emerging international markets such as Mexico, Chile and
Brazil included in the Morgan Stanley Market Free Index. These
investments may made directly or through local exchanges, through
publicly traded closed-end country funds, or through "passive
foreign investment companies."
- Up to 20% of the Fund's total assets may be invested 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.
- A substantial portion of the Fund's assets will be denominated in
foreign currencies.
INVESTMENT RISKS. The risks associated with investing in the Index Funds are
described below and in Fund Summaries: Investments, Risk, & Performance at the
front of this prospectus.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
---------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options)
that derive their value from the performance of underlying assets or
securities
---------------------------------------------------------------------
SMALL CAPITALIZATION COMPANIES: Investments in smaller, younger companies may be
riskier and more volatile 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.
FOREIGN SECURITIES: Investments in foreign securities involve risks different
from investments in U.S. securities. 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.
Europe. Europe includes countries with highly developed markets
as well as countries with emerging markets. Many developed
countries in Western Europe are members of the European Union and
the EMU which requires compliance with stringent fiscal and
monetary controls. The markets of Eastern European countries
continue to remain relatively undeveloped and are sensitive to
political and economic developments.
Asia. Asia includes countries in all stages of economic
development from the highly developed market economy of Japan to
the emerging market economy of the People's Republic of China.
Generally, Asian economies face over-extension of credit,
currency devaluation, rising unemployment, decreased exports, and
economic recessions. Currency devaluation in any one country may
have a negative affect on the entire region. Recently, the
markets in each Asian country suffered significant downturns and
volatility. Although the Asian market appears to be recovering,
continued volatility may persist.
17
<PAGE> 645
Latin America. Latin America countries are considered to be
emerging market economies that are marked by high interest rates,
inflation, and unemployment. Currency devaluation in any one
country may have an adverse affect on the entire region.
Recently, the markets in many Latin American countries have
experienced significant downturns as well as significant
volatility. Although the Latin American market appears to be
recovering, continued volatility may persist. A small number of
companies and industries, including the telecommunications
sector, represent a large portion of the market in many Latin
America countries.
For more information about risks associated with the types of investments that
the Equity Funds purchase, please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
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.
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.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Funds' investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE INDEX FUNDS' SECURITIES
Short-term corporate obligations, such as 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 that present
attractive opportunities and are rated in the lowest investment
grade category. These corporate bonds may be riskier than higher
rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
18
<PAGE> 646
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the
Funds may invest up to 10% of their total assets in cash and CASH EQUIVALENTS
(see below) for temporary defensive purposes. These investments may result in
a lower yield than lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its
agencies and instrumentalities, repurchase agreements (other than
equity repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest
rating categories), variable rate master demand notes, and bank
money market deposit accounts.
------------------------------------------------------------------
PORTFOLIO TURNOVER.
The Funds may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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, 1999 is shown on
the Financial Highlights. To the extent portfolio turn over results in
short-term capital gains, such gains will generally be taxed at ordinary income
tax rates.
19
<PAGE> 647
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from Wingspan Investment Services, Inc., a
Shareholder Servicing Agent. Your shares will be held for you by Wingspan
Investment Services, Inc.
WHEN CAN I BUY SHARES?
You may purchase Fund shares on any day that the Funds are open for business. As
your Shareholder Servicing Agent, Wingspan Investment Services, Inc. is
responsible for sending your purchase order to the Funds. While the following
information describes the Funds' purchase requirements, Wingspan Investment
Services, Inc. may have an earlier cut-off time for purchase orders.
- - 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, Christmas Eve,
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 for Class I shares 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 on the business day after the order is
placed.
- - 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.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
- - 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 per Fund ($100 for
employees of Bank One Corporation and its affiliates). The minimum
initial investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- The One Group Services Company may waive these minimums.
3. Execute a purchase order through your Wingspan Investment Account.
20
<PAGE> 648
4. Send a personal check (unless you choose to pay by wire or bank transfer)
payable to "Wingspan Investment Services, Inc." to:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
If you choose to pay by wire, please call The One Group Services Company
at 1-800-480-4111.
5. All checks must be in U.S. dollars. Wingspan Investment Services will
accept third party checks only if accompanied by an AMA deposit slip.
Redemptions from a Fund will not be permitted for ten (10) calendar days
if purchases are made by check.
6. If you have any questions, contact Wingspan Investment Services at
1-800-977-WING.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Wingspan Investment Account Application
Form and then:
- - Contact Wingspan Investment Services, Inc. at 1-800-977-WING to relay
your purchase instructions.
- - Authorize a bank transfer or initiate a wire transfer to the following
wire address:
Chase Manhattan Bank
ABA 021000021
DLJ Pershing Division
Account 930-1-032992
For further credit to:
Your Name
Your Wingspan Investment Account Number (ex: 123456789)
- - You may revoke your right to make purchases over the telephone by sending
a letter to:
Wingspan Investment Services
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Wingspan Investment Account is established, you may purchase
additional Class I shares by making automatic monthly investments from your bank
account. The minimum initial investment is still $1,000 per Fund, but minimum
automatic additions are only $25 per Fund. The One Group Services Company may
waive these minimums. To establish a Systematic Investment Plan:
- - Select the "Systematic Investment Plan" option on your Wingspan
Investment Account 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 five (5) calendar days.
- - One Group currently does not charge for this service, but may impose a
charge in the future.
- - You may revoke your right to make systematic investments by calling
Wingspan Investment Services, Inc. at 1-800-977-WING or by sending a
letter to:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
21
<PAGE> 649
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 One Group Fund.
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 learn more about
it, please call Wingspan Investment Services at 1-800-977-WING.
One Group does not charge a fee for this privilege. In addition, 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.
- - One Group has 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 Wingspan Investment Services, Inc..
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).
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, 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, 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
22
<PAGE> 650
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.
- - As your Shareholder Servicing Agent, Wingspan Investment Services, Inc.
is responsible for sending your redemption order to the Funds. Wingspan
Investment Services may have a different cut-off time than do the Funds.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Wingspan Investment
Account Form, you must send a written redemption request to Wingspan
Investment Services, Inc. at the following address:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling Wingspan Investment Services,
Inc. at 1-800-977-WING.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. Wingspan Investment Services, Inc..
- - Your redemption proceeds will be paid within seven days after receipt of
the redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If the Fund receives your redemption request by 4:00 p.m. ET (or when the
NYSE closes), you will receive that day's NAV.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Wingspan Investment Account Form.
- - Call Wingspan Investment Services, Inc. at 1-800-977-WING to relay your
redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Wingspan Investment Account Form.
- - 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 your Wingspan
Investment Account 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:
23
<PAGE> 651
1. 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.
2. 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
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in securities,
the Fund will value the securities selected in the same manner in which
it computes its NAV. This process minimizes the effect of large
redemptions on the Fund.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, 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, 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 per Fund. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of Bank One Corporation and its
affiliates.
- - 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 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 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.
DIVIDEND POLICIES
DIVIDENDS
Except for the International Equity Index Fund, the Funds declare dividends on
the last business day of each quarter. The International Equity Index Fund
declares dividends on the last business day of each year. Dividends for the
Funds are distributed on the first business day of the next month after they are
declared. 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
24
<PAGE> 652
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.
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. You also may call Wingspan Investment Sercices,
Inc. at 1-800-977-WING to make this change.
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, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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 Wingspan
Investment Services, Inc. at 300 S. Riverside Plaza, Suite 0860, Chicago, IL
60670 or 1-800-977-WING.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
25
<PAGE> 653
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rates:
ANNUAL RATE AS PERCENTAGE
FUND OF AVERAGE DAILY NET ASSETS
- ---- ---------------------------
One Group International Equity Index Fund(1) .55%
One Group Equity Index Fund .14%
1. Includes fees paid by Banc One Investment Advisors to Independence
International, the former sub-advisor to the International Equity Index Fund.
The Market Expansion Index Fund began operations on July 31, 1998 and does not
have a full fiscal year of advisory fees. Under the investment advisory
agreement with the Fund, Banc One Investment Advisors is entitled to a fee,
which is calculated daily and paid monthly, of __% of the average daily net
assets of the Market Expansion Index Fund.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
26
<PAGE> 654
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
27
<PAGE> 655
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
ONE GROUP EQUITY INDEX FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32
Net realized and
unrealized gains
(losses) from
investments 5.98 5.27 3.16 2.59
Total from Investment
Activities 6.31 5.62 3.49 2.91
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29)
In excess of net
investment income -- -- (0.01) (0.02)
From net realized gains (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.95) (0.48) (0.86) (0.47)
NET ASSET VALUE, END
OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03
Total Return 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $671,422 $480,819 $321,058 $234,895
Ratio of expenses
to average net assets 0.35% 0.30% 0.30% 0.33%
Ratio of net investment
income to average
net assets 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to
average net assets* 0.62% 0.61% 0.59% 0.66%
Ratio of net investment
income to average
net assets* 1.10% 1.56% 1.89% 2.24%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a)Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
</TABLE>
28
<PAGE> 656
<TABLE>
<CAPTION>
ONE GROUP MARKET INDEX EXPANSION FUND Financial Highlights
PERIOD ENDED
DECEMBER 31,
CLASS I 1999 1998(a)
- ------- ---- -------
1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Investment Activities:
Net investment income 0.03
Net realized and unrealized gains (losses)
from investments and futures 0.93
Total from Investment Activities 0.96
Distributions:
Net investment income (0.03)
In excess of net investment income --
From net realized gain (0.41)
In excess of net realized gain --
Total Distributions (0.44)
NET ASSET VALUE, END OF PERIOD $ 10.52
Total Return 9.91%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $27,483
Ratio of expenses to average net assets 0.56%(c)
Ratio of net investment income to average net assets 0.75%(c)
Ratio of expenses to average net assets* 1.12%(c)
Portfolio turnover 20.18%
</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) For the period July 31, 1998 (commencement of operations)
through December 31, 1998. (b) Not Annualized. (c) Annualized.
29
<PAGE> 657
<TABLE>
<CAPTION>
PERIOD ENDED
ONE GROUP INTERNATIONAL EQUITY INDEX FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.89 $ 15.17 $ 13.93 $ 13.46
Investment Activities:
Net investment income 0.21 0.15 0.11 0.13
Net realized and
unrealized gains
from investments 1.32 2.02 1.43 0.46
Total from Investment
Activities 1.53 2.17 1.54 0.59
Distributions:
From net investment income (0.02) (0.17) (0.16) (0.08)
In excess of net
investment income -- (0.13) (0.02) --
From net realized gains (0.43) (0.15) (0.12) (0.04)
In excess of net
realized gains -- -- -- --
Total Distributions (0.45) (0.45) (0.30) (0.12)
NET ASSET VALUE,
END OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93
Total Return 9.54% 14.64% 11.22% 4.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $586,741 $ 449,949 $ 347,790 $ 218,299
Ratio of expenses
to average net assets 0.88% 0.86% 0.97% 1.04%
Ratio of net investment
income to average
net assets 1.29% 1.00% 1.04% 1.25%
Ratio of expenses to
average net assets* 0.88% 0.86% 1.00% 1.04%
Ratio of net investment
income to average
net assets* 1.29% 1.00% 1.01% 1.25%
Portfolio turnover(a) 9.90% 9.61% 6.28% 4.67%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
</TABLE>
30
<PAGE> 658
APPENDIX A
----------
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> <C>
ONE GROUP EQUITY INDEX FUND 1
ONE GROUP MARKET EXPANSION INDEX FUND 2
ONE GROUP INTERNATIONAL EQUITY INDEX FUND 3
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, 1-3 Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-3 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities 1-3 Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments 1-3 Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by 1-3 Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. 1-3 Market
REPURCHASE AGREEMENTS: The purchase of a security 1-3 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security 1-3 Market
and the simultaneous commitment to buy the security Leverage
back at an 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% 1-3 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-3 Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
</TABLE>
31
<PAGE> 659
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other 1-3 Market
mutual funds, including One Group money market
funds and shares of other money market funds
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 1-3 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer 1-3 Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing 1-3 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled 1-3 Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time 1-3 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-3 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, 1,3 Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered 1-3 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1-3 Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with 1-3 Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
</TABLE>
32
<PAGE> 660
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C>
PREFERRED STOCK: A class of stock that 1-3 Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
SWAPS, CAPS AND FLOORS: A Fund may enter into 1-3 Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a 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 1-3 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
OBLIGATIONS OF SUPRANATIONAL AGENCIES: Obligations 3 Credit
of supranational agencies who are chartered to Foreign Investment
promote economic development and are supported
by various governments and governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Funds 3 Management
may engage in transactions in financial futures Liquidity
and related options, which are generally described Credit
above. The Funds will enter into these transactions Market
in foreign currencies for hedging purposes only. Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual 3 Management
agreement to purchase or sell one specified currency Liquidity
for another currency at a specified future date Credit
and price. The Funds will enter into forward Market
foreign exchange transactions for hedging Political
purposes only. Leverage
Foreign Investment
INDEX SHARES: Ownership interests in unit 1, 2 Market
investment trusts and other pooled investment
vehicles that hold a portfolio of securities
or stocks designed to track the price performance
and dividend yield of a particular index such as Standard &
Poor's Depository Receipts ("SPDRs") and Nasdaq 100's. The
Equity Index Fund invests only in SPDRs.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - 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.
33
<PAGE> 661
- - 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.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
34
<PAGE> 662
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
35
<PAGE> 663
ONE GROUP(R) MUTUAL FUNDS
MONEY MARKET FUNDS SERVICE CLASS SHARES COMBINED PROSPECTUS
NOVEMBER 1, 1999
ONE GROUP(R) PRIME MONEY MARKET FUND
ONE GROUP(R) U. S. TREASURY SECURITIES MONEY MARKET FUND
ONE GROUP(R) MUNICIPAL MONEY MARKET FUND
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
For use by Wingspan Investment Services, Inc.
<PAGE> 664
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Prime Money Market Fund
One Group U.S. Treasury Securities Money Market Fund
One Group Municipal Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
Temporary Defensive Positions
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 665
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP PRIME MONEY MARKET FUND
WHAT IS THE GOAL OF THE PRIME MONEY MARKET FUND?
The Fund seeks current income with liquidity and stability of principal.
WHAT ARE THE PRIME MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in high quality, short-term money market
instruments. These instruments include corporate notes, commercial paper,
funding agreements, certificates of deposit, bank obligations and deposit notes.
The Fund will concentrate in the financial services industry. The Fund will
comply with SEC rules applicable to all money market funds, including Rule 2a-7
under the Investment Company Act of 1940. For more information about the Prime
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE PRIME MONEY MARKET FUND?
The main risks of investing in the Prime Money Market Fund and the circumstances
likely to adversely affect your investment are described below. Before you
invest, please read "More About the Funds" and "Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because 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 also decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Concentration. The Fund will invest a significant portion of its assets
in the securities of companies in the financial services industry.
Because of the Fund's greater exposure to that industry, economic,
political and regulatory developments affecting the financial services
industry will have a disproportionate impact on the Fund.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE PRIME MONEY MARKET FUND PERFORMED?
By showing the variability of the Prime Money Market Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE PRIME MONEY MARKET FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
3
<PAGE> 666
ONE GROUP PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.05% 7.90% 5.88% 3.58% 2.97% 4.09% 5.83% 5.20% 5.32% 5.30%
- ---------------------------------------------------------------------------------------
</TABLE>
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.32%. Service Class shares commenced operations on April 16, 1999
and do not have a full calendar year of investment returns as of the date of
this Prospectus. The returns are for Class I shares which are not offered in
this prospectus. Class I shares would have substantially similar annual returns
because the shares are invested in the same portfolio of securities and the
annual returns would differ only to the extent that the classes do not have the
same expenses.
Best Quarter: 2.34% 2Q 1989; Worst Quarter: 0.72% 2Q 1993.
4
<PAGE> 667
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 8/1/85)(2)
-----------------
<S> <C> <C> <C> <C>
One Group Prime Money Market Fund 4.98% 5.28% 5.27% 5.69%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Service Class Shares commenced operations on April 16, 1999 and do not have
a full calendar year of investment returns as of the date of this Prospectus.
The returns are for Class I shares which are not offered in this prospectus.
Class I shares would have substantially similar annual returns because the
shares are invested in the same portfolio of securities and the annual returns
would differ only to the extent that the classes do not have the same expenses.
(2) Data for performance purposes begins on 1/1/87.
To obtain current yield information, call toll-free 1-800-480-4111.
5
<PAGE> 668
FEES AND EXPENSES OF THE PRIME MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your SERVICE CLASS
investment)(1)
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a none
percentage of offering price)
Maximum Deferred Sales
Charge (Load)(as a percentage
of original purchase price of none
redemption proceeds, as
applicable)
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35%
Distribution [and/or Service] .75%
(12b-1) Fees
Other Expenses .19%
Total Annual fund Operating 1.29%
Expenses
Fee Waiver and/or Expense (.22%)
Reimbursement(3)
Net Expenses 1.07%
- ---------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.07% for Service Class shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
6
<PAGE> 669
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- -----------------------------------------------
SERVICE CLASS(2)
1 Year(1) $ 109
3 Years $ 387
5 Years $ 686
10 Years $ 1,537
- -----------------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Service Shares would
be 131.
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
7
<PAGE> 670
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND
WHAT IS THE GOAL OF THE U. S. TREASURY SECURITIES MONEY MARKET FUND?
The Fund seeks current income with liquidity and stability of principal.
WHAT ARE THE U. S. TREASURY SECURITIES MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests exclusively in short-term U. S. Treasury obligations including
repurchase agreements collateralized by such Treasury obligations and
when-issued securities, U. S. Treasury bills, notes and other securities issued
or backed by the U. S. Government. The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the U. S. Treasury Securities
Money Market Fund's investment strategies, please read "More About the Funds"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE U. S. TREASURY SECURITIES MONEY
MARKET FUND?
The main risks of investing in the U. S. Treasury Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE U.S. TREASURY SECURITIES MONEY MARKET FUND PERFORMED?
By showing the variability of the U. S. Treasury Securities Money Market Fund's
performance from year to year, the charts below help show the risk of investing
in the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE U. S. TREASURY
SECURITIES MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
8
<PAGE> 671
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.80% 7.55% 5.51% 3.32% 2.81% 3.85% 5.62% 5.08% 5.13% 5.03%
- ----------------------------------------------------------------------------------
</TABLE>
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 2.15%. Service Class shares commenced operations on April 16, 1999
and do not have a full calendar year of investment returns as of the date of
this Prospectus. The returns are for Class I shares which are not offered in
this prospectus. Class I shares would have substantially similar annual returns
because the shares are invested in the same portfolio of securities and the
annual returns would differ only to the extent that the classes do not have the
same expenses.
Best Quarter: 2.28% 2Q 1989; Worst Quarter: 0.69% 2Q 1993.
9
<PAGE> 672
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- -----------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 9/9/85)(2)
-----------------
<S> <C> <C> <C> <C>
One Group U.S. Treasury Securities Money
Market Fund 4.63% 5.06% 5.02% 5.42%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Service Class Shares commenced operations on April 16, 1999 and do not have
a full calendar year of investment returns as of the date of this Prospectus.
The returns are for Class I shares which are not offered in this prospectus.
Class I shares would have substantially similar annual returns because the
shares are invested in the same portfolio of securities and the annual returns
would differ only to the extent that the classes do not have the same expenses.
(2) Data for performance purposes begins on January 1, 1987.
To obtain current yield information, call toll-free 1-800-480-4111.
10
<PAGE> 673
FEES AND EXPENSES OF THE U. S. TREASURY SECURITIES FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your SERVICE CLASS
investment)(1)
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a none
percentage of offering price)
Maximum Deferred Sales
Charge (Load)(as a percentage none
of original purchase price of
redemption proceeds, as
applicable)
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35%
Distribution [and/or Service] .75%
Service] (12b-1) Fees
Other Expenses .19%
Total Annual fund Operating 1.29%
Expenses
Fee Waiver and/or Expense (.22%)
Reimbursement(3)
Net Expenses 1.07%
- ---------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.07% for Service Class shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
11
<PAGE> 674
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- ------------------------------------------------
SERVICE CLASS(2)
1 Year(1) $ 109
3 Years $ 387
5 Years $ 686
10 Years $ 1,537
- ------------------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Service Shares would
be 131.
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
12
<PAGE> 675
ONE GROUP MUNICIPAL MONEY MARKET FUND
WHAT IS THE GOAL OF THE MUNICIPAL MONEY MARKET FUND?
The Fund seeks as high a level of current interest income exempt from Federal
income tax as is consistent with liquidity and stability of principal.
WHAT ARE THE MUNICIPAL MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high quality, short-term money market instruments. These
instruments include short-term municipal securities, which provide tax-exempt
income. The Fund will comply with SEC rules applicable to all money market
funds, including Rule 2a-7 under the Investment Company Act of 1940. For more
information about the Municipal Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
HOW WILL MY INVESTMENT BE TAXED?
Up to 100% 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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE MUNICIPAL MONEY MARKET FUND?
The main risks of investing in the Municipal Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
13
<PAGE> 676
HOW HAS THE MUNICIPAL MONEY MARKET FUND PERFORMED?
By showing the variability of the Municipal Money Market Fund's performance from
year to year, the charts below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE MUNICIPAL MONEY MARKET FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions.
- --------------------------------------------------------------------------------
ONE GROUP MUNICIPAL MONEY MARKET FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.11% 5.77% 4.37% 2.49% 2.10% 2.54% 3.60% 3.13% 3.31% 3.10%
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 1.35%. Service Class shares commenced operations on April 16, 1999
and do not have a full calendar year of investment returns as of the date of
this Prospectus. The returns are for Class I shares which are not offered in
this prospectus. Class I shares would have substantially similar annual returns
because the shares are invested in the same portfolio of securities and the
annual returns would differ only to the extent that the classes do not have the
same expenses.
Best Quarter: 1.58% 2Q 1989; Worst Quarter: 0.49% 1Q 1994.
14
<PAGE> 677
The Average Annual Total Return Table shows the Fund's average annual returns
for the periods indicated. Average annual total returns for more than one year
tend to smooth out variations in a Fund's total return and are not the same as
actual year-by-year results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
(THROUGH JUNE 30, 1999)
- --------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
- ------- ------ ------- -------- (SINCE 6/4/87)
--------------
<S> <C> <C> <C> <C>
One Group Municipal Money Market Fund 2.88% 3.19% 3.47% 3.76%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Service Class Shares commenced operations on April 16, 1999 and do not have
a full calendar year of investment returns as of the date of this Prospectus.
The returns are for Class I shares which are not offered in this prospectus.
Class I shares would have substantially similar annual returns because the
shares are invested in the same portfolio of securities and the annual returns
would differ only to the extent that the classes do not have the same expenses.
To obtain current yield information, call toll-free 1-800-480-4111.
15
<PAGE> 678
FEES AND EXPENSES OF THE MUNICIPAL MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your SERVICE CLASS
investment)(1)
<S> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a none
percentage of offering price)
Maximum Deferred Sales
Charge (Load)(as a percentage none
of original purchase price of
redemption proceeds, as
applicable)
Redemption Fee none
Exchange Fee none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35%
Distribution [and/or Service] .75%
(12b-1) Fees
Other Expenses .20%
Total Annual fund Operating 1.30%
Expenses
Fee Waiver and/or Expense (.28%)
Reimbursement(3)
Net Expenses 1.02%
- ----------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Expense Information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.02% for Service Class shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
16
<PAGE> 679
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- ---------------------------------------
SERVICE CLASS(2)
1 Year(1) $ 104
3 Years $ 384
5 Years $ 686
10 Years $ 1,543
- ---------------------------------------
(1) Without contractual fee waivers, 1 Year expenses for Service Shares would
be 132.
(2) Because of the nature of the shares, investors are not expected to remain in
Service Class shares for more than a very limited period of time.
17
<PAGE> 680
More About the Funds
Each of the three funds described in this Prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of One Group
Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The three mutual funds described in this Prospectus are designed to produce high
current income consistent with liquidity or capital preservation and stability
of principal. The principal investment strategies that are used to meet each
Fund's investment objective are described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are also described below.
-----------------------------------------------------------
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve "fundamental
policies". A policy is fundamental if it cannot be
changed without the consent of a majority of the
outstanding shares of the Fund.
-----------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only in U.S. denominated
securities.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - The Fund invests exclusively in money market instruments. These include:
1. corporate notes.
2. commercial paper.
3. funding agreements.
4. certificates of deposit.
5. bank obligations and deposit notes.
- - The Fund will invest at least 25% of its total assets in securities issued
by companies in the financial services industry, although the Fund may
invest less than 25% of its total assets in that industry if warranted due
to adverse economic conditions and if investing less than that amount would
be in the best interests of shareholders. The financial services industry
includes banks, broker-dealers, finance companies and other issuers of
asset-backed securities.
- - The Fund may lend its portfolio's securities.
-------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the
current maturities (that is, the term of the
securities) of the individual securities in a fund.
Average weighted maturity is important to investors
as an indication of a fund's sensitivity to changes
in interest rates. The longer the average weighted
maturity, the more fluctuation in share price you
can expect.
-------------------------------------------------------
18
<PAGE> 681
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
ONE GROUP MUNICIPAL MONEY MARKET FUND.
- - The average maturity on a dollar-weighted basis of the securities held by
the Fund will be 90 days or less.
- - Each security held by the Fund will mature in 397 days or less.
- - The Fund will acquire only those securities that present minimal credit
risks.
- - As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in municipal securities.
- - The Fund will purchase municipal securities only if the issuer receives
assurances from its legal counsel that the interest payable on the
securities is exempt from Federal personal income tax.
- - 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" in Appendix A.
INVESTMENT RISKS. The main risks associated with investing in the Money Market
Funds are described in Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described below.
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.
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 the securities in the Fund, and the value of your investment in a Fund,
will increase and decrease as the value of a Fund's investments increase and
decrease.
DERIVATIVES. The Prime Money Market Fund and Municipal Money Market Fund invest
in securities that are considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives present, to varying degrees,
market, credit, leverage, liquidity, and management risks.
-----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures
and options) that derive their value from the
performance of underlying assets or securities.
-----------------------------------------------------------
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of Additional Information.
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.
19
<PAGE> 682
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.
3. 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 regard to this
restriction as permitted by applicable law.
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 (except that the Fund may concentrate its
investments in securities issued by companies in the financial services
industry). 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 U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations.
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.
PORTFOLIO QUALITY AND MATURITY. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, the remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
TEMPORARY DEFENSIVE POSITIONS. To respond to unusual market conditions, the
Municipal Money Market Fund may i) invest all or most of their assets in CASH
EQUIVALENTS (i.e., securities that are not municipal securities) and ii) hold
uninvested cash pending investment, for temporary defensive purposes. These
investments may result in a lower yield than lower-quality or longer term
investments and may prevent the Funds from meeting their investment objectives.
--------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality
instruments with maturities of three months or less on the
date they are purchased. They include securities issued by
the U.S. Government, its agencies and instrumentalities,
repurchase agreements (other than equity repurchase
agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two
highest rating categories), variable rate master demand
notes, and bank money market deposit accounts.
--------------------------------------------------------
20
<PAGE> 683
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from Wingspan Investment Services, Inc., a
Shareholder Servicing Agent. Your shares will be held for you by Wingspan
Investment Services, Inc.
WHEN CAN I BUY SHARES?
You may purchase Fund shares on any day that the Funds are open for business. As
your Shareholder Servicing Agent, Wingspan is responsible for sending your
purchase order to the Funds. While the following information describes the
Funds' purchase requirements, Wingspan may have a cut-off time for purchase
orders.
- - 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, Christmas Eve, 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:
- before 12:00 noon, Eastern Time ("ET"), for the Municipal Money
Market Fund;
- 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 the times listed above 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 the NYSE closes
before the times listed above, purchase requests received after the NYSE
closes will be effective the following business day.
- - 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.
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 12:00 noon and 4:00 p.m., ET, for
the Municipal Money Market Fund; 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 the NYSE closes
before the times listed above, 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 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA is $250.
- Subsequent investments must be at least $25 per Fund.
21
<PAGE> 684
- The One Group Services Company may waive these minimums.
3. Execute a purchase order through your Wingspan Investment Account.
4. Send a personal check (unless you choose to pay by wire or bank
transfer) payable to "Wingspan Investment Services, Inc. " to:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
5. All checks must be in U.S. dollars. Wingspan Investment Services will
accept third party checks only if accompanied by an AMA deposit slip.
6. 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).
7. If you have any questions, contact Wingspan Investment Services, Inc.
at 1-800-977-WING.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Wingspan Investment Account Application
Form and then:
- - Contact Wingspan Investment Services, Inc. at 1-800-977-WING to relay
your purchase instructions.
- - Authorize a bank transfer or initiate a wire transfer to the following
wire address:
Chase Manhattan Bank
ABA 021000021
DLJ Pershing Division
Account 930-1-032992
For further credit to:
Your Name
Your Wingspan Investment Account Number (ex: 123456789)
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group Mutual Funds. Compensation comes from 12b-1 fees and
payments by The One Group Services Company from its own resources.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds 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 One Group.
- - 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% for each
Fund.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and the remainder for distribution. During the
last fiscal year, The One Group Services Company received 12b-1 fees.
- - 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.
22
<PAGE> 685
- - Because 12b-1 fees are paid our of Fund assets on an on-going basis,
over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. EXCHANGING FUND
SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
Service Class shares do not have exchange privileges.
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:
(i) 12:00 noon ET, for the Municipal Money Market Fund, and
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and the U.S.
Treasury Securities Money Market Fund will be effective that day.
On occasion, the NYSE will close before 4:00 p.m. ET. When the
NYSE closes before the times listed above, redemption requests
received after the NYSE closes will be effective the following
business day.
- - As your Shareholder Servicing Agent, Wingspan Investment Services, Inc.
is responsible for sending your redemption order to the Funds. Wingspan
Investment Services, Inc. may have a different cut-off time than do the
Funds.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Wingspan
Investment Account Application Form, you must send a written redemption
request to Wingspan Investment Services, Inc. at the following address:
Wingspan Investment Services, Inc.
300 S. Riverside Plaza, Suite 0860
Chicago, IL 60670
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling Wingspan Investment
Services, Inc. at 1-800-977-WING.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. Wingspan Investment Services, Inc.
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Funds will attempt to honor requests for same day payment
if the request is received before the times listed in When Can I
Receive Shares?.
If redemption requests are received after these times, the Funds will
attempt to wire payment the next business day.
- - 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 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?"
23
<PAGE> 686
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Wingspan Investment Account Application
Form.
- - Call Wingspan Investment Services, Inc. at 1-800-977-WING 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.
- - 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 your Wingspan
Investment 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 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.
2. 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
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth 3% or more of a Fund's assets, the Fund reserves the right
to pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund
will value the securities selected in the same manner in which it
computes its NAV. This process minimizes the effect of large
redemptions on the Fund and its remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - Because of the high cost of handling small investments, 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.
- - 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.
24
<PAGE> 687
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
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. You also may change the way you receive dividends
and distributions by calling Wingspan Investment Services, Inc. at
1-800-977-WING.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may 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.
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 (generally, all
of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF DIVIDENDS--MUNICIPAL MONEY MARKET FUND
The Fund will distribute substantially all of its net investment income. The
Fund 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 federal 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.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally 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
25
<PAGE> 688
you are considering purchasing shares of the money market funds, particularly
the Municipal Money Market Fund, 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 Wingspan
Investment Services, Inc. at 1-800-977-WING.
REPORTING
In September and March you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
26
<PAGE> 689
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each year. For the most recent fiscal year, the
Funds paid advisory fees at the following rate:
<TABLE>
<CAPTION>
ANNUAL RATE AS PERCENTAGE
FUND NAME OF AVERAGE DAILY NET ASSETS
- --------- ---------------------------
<S> <C>
One Group (R) Prime Money Market Fund .32%
One Group (R) U.S. Treasury Securities Money Market Fund .32%
One Group (R) Municipal Money Market Fund .26%
</TABLE>
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
27
<PAGE> 690
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand each Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Funds
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Funds' financial statements are included in the Statement of Additional
Information.
ONE GROUP PRIME MONEY MARKET FUND Financial Highlights
28
<PAGE> 691
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND Financial Highlights
29
<PAGE> 692
ONE GROUP MUNICIPAL MONEY MARKET FUND Financial Highlights
30
<PAGE> 693
APPENDIX A
----------
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
- --------- ---------
One Group(R) Prime Money Market Fund 1
One Group(R) U. S. Treasury Securities Money Market Fund 2
One Group(R) Municipal Money Market Fund 3
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, 1-3 Market
and 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 1, 3 Market
by agencies and instrumentalities of the U.S. Credit
Government. These 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 1, 3 Liquidity
in exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and 1-3 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security 1, 2 Market
and the simultaneous commitment to buy the security Leverage
back at an 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 Credit
Fund's total assets. In return the Fund will receive Market
cash, other securities and/or letters of credit as Leverage
collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-3 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other money market 1, 3 Market
mutual funds, including One Group money market funds
and shares of other money market funds 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>
31
<PAGE> 694
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
EXTENDABLE COMMERCIAL NOTES: Variable rate notes 1, 3 Market
which normally mature within a short period of time Credit
(e.g., 1 month) but which may be extended by the Liquidity
issuer for a maximum maturity of thirteen months.
BANKERS' ACCEPTANCES: Bills of exchange or time 1, 3 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1, 3 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days Market
to nine months.
FOREIGN SECURITIES: Commercial paper of foreign 1, 3 Market
issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered 1, 3 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1, 3 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 1, 3 Pre-payment
by real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
DEMAND FEATURES: Securities that are subject to puts 1, 3 Market
and standby commitments to purchase the securities at Liquidity
a fixed price (usually with accrued interest) within Management
a fixed period of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state 1, 3 Market
or political subdivision to obtain funds for various Credit
public purposes. Municipal securities include private Political
activity bonds and industrial development bonds, as Tax
well as General Obligation Notes, Tax Anticipation Regulatory
Notes, Bond Anticipation Notes, Revenue Anticipation
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 1 Market
banks and highly rated insurance companies such as Credit
Guaranteed Investment Contracts ("GICs") and Bank Liquidity
Investment Contracts ("BICs").
PARTICIPATION INTERESTS: Interests in municipal 1, 3 Credit
securities, including municipal leases, from Tax
financial institutions such as commercial and Market
investment banks, savings and loan associations and
insurance companies. These interests may take the
form of participations, beneficial interests in a
trust, partnership interests or any other form of
indirect ownership that allows the Funds to treat the
income from the investment as exempt from Federal
Income Tax.
</TABLE>
32
<PAGE> 695
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
ASSET-BACKED SECURITIES: Securities secured by 1, 3 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of receivables Regulatory
or other assets.
</TABLE>
33
<PAGE> 696
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 and liquidity 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 lender has when a borrower defaults on
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.
34
<PAGE> 697
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
35
<PAGE> 698
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) REAL ESTATE FUND PROSPECTUS
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 699
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Real Estate Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 700
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP REAL ESTATE FUND
WHAT IS THE GOAL OF THE REAL ESTATE FUND?
The Fund seeks to provide current income and long-term growth of capital.
WHAT ARE THE REAL ESTATE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in equity securities of companies operating in the real
estate industry. "Real estate companies" are companies that earn at least 50% of
their revenues from owning, constructing, financing, managing, or selling
different types of real estate (i.e., commercial, residential, or industrial).
It also includes companies that have at least 50% of their assets in real
estate. These companies include real estate investment trusts or REITs. For more
information about the Real Estate Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
WHAT IS A REIT?
A REIT or a real estate investment trust is a pooled investment vehicle which
invests in income producing real estate or real estate loans. REITs are
classified as equity REITs, mortgage REITs, or a combination of equity and
mortgage REITs. Equity REITs mainly invest directly in real estate and obtain
income from the collecting rent. Mortgage REITS invest in mortgages and obtain
income from collecting interest payments on the mortgages. REITs are not taxed
on income distributed to shareholders if they comply with several requirements
of the Internal Revenue Code.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE REAL ESTATE FUND?
The main risks of investing in the Real Estate Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Real Estate Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Real Estate Fund.
Real Estate Securities: The Real Estate Fund's investments in real
estate securities are subject to the same risks as direct investments
in real estate. Real estate values rise and fall in response to many
factors, including local, regional and national economic conditions,
the demand for rental property, and interest rates. When economic
growth is slowing, demand for property decreases and prices may fall.
Rising interest rates, which drive up mortgage and financing costs,
can inhibit construction, purchases, and sales of property. Property
values could decrease because of overbuilding, extended vacancies,
increase in property taxes and operating expenses, zoning laws,
environmental regulations, clean-up of and liability for environmental
hazards, uninsured casualty or condemnation losses, or a general
decline in neighborhood values. The Fund's investments and your
investment may decline in response to declines in property values or
other adverse changes to the real estate market.
REIT Risk. In addition to the risks facing real estate securities, the
Real Estate Fund's investments in REITs involve unique risks. REITs
may have limited financial resources, may trade less frequently and in
limited volume and may be more volatile than other securities.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact on
smaller companies, there may be
3
<PAGE> 701
greater and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or real estate industry stock
prices in particular) may decline over short or extended periods of
time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent
upon the performance of underlying assets or securities. If the
underlying assets do not perform as expected, the value of the
derivative security and your investment in the Fund declines.
Derivatives are more volatile and are riskier in terms of both
liquidity and value than traditional investments.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage REITS. The issuers of these securities and
other callable securities may be able to repay principal in advance,
especially when interest rates fall. Changes in pre-payment rates can
affect return on investment and yield of mortgage REITs. When mortgage
and other obligations are pre-paid and when securities are called, the
Fund may have to reinvest in securities with a lower yield. The Fund
may also fail to recover premiums paid for the securities, resulting
in an unexpected capital loss.
Not Diversified. The Fund is considered non-diversified and can invest
more of its assets in securities of a single issuer than a
"diversified" fund. In addition, the Fund's investments are
concentrated in the real estate industry. This concentration increases
the risk of loss to the Fund by increasing its exposure to economic,
business, political or regulatory development that may be adverse to
the real estate industry.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The Fund began operations on ______________________and does not have a full
calendar year of investment returns at the date of this Prospectus.
4
<PAGE> 702
FEES AND EXPENSES OF THE REAL ESTATE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .50% .50% .50% .50%
Total Annual Fund Operating 1.59% 2.24% 2.24% 1.24%
Expenses
Fee Waiver and/or Expense (.24%) (.14%) (.14%) (.14%)
Reimbursement(4)
Net Expenses 1.35% 2.10% 2.10% 1.10%
- -------------------------------------------------------------------------------------------------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.35% for Class A shares, 2.10% for Class B shares, 2.10%
for Class C shares, and 1.10% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 703
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $655 $213 $713 $213 $313 $112
3 Years $978 $687 $987 $687 $687 $380
5 Years $1,324 $1,187 $1,387 $1,187 $1,187 $668
10 Years $2,296 $2,400 $2,400 $2,564 $2,564 $1,488
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Class A $678
Class B (no redemption) $227
Class B (with redemption) $727
Class C (no redemption) $227
Class C (with redemption) $327
Class I $126
</TABLE>
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
6
<PAGE> 704
MORE ABOUT THE FUND
The Fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that seeks to provide current income and
long-term growth of capital. The principal investment strategies that are used
to meet the Fund's investment objective are described in Fund Summary:
Investments, Risk, & Performance in the front of this prospectus. They are also
described below.
- The Fund normally invests at least 65% of its total assets in
equity securities of companies operating in the real estate
industry. These securities include common stocks and debt
securities and preferred stocks that are convertible to common
stocks.
- Up to 35% of the Fund's total assets may be invested in U.S.
government securities, other investment grade fixed income
securities, cash and cash equivalents, and equity securities of
companies outside the real estate industry.
- The Fund may also invest up to 25% of its net assets in the
securities of foreign issuers.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information. There can be
no assurance that the Fund will achieve its investment objectives.
INVESTMENT RISKS. The risks associated with investing in the Real Estate Fund
are described below and in Fund Summary: Investments, Risk, & Performance at the
front of this prospectus.
REAL ESTATE SECURITIES: The Fund generally is subject to the same risks that
affect direct investments in real estate and its performance is closely tied to
conditions affecting the real estate industry. Real estate values rise and fall
in response to a variety of factors, including local, regional and national
economic conditions, the strength of specific industries renting properties, and
other factors affecting supply and demand for properties. When economic growth
is slowing, demand for property decreases and prices may decline. Rising
interest rates, which drive up mortgage and financing costs, can restrain
construction and buying and selling activity and make other investments more
attractive. Property values could decrease because of overbuilding, extended
vacancies, increase in property taxes and operating expenses, changes in zoning
laws, environmental regulations, clean-up of and liability for environmental
hazards, uninsured casualty or condemnation losses, or a general decline in
neighborhood values. The value of securities of companies that service the real
estate industry will also be affected by changes affecting the real estate
market.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
7
<PAGE> 705
----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
----------------------------------------------------------
For more information about risks associated with the types of investments that
the Real Estate Fund purchases, please read Fund Summary: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 25% of its total
assets would be invested in the securities of that issuer. This restriction
applies with respect to 50% of the Fund's total assets. With respect to the
remaining 50% of the Fund's total assets, it may 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. This does not include securities
issued or guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements involving these securities.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries (except the real estate industry). 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.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE FUND'S SECURITIES
- - 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.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
8
<PAGE> 706
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest all or most of its assets in cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Fund from
meeting its investment objectives.
-----------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are
purchased. They include securities issued by the U.S. Government,
its agencies and instrumentalities, repurchase agreements (other
than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two
highest rating categories), variable rate master demand notes,
and bank money market deposit accounts.
-----------------------------------------------------------------
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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.
9
<PAGE> 707
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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
Fund is 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, Christmas Eve, 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?
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."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. 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. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
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.
10
<PAGE> 708
- 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 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual and endorsed to One Group
Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
7. 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.
11
<PAGE> 709
8. 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 transferor 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 One Group Fund (ex: One Group Real Estate--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund. 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 five (5) calendar days.
- 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 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.
12
<PAGE> 710
- 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 One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources. The
tables below show the charges for each class of shares and the percentage of
your investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 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 and 0.50% of the purchase price if you redeem
within two years of purchase, unless The One Group Services Company
receives notice before you invest indicating that your Shareholder
Servicing Agent is waiving its commission.
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:
13
<PAGE> 711
<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.
- No CDSC is imposed on share appreciation, nor is a CDSC 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
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 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 One Group shares you receive in the
reorganization.
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
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 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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
14
<PAGE> 712
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:
- 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 One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and
subsidiaries.
- 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.
- Certain 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.
15
<PAGE> 713
5. Bought with proceeds from the sale of Class I shares of a One Group Fund 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
One Group Fund, 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 One Group Fund.
8. Bought with assets of 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.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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.
16
<PAGE> 714
6. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group Fund.
- 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 One Group Fund, 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 One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
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.
One Group does not charge a fee for this privilege. In addition, 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 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:
17
<PAGE> 715
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, 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, 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:
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
18
<PAGE> 716
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 The One Group Service 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.
- 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, 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 you begin participating in the Plan.
Shares received from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable Class B or Class
C sales charge is waived provided your withdrawals do not exceed
10% annually. Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales load.
19
<PAGE> 717
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
- - Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of the Fund's assets, the Fund reserves the right to
pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund will
value the securities selected in the same manner in which it computes NAV.
This process minimizes the effect of large redemptions on the Fund and its
remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - Because of the high cost of handling small investments, 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
per Fund. The sub-minimum account fee will not apply to IRA accounts and
the accounts of employees of Bank One Corporation and its affiliates.
- - 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 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> 718
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Fund generally declares dividends on the last business day of each quarter.
Dividends for the Fund are distributed on the first business day of the next
month after they are declared. 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. You also may call The One Group Services
Company at 1-800-480-4111 to make this change.
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 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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
21
<PAGE> 719
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans generally 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, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
22
<PAGE> 720
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) 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 performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of the Fund. The Fund began operations on ______, 1999
and does not have a full fiscal year of advisory fees. Under the investment
advisory agreement with the Fund, Banc One Investment Advisors is entitled to a
fee, which is calculated daily and paid monthly. As the assets in the Fund
increase, the investment advisory fees for the Fund are reduced as follows:
First $1.5 billion .74%
Next $500 million .70%
Thereafter .65%
THE FUND MANAGERS
The Fund is managed by a team of Fund 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.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
23
<PAGE> 721
This section normally would include Financial Highlights for the Fund. Because
the Fund has not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 722
APPENDIX A
----------
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. 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.
INSTRUMENT RISK TYPE
- ---------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an 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% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
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<PAGE> 723
INSTRUMENT RISK TYPE
- ---------- ---------
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of money market funds 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 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
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<PAGE> 724
INSTRUMENT RISK TYPE
- ---------- ---------
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and Market
non-convertible debt securities. Credit
ASSET-BACKED SECURITIES: Securities secured by Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
MORTGAGE DOLLAR ROLLS: A transaction in which Pre-payment
a Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans Pre-payment
in a mortgage pool which provide for a fixed Market
initial mortgage interest rate for a Credit
specified period of time, after which the rate Regulatory
may be subject to periodic adjustments.
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a 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 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
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.
27
<PAGE> 725
- - 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.
- Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
28
<PAGE> 726
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Fund from the SEC's web site at
http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
29
<PAGE> 727
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TECHNOLOGY FUND PROSPECTUS
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 728
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Technology Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
<PAGE> 729
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TECHNOLOGY FUND
WHAT IS THE GOAL OF THE TECHNOLOGY FUND?
The Fund is designed to provide long-term capital growth.
WHAT ARE THE TECHNOLOGY FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in equity securities of companies that have developed,
or are expected to develop, products, processes, or services that will provide
significant technological advances and improvements, as well as companies whose
processes or services will benefit from such advances and improvements. These
companies may include, for example, companies that develop, produce or
distribute products in the computer, electronics, communications, healthcare,
and biotechnology sectors. In selecting investments, Banc One Investment
Advisors searches for companies (regardless of size) whose stocks appear to be
trading below their true value. The Fund also will invest in companies that are
positioned for accelerated growth or higher earnings. For more information about
the Technology Fund's investment strategies, please read "More About the Fund"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TECHNOLOGY FUND?
The main risks of investing in the Technology Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Technology Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Technology Fund.
Securities Of Technology Companies: The Fund's performance is closely
tied to and affected by the technology sector. The stock price of
technology companies tends to be more volatile than the stock price of
companies in other industries. Competitive pressures also may have a
significant effect on the financial condition of technology-sensitive
companies. In addition, because of the rapid pace of technological
development, products and services produced by companies in which the
Fund invests may become obsolete or have relatively short product
cycles. As a result the Fund's returns may be considerably more
volatile than the returns of other mutual funds that do not invest in
companies in the technology sector.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact on
smaller companies, there may be greater and more frequent changes in
their stock price. This may cause unexpected and frequent decreases in
the value of your investment in the Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or technology stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities (like
mortgage-backed securities) is dependent upon the performance of
underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative
3
<PAGE> 730
security and your investment in the Fund declines. Derivatives are more
volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not Diversified. The Fund is considered non-diversified and can invest
more of its assets in securities of a single issuer than a
"diversified" fund. In addition, the Fund's investments are
concentrated in the technology sector. This concentration increases the
risk of loss to the Fund by increasing its exposure to economic,
business, political or regulatory developments that may be adverse to
the technology sector of the economy.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The Fund began operations on __, 1999 and does not have a full calendar year of
investment returns at the date of this Prospectus.
4
<PAGE> 731
FEES AND EXPENSES OF THE TECHNOLOGY FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees 1.00% 1.00% 1.00% 1.00%
Distribution [and/or
Service] (12b-1) Fees .35% 1.00% 1.00% none
Other Expenses .50% .50% .50% .50%
Total Annual Fund Operating 1.85% 2.50% 2.50% 1.50%
Expenses
Fee Waiver and/or Expense (.30%) (.20%) (.20%) (.20%)
Reimbursement(4)
Net Expenses 1.55% 2.30% 2.30% 1.30%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may 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) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.55% for Class A shares, 2.30% for Class B shares, 2.30%
for Class C shares, and 1.30% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 732
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $674 $233 $733 $233 $333 $132
3 Years $1,049 $760 $1,060 $760 $760 $454
5 Years $1,447 $1,313 $1,513 $1,313 $1,313 $800
10 Years $2,557 $2,661 $2,661 $2,821 $2,821 $1,773
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $703
Class B (no redemption) $253
Class B (with redemption) $753
Class C (no redemption) $253
Class C (with redemption) $353
Class I $153
(2) Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
6
<PAGE> 733
MORE ABOUT THE FUND
The Fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that is designed to provide long-term
growth of capital. The principal investment strategies that are used to meet the
Fund's investment objective are described in Fund Summary: Investments, Risk, &
Performance in the front of this prospectus. They are also described below.
- - The Fund normally invests at least 65% of its total assets in common and
preferred stocks, rights, warrants, convertible securities, and other
equity securities that develop or benefit from significant technological
advancements or improvements.
- - Up to 35% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents, and equity securities of companies outside the technology
industry.
- - The Fund may also invest up to 25% of its net assets in the securities of
foreign issuers.
- - The Fund also may engage in securities lending.
- - Not all the securities purchased by the Fund will pay dividends.
There can be no assurance that the Fund will achieve its investment objectives.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information..
INVESTMENT RISKS. The risks associated with investing in the Technology Fund are
described below and in Fund Summary: Investments, Risk, & Performance at the
front of this prospectus.
SECURITIES OF TECHNOLOGY COMPANIES: The Fund invests a significant portion of
its assets in the securities of companies in the technology sector. Because of
this focus, the Fund's performance is closely tied to and affected by this
sector. The stock price of technology companies tends to be more volatile than
the stock price of companies in other industries. Competitive pressures also may
have a significant effect on the financial condition of technology-sensitive
companies. For example, if technology continues to advance at an accelerated
rate, and the number of companies and product offerings continues to expand,
increasingly aggressive pricing may affect the profitability of companies in
which the Fund invests. In addition, because of the rapid pace of technological
development, products and services produced by companies in which the Fund
invests may become obsolete or have relatively short product cycles. As a result
the Fund's returns may be considerably more volatile than the returns of other
mutual funds that do not invest in securities of technology companies.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management 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 if the Fund did not use such instruments.
------------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that
derive their value from the performance of underlying assets or
securities.
------------------------------------------------------------------------
<PAGE> 734
For more information about risks associated with the types of investments that
the Technology Fund purchases, please read Fund Summary: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 25% of its
total assets would be invested in the securities of that issuer. This
restriction applies with respect to 50% of the Fund's total assets.
With respect to the remaining 50% of the Fund's total assets, it may
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. This
does not include securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase agreements involving
these securities.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries (except the technology sector). 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.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE FUND'S SECURITIES
- - 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.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest all or most of its assets in Cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Fund from
meeting its investment objectives.
8
<PAGE> 735
-----------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its agencies
and instrumentalities, repurchase agreements (other than equity
repurchase agreements), certificates of deposit, bankers' acceptances,
commercial paper (rated in one of the two highest rating categories),
variable rate master demand notes, and bank money market deposit
accounts.
-----------------------------------------------------------------------
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. 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.
9
<PAGE> 736
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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
Fund is 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, Christmas Eve, 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?
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."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. 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. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allows participants to defer taxes while their retirement savings grow.
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.
10
<PAGE> 737
- - 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 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides information
that can help you choose the appropriate share class.
- 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) payable to "One Group" to:
State Street Bank and Trust Company
c/o 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)."
If you choose to pay by wire, please call The One Group Services
Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. 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).
11
<PAGE> 738
7. 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.
8. 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 to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Technology --A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- 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, 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 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 per Fund, but
minimum automatic additions are only $25 per Fund. 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 five (5) calendar days.
- 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
12
<PAGE> 739
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 One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 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 and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
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
13
<PAGE> 740
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.
- No CDSC is not imposed on share appreciation, nor is a CDSC 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 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 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 One
Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
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 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.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
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<PAGE> 741
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:
- 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 One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of 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 Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
- 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.
- Certain 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.
15
<PAGE> 742
5. Bought with proceeds from the sale of Class I shares of a One Group
Fund 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 One Group Fund, 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 One Group Fund.
8. Bought with assets of 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.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need 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. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need 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.
16
<PAGE> 743
6. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
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. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
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 One Group Fund.
- 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 One Group Fund, 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
One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of another
One Group Fund.
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 the
Systematic Exchange 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.
One Group does not charge a fee for this privilege. In addition, 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 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:
17
<PAGE> 744
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, 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, 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:
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 participant in 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
18
<PAGE> 745
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. 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 The One Group Service 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.
- 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, 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 you begin participating in the Plan.
Shares received from dividend and capital gains reinvestment
are included in calculating the 10%. The applicable Class B or
Class C sales charge is waived provided your withdrawals do
not exceed 10% annually. Withdrawals in excess of 10% will
subject the entire annual withdrawal to the applicable sales
load.
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<PAGE> 746
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
- Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of the Fund's assets, the Fund reserves the right
to pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund
will value the securities selected in the same manner in which it computes
NAV. This process minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, 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, 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 per Fund. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of Bank One Corporation and its
affiliates.
- 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 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> 747
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Fund generally declares dividends on the last business day of each quarter.
Dividends for the Fund are distributed on the first business day of the next
month after they are declared. 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. You also may call The One Group Services Company
at 1-800-480-4111 to make this change.
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 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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) 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 distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
21
<PAGE> 748
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans generally 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, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
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<PAGE> 749
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) 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 performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Investment Trust. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of the Fund. The Fund began operations on ,
1999 and does not have a full fiscal year of advisory fees. Under the investment
advisory agreement with the Fund, Banc One Investment Advisors is entitled to a
fee, which is calculated daily and paid monthly, equal to 1.00% of the assets of
the Fund.
THE FUND MANAGERS
The Fund is managed by a team of Fund 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.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
23
<PAGE> 750
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 751
APPENDIX A
----------
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. 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.
INSTRUMENT RISK TYPE
- ---------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an 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% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of other money market funds
for which Banc One Investment Advisors serves as
25
<PAGE> 752
INSTRUMENT RISK TYPE
- ---------- ---------
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 Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
26
<PAGE> 753
INSTRUMENT RISK TYPE
- ---------- ---------
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and Market
non-convertible debt securities. Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a 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 Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
INDEX SHARES: Ownership interest in unit investment trusts Market
and other pooled investment vehicles that hold a portfolio
of securities or stocks designed to track the price performance
and dividend yield of a particular index including Standard
& Poor's Depository Receipts ("SPDRs") and Nasdaq-100s.
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 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
<PAGE> 754
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.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
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 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.
28
<PAGE> 755
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Fund from the SEC's web site at
http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
29
<PAGE> 756
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TAX-EXEMPT MONEY MARKET FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 757
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Tax-Exempt Money Market Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 758
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TAX-EXEMPT MONEY MARKET FUND
WHAT IS THE GOAL OF THE TAX-EXEMPT MONEY MARKET FUND?
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.
WHAT ARE THE TAX-EXEMPT MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in high quality, short-term money market
instruments. These instruments consist primarily of municipal securities,
certificates of deposit and commercial paper. The Fund will comply with
Securities and Exchange ("SEC") rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of 1940. The Fund will
concentrate its investments in the financial services industry. For more
information about the Tax-Exempt Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by 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. The securities are
issued to raise funds for various public and private purposes.
HOW WILL MY INVESTMENT BE TAXED?
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.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TAX-EXEMPT MONEY MARKET FUND?
The main risks of investing in the Tax-Exempt Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
3
<PAGE> 759
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE TAX-EXEMPT MONEY MARKET FUND PERFORMED?
The Tax-Exempt Money Market Fund was not in operation as of June 30, 1998.
Therefore, the performance that normally would be provided in this section is
unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-877-691-1118.
4
<PAGE> 760
FEES AND EXPENSES OF THE TAX-EXEMPT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your CLASS I CLASS S
investment)(1) ------- -------
Maximum Sales Charge none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses .10% .10%
that are deducted from Fund assets)
Investment Advisory Fees
Distribution [and/or none none
Service] (12b-1) Fees
Other Expenses .18% .40%
Total Annual fund Operating .25% .50%
Expenses
Fee Waiver and/or Expense (.07%) (.15%)
Reimbursement(2)
.18% .35%
Net 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, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .18% for Class I shares and .35% for Class S shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 761
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- -------------------- ------------------ -------------------
CLASS I CLASS S
- -------------------- ------------------ -------------------
1 Year(1) $ 18 $ 36
3 Years $ 73 $145
5 Years $134 $264
10 Years $311 $613
- ----------------------------- -----------------------------
1 Without contractual fee waivers, 1 Year expenses for Class I shares would be
$26 and for Class S shares would be $51.
6
<PAGE> 762
MORE ABOUT THE FUND
The fund described in this Prospectus is a series of One Group Mutual Funds
("One Group") and is managed by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors"). For more information about One Group and Banc One
Investment Advisors, please read "Management of the Funds" and the Statement of
Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The mutual fund described in this Prospectus are designed to produce high
current interest income free of Federal tax consistent with the preservation of
capital, maintenance of liquidity and stability of principal. The principal
investment strategies that are used to meet the Fund's investment objective are
described in Fund Summaries: Investments, Risk & Performance in the front of
this Prospectus. They are also described below.
There can be no assurance that the Fund will achieve its investment objective.
Please note that the Fund also may use strategies that are not described below,
but which are described in the Statement of Additional Information.
ONE GROUP TAX-EXEMPT MONEY MARKET FUND. The Fund invests only in U.S.
dollar denominated securities.
- The average maturity on a dollar-weighted basis of the securities
held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present minimal
credit risks.
- The Fund invests exclusively in money market instruments. These
include, but are not limited to:
1. U.S. Treasury obligations and obligations issued or
guaranteed by U.S. agencies or instrumentalities.
2. mortgage backed securities.
3. commercial paper.
4. bank obligations and deposit notes.
5. notes/bonds.
6. medium term notes.
7. funding agreements.
8. domestic or Yankee or Euro certificates of deposit.
- The Fund will purchase municipal securities only if the issuer
receives assurances from its legal counsel that the interest
payable on the securities is exempt from Federal personal income
tax.
- The Fund invests at least 80% of its net assets in municipal
securities.
----------------------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current maturities
(that is, the term of the securities) of the individual securities in
a fund. Average weighted maturity is important to investors as an
indication of a fund's sensitivity to changes in interest rates. The
longer the average weighted maturity, the more fluctuation in yield
you can expect.
----------------------------------------------------------------------
INVESTMENT RISKS
The main risks associated with investing in the Tax-Exempt Money Market Fund are
described in the Fund Summaries: Investments, Risk & Performance in the front of
this Prospectus. Additional risks are described below.
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.
7
<PAGE> 763
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.
PREPAYMENT AND CALL RISK: As part of its investment strategy, the Tax-Exempt
Money Market Fund invests in mortgage-backed and asset-backed securities. These
securities are subject to prepayment and all risks. The issuers of these
securities may be able to repay principal early, especially when interest rates
fall. Changes in prepayment rates can affect the return on investment and yield
of mortgage-backed and asset-backed securities volatile. When obligations are
prepaid, the Fund may have to reinvest in securities with lower yields. The Fund
may fail to recover premiums paid for the securities, resulting in an unexpected
capital loss.
DERIVATIVES. The Tax-Exempt Money Market Fund may invest in securities that are
considered to be DERIVATIVES. These securities may be more volatile than other
investments. Derivatives present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
---------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
---------------------------------------------------------
For more information about risks associated with the types of investments that
the Institutional Money Market Funds purchase, please read the Fund Summaries:
Investments, Risk & Performance, Appendix A and the Statement of Additional
Information.
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.
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 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 regard to this
restriction as permitted by applicable law.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net 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.
8
<PAGE> 764
6. 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 or
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
Additional investment policies can be found in the Statement of Additional
Information.
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 Board of Trustees of
One Group Mutual Funds in determining whether an investment is illiquid.
PORTFOLIO QUALITY AND MATURITY. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
9
<PAGE> 765
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
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:
- - Institutional investors and other accredited 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.
- - If you have questions about eligibility, please call The One Group
Services Company at 1-877-691-1118.
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, Christmas Eve 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 before 5:00 p.m. ET.
- - 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.
- - 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.
10
<PAGE> 766
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We refer to these entities as "Intermediaries".
- - Class S shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional services.
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 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 5:00 p.m. ET.
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. You also must
maintain a minimum account balance of $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 authorize a bank transfer or
initiate a wire transfer payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
5. 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.
6. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-877-691-1118.
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 1-877-691-1118 to relay your purchase instructions.
11
<PAGE> 767
- - Authorize a bank transfer or initiate a wire transfer payable to "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 One Group Fund (ex: One Group Institutional Prime Money Market
Fund)
Your Account Number (ex: 123456789)
Your Account Registration (ex: ABC Corporation)
- - 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, 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 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 One Group Institutional
Money Market Fund.
- - One Group may change the terms and conditions of your exchange
privileges upon 60 days written notice.
- - One Group Funds offers 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 the Systematic Exchange Privilege, please select it on
your account application. To learn more about it, please call The One
Group Services Company at 1-877-691-1118.
- - 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 3:00 p.m.
ET.
- - You have provided 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.
12
<PAGE> 768
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, 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, 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
5:00 p.m. ET 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 One Group
P.O. Box 8528
Boston, MA 02266-8528
- - You may request redemption forms by calling The One Group Services
Company at 1-877-691-1118
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in 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. Your Shareholder Servicing Agent.
13
<PAGE> 769
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Fund will attempt to honor requests for same day payment
if the request is received before 5:00 p.m. ET. If redemption requests
are received after those times, the Fund will attempt to wire payment
the next business day.
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 The One Group Services Company
at 1-877-691-1118 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.
- - 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, 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
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth 3% or more of the Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - 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.
14
<PAGE> 770
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
Dividends payable on Class I shares will be more than those payable on Class S
shares. This is because Class S shares have higher expenses.
The Fund generally declares dividends each business day. Dividends are
distributed on the first business day of the next month after they are declared.
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 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. You may change the way you receive dividends and
distributions by calling The One Group Services Company at 1-877-691-1118.
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. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income. The
Fund 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 federal 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
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.
15
<PAGE> 771
TAX INFORMATION
The Form 1099 that is mailed to eligible taxpayers in January details dividends
and their federal tax category. Even though the Fund provides 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, call
1-877-691-1118 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
16
<PAGE> 772
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to One
Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $126 billion in assets.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
17
<PAGE> 773
APPENDIX A
----------
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, please 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, and bonds. Market
TREASURY RECEIPTS: TRs, TIGRS, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and Market
instrumentalities of the U.S. Government. These include Ginnie Mae, Credit
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange Liquidity
for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous Credit
commitment to return the security to the seller at an agreed upon price Market
on an agreed upon date. This is treated as a loan. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money market mutual funds, Market
including One Group money market funds and shares of other money market
mutual funds 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.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes which normally mature Market
within a short period of time (e.g., 1 month) but which may be extended Credit
by the issuer for a maximum maturity of thirteen months. Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted Credit
by a commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes Credit
issued by corporations and other entities. Maturities generally vary Liquidity
from a few days to nine months. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and obligations Market
of foreign banks, overseas branches of U.S. banks and Political
supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act Liquidity
of 1933, such as privately placed commercial paper and Rule 144A securities. Market
</TABLE>
19
<PAGE> 774
<TABLE>
<S> <C>
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with interest rates Market
which are reset daily, weekly, quarterly or some other period and Credit
which may be payable to the Fund on demand. Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans Pre-Payment
and pools of loans. These include collateralized mortgage obligations ("CMOs") Market
and Real Estate Mortgage Investment Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments Market
to purchase the securities at a fixed price (usually with accrued interest) Liquidity
within a fixed period of time following demand by a Fund. Management
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain Market
funds for various public purposes. Municipal securities include private Credit
activity bonds and industrial development bonds, as well as General Obligation Political
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Tax
Notes, other short-term tax-exempt obligations, municipal leases, and Regulatory
obligations of municipal housing authorities and single family revenue bonds.
PARTICIPATION INTERESTS: Interests in municipal securities, including municipal Credit
leases, from financial institutions such as commercial and investment Tax
banks, savings and loan associations and insurance companies. These Market
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 receivables, Pre-payment
home equity loans, truck and auto loans, leases, credit card receivables Market
and other securities backed by other types of receivables Credit
or other assets. Regulatory
</TABLE>
20
<PAGE> 775
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 and liquidity of a security
can be adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - 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.
- - 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.
- - 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.
- - 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 lender has when a borrower defaults on
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.
21
<PAGE> 776
- - 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.
22
<PAGE> 777
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
23
<PAGE> 778
STATEMENT OF ADDITIONAL INFORMATION
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
(THE "U.S. TREASURY SECURITIES MONEY MARKET FUND")
ONE GROUP PRIME MONEY MARKET FUND (THE "PRIME MONEY MARKET FUND")
ONE GROUP MUNICIPAL MONEY MARKET FUND (THE "MUNICIPAL MONEY MARKET FUND")
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND (THE "OHIO MUNICIPAL MONEY MARKET
FUND")
ONE GROUP BALANCED FUND (THE "BALANCED FUND")
ONE GROUP LARGE CAP GROWTH FUND (THE "LARGE CAP GROWTH FUND")
ONE GROUP LARGE CAP VALUE FUND (THE "LARGE CAP VALUE FUND")
ONE GROUP MID CAP GROWTH FUND (THE "MID CAP GROWTH FUND")
ONE GROUP INTERNATIONAL EQUITY INDEX FUND (THE "INTERNATIONAL EQUITY INDEX
FUND")
ONE GROUP MID CAP VALUE FUND (THE "MID CAP VALUE FUND")
ONE GROUP EQUITY INDEX FUND (THE "EQUITY INDEX FUND")
ONE GROUP EQUITY INCOME FUND (THE "EQUITY INCOME FUND")
ONE GROUP DIVERSIFIED EQUITY FUND (THE "DIVERSIFIED EQUITY FUND")
ONE GROUP SMALL CAP GROWTH FUND (THE "SMALL CAP GROWTH FUND")
ONE GROUP INTERMEDIATE BOND FUND (THE "INTERMEDIATE BOND FUND")
ONE GROUP INCOME BOND FUND (THE "INCOME BOND FUND")
ONE GROUP GOVERNMENT BOND FUND (THE "GOVERNMENT BOND FUND")
ONE GROUP ULTRA SHORT-TERM BOND FUND (THE "ULTRA SHORT-TERM BOND FUND")
ONE GROUP SHORT-TERM BOND FUND (THE "SHORT-TERM BOND FUND")
ONE GROUP TREASURY & AGENCY FUND (THE "TREASURY & AGENCY FUND")
ONE GROUP HIGH YIELD BOND FUND (THE "HIGH YIELD BOND FUND")
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND (THE "INTERMEDIATE TAX-FREE BOND
FUND")
ONE GROUP MUNICIPAL INCOME FUND (THE "MUNICIPAL INCOME FUND")
ONE GROUP ARIZONA MUNICIPAL BOND FUND
(THE "ARIZONA MUNICIPAL BOND FUND")
ONE GROUP WEST
VIRGINIA MUNICIPAL BOND FUND (THE "WEST VIRGINIA MUNICIPAL BOND FUND")
ONE GROUP LOUISIANA MUNICIPAL BOND FUND
(THE "LOUISIANA MUNICIPAL BOND FUND")
ONE GROUP OHIO MUNICIPAL BOND FUND (THE "OHIO MUNICIPAL BOND FUND")
ONE GROUP KENTUCKY MUNICIPAL BOND FUND (THE "KENTUCKY MUNICIPAL BOND FUND")
ONE GROUP TREASURY ONLY MONEY MARKET FUND (THE "TREASURY ONLY
MONEY MARKET FUND")
ONE GROUP GOVERNMENT MONEY MARKET FUND
(THE "GOVERNMENT MONEY MARKET FUND")
ONE GROUP TAX-EXEMPT
MONEY MARKET FUND (THE "TAX-EXEMPT MONEY MARKET FUND")
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND (THE "INSTITUTIONAL PRIME MONEY
MARKET FUND")
ONE GROUP INVESTOR GROWTH FUND (THE "INVESTOR GROWTH FUND")
ONE GROUP INVESTOR GROWTH & INCOME FUND (THE "INVESTOR GROWTH & INCOME FUND")
ONE GROUP INVESTOR BALANCED FUND (THE "INVESTOR BALANCED FUND")
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND (THE "INVESTOR CONSERVATIVE
GROWTH FUND")
ONE GROUP SMALL CAP VALUE FUND (THE "SMALL CAP VALUE FUND")
1
<PAGE> 779
ONE GROUP DIVERSIFIED MID CAP FUND (THE "DIVERSIFIED MID CAP FUND")
ONE GROUP DIVERSIFIED INTERNATIONAL FUND (THE "DIVERSIFIED INTERNATIONAL FUND")
ONE GROUP MARKET EXPANSION INDEX FUND (THE "MARKET EXPANSION INDEX FUND")
ONE GROUP BOND FUND (THE "BOND FUND")
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND (THE "SHORT-TERM MUNICIPAL BOND FUND")
ONE GROUP TAX-FREE BOND FUND (THE "TAX-FREE BOND FUND")
ONE GROUP MICHIGAN MUNICIPAL BOND FUND (THE "MICHIGAN MUNICIPAL BOND FUND")
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND (THE "MICHIGAN MUNICIPAL MONEY
MARKET FUND")
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND (THE "CASH MANAGEMENT MONEY MARKET
FUND")
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND (THE "TREASURY CASH
MANAGEMENT MONEY MARKET FUND")
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND (THE "TREASURY PRIME
CASH MANAGEMENT MONEY MARKET FUND")
ONE GROUP U.S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
(THE "U.S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET
FUND")
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND (THE "MUNICIPAL CASH
MANAGEMENT MONEY MARKET FUND")
ONE GROUP REAL ESTATE FUND (THE "REAL ESTATE FUND")
ONE GROUP TECHNOLOGY FUND (THE "TECHNOLOGY FUND")
ONE GROUP U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (THE "US GOVERNMENT
SECURITIES MONEY MARKET FUND") AND
ONE GROUP TREASURY PRIME MONEY MARKET FUND (THE "TREASURY PRIME MONEY
MARKET FUND")
(EACH A "FUND," AND COLLECTIVELY THE "FUNDS")
NOVEMBER 1, 1999
This Statement of Additional Information is not a Prospectus, but supplements
and should be read in conjunction with the Prospectuses dated November 1, 1999.
This Statement of Additional Information is incorporated in its entirety into
each Fund's Prospectus. The Annual Report for the Funds for the fiscal year
ended June 30, 1999 will be incorporated by reference into this Statement of
Additional Information pursuant to a filing made pursuant to Rule 485(b). A copy
of the Annual Report and 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.
2
<PAGE> 780
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST
INVESTMENT OBJECTIVES AND POLICIES........................................................................
Additional Information on Fund Instruments ..........................................................
Asset-Backed Securities .........................................................................
Bank Obligations ................................................................................
Commercial Paper ................................................................................
Common Stock ....................................................................................
Convertible Securities ..........................................................................
Demand Features .................................................................................
Foreign Investments .............................................................................
Risk Factors of Foreign Investments ........................................................
Limitations on the Use of Foreign Investments ..............................................
Foreign Currency Transactions ...................................................................
Position Hedging ...........................................................................
Forward Foreign Currency Exchange Contracts ................................................
Foreign Currency Futures Contracts .........................................................
Foreign Currency Options ...................................................................
Foreign Currency Conversion ................................................................
Other Foreign Currency Hedging Strategies ..................................................
Risk Factors in Hedging Transactions .......................................................
Futures and Options Trading .....................................................................
Futures Contracts ..........................................................................
Limitations on the Use of Futures Contracts ................................................
Risk Factors in Futures Transactions .......................................................
Options Contracts ..........................................................................
Writing (Selling) Covered Calls ............................................................
Purchasing Call Options ....................................................................
Purchasing Put Options .....................................................................
Secured Puts ...............................................................................
Straddles and Spreads ......................................................................
Risk Factors in Options Transactions .......................................................
Limitations on the Use of Options ..........................................................
Government Securities ...........................................................................
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds ...........................................................
High Yield/High Risk Securities/Junk Bonds ......................................................
Index Investing by the Equity Index, Market Expansion Index
and International Equity Index Funds .......................................................
Index Shares
Investment Company Securities ...................................................................
Loan Participations and Assignments .............................................................
Mortgage-Related Securities .....................................................................
Mortgage-Backed Securities (CMOs and REMICs) ...............................................
Limitations on the Use of Mortgage Backed Securities .......................................
Mortgage Dollar Rolls ......................................................................
Stripped Mortgage Backed Securities ........................................................
Adjustable Rate Mortgage Loans..............................................................
Risk Factors of Mortgage-Related Securities ................................................
Municipal Securities ............................................................................
Risk Factors in Municipal Securities .......................................................
Limitations on the Use of Municipal Securities .............................................
Arizona Municipal Securities ...............................................................
Kentucky Municipal Securities ..............................................................
Louisiana Municipal Securities .............................................................
Michigan Municipal Securities ..............................................................
Ohio Municipal Securities ..................................................................
West Virginia Municipal Securities .........................................................
New Financial Products ..........................................................................
PERCS ...........................................................................................
</TABLE>
3
<PAGE> 781
<TABLE>
<CAPTION>
PAGE
<S> <C>
Preferred Stock .................................................................................
Real Estate Investment Trusts ("REITs")..........................................................
Repurchase Agreements ...........................................................................
Reverse Repurchase Agreements ...................................................................
Restricted Securities ...........................................................................
Securities Lending ..............................................................................
Short-term Funding Agreements ...................................................................
Structured Instruments ..........................................................................
Swaps, Caps and Floors ..........................................................................
Treasury Receipts ...............................................................................
U.S. Treasury Obligations .......................................................................
Variable and Floating Rate Instruments ..........................................................
Warrants ........................................................................................
When-Issued Securities and Forward Commitments ..................................................
Ratings of Portfolio Securities
Investment Restrictions .............................................................................
Portfolio Turnover ..................................................................................
Additional Tax Information Concerning All Funds .....................................................
Additional Tax Information Concerning the Tax-Advantaged Funds ......................................
Additional Tax Information Concerning the International Funds .......................................
Foreign Tax Credit ..................................................................................
Additional Tax Information Concerning the Funds of Funds ............................................
VALUATION
Valuation of the Money Market and Institutional Money Market Funds ..................................
Valuation of the Equity Funds, the Bond Funds and the Municipal
Bond Funds ......................................................................................
ADDITIONAL INFORMATION REGARDING THE CALCULATION OF PER SHARE
NET ASSET VALUE .....................................................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ...........................................................
Exchanges ...........................................................................................
Redemptions..........................................................................................
MANAGEMENT OF THE TRUST ..................................................................................
Trustees & Officers .................................................................................
Investment Advisor and Sub-Advisors .................................................................
Glass-Steagall Act ..................................................................................
Portfolio Transactions ..............................................................................
Administrator .......................................................................................
Distribution Plan ...................................................................................
Predecessor Funds' Distribution and Shareholder Servicing Plans .....................................
Cash Compensation to Shareholder Servicing Agents
Custodian, Transfer Agent and Dividend Disbursing Agent..............................................
Subcustodian
Experts
ADDITIONAL INFORMATION ...................................................................................
Description of Shares ...............................................................................
Shareholder and Trustee Liability ...................................................................
Performance .........................................................................................
Calculation of Performance Data .....................................................................
Miscellaneous .......................................................................................
FINANCIAL STATEMENTS
</TABLE>
4
<PAGE> 782
THE TRUST
One Group Mutual Funds (the "TRUST") is an open-end management
investment company. The Trust was formed as a Massachusetts Business Trust on
May 23, 1985. The Trust changed its name from The One Group(R) to One Group
Mutual Funds in March, 1999. The Trust consists of fifty-four series of units
of beneficial interest ("SHARES") each representing interests in one of the
following 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) the Ohio Municipal Money Market Fund, the
Michigan Municipal Money Market Fund (formerly, Pegasus Michigan
Municipal Money Market Fund), the U.S. Government Securities Money
Market Fund, and the Treasury Prime Money Market Fund (these seven
Funds being collectively referred to as the "MONEY MARKET FUNDS"),
Equity Funds: The Equity Income Fund (formerly, the Income Equity
Fund), the Mid Cap Value Fund (formerly, the Disciplined Value Fund),
the Mid Cap Growth Fund (formerly, the Growth Opportunities Fund and
the Small Company Growth Fund), the Equity Index Fund, the
International Equity Index Fund, the Large Cap Value Fund (formerly,
the Large Company Value Fund and the Quantitative Equity Portfolio),
the Large Cap Growth Fund (formerly, the Large Company Growth Fund),
the Balanced Fund (formerly, the Asset Allocation Fund and the
Flexible Balanced Portfolio), the Diversified Equity Fund (formerly,
the Value Growth Fund), the Small Cap Growth Fund (formerly, the
Small Capitalization Fund and the Gulf South Growth Fund), the Small
Cap Value Fund (formerly, Pegasus Small-Cap Opportunity Fund), the
Diversified Mid Cap Fund (formerly, Pegasus Mid-Cap Opportunity
Fund), Diversified International Fund (formerly, Pegasus
International Equity Fund), and the Market Expansion Index Fund
(formerly, Pegasus Market Expansion Index Fund), the Real Estate
Fund, and the Technology Fund (these sixteen Funds being collectively
referred to as the "EQUITY FUNDS"),
Bond Funds: The Intermediate Bond Fund, the Income Bond Fund, the
Government Bond Fund, the Ultra Short-Term Bond Fund (formerly the
Ultra Short-Term Income Fund and the Government ARM Fund), the
Short-Term Bond Fund (formerly, the Limited Volatility Bond Fund),
the Treasury & Agency Fund, the High Yield Bond Fund (formerly, the
Income Fund) and the Bond Fund (formerly, Pegasus Bond Fund) (these
eight 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 Tax-Free
Bond Fund (formerly, Pegasus Municipal Bond Fund), the Short-Term
Municipal Bond Fund (formerly, Pegasus Short Municipal Bond Fund),
the Ohio Municipal Bond Fund, the West Virginia Municipal Bond Fund,
the Kentucky Municipal Bond Fund, the Arizona Municipal Bond Fund,
the Louisiana Municipal Bond Fund, and the Michigan Municipal Bond
Fund (formerly, Pegasus Michigan Municipal Bond Fund) (these ten
Funds being collectively referred to as the "MUNICIPAL BOND FUNDS"),
Institutional Money Market Funds: The Treasury Only Money Market
Fund, the Government Money Market Fund, the Tax-Exempt Money Market
Fund, the Institutional Prime Money Market Fund, the Cash Management
Money Market Fund (formerly, Pegasus Cash Management Fund), the
Treasury Cash Management Money Market Fund (formerly, Pegasus
Treasury Cash Management Fund), the Treasury Prime Cash Management
Money Market Fund (formerly, Pegasus Treasury Prime Cash Management
Fund), the U.S. Government Securities Cash Management Money Market
Fund (formerly, Pegasus U.S. Government Securities Cash Management
Fund), and the Municipal Cash Management Money Market Fund (formerly,
Pegasus Municipal
5
<PAGE> 783
Cash Management Fund) (these nine 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 Conservative Growth Fund, and the Investor
Balanced Fund (these four 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 Michigan Municipal Money Market Fund, the Municipal Bond Funds,
the Tax-Exempt Money Market Fund, and the Municipal Cash Management Money Market
Fund are also referred to as the "TAX-ADVANTAGED FUNDS."
INTERNATIONAL FUNDS: The Diversified International Fund and the International
Equity Index Fund are also referred to as the "INTERNATIONAL FUNDS."
CASH MANAGEMENT FUNDS: The Cash Management Money Market Fund, the Treasury Cash
Management Money Market Fund, the Treasury Prime Cash Management Money Market
Fund, the U.S. Government Securities Cash Management Money Market Fund, and the
Municipal Cash Management Money Market Fund are also referred to as the "CASH
MANAGEMENT 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
following which are non-diversified:
1. the Ohio Municipal Bond Fund,
2. the Kentucky Municipal Bond Fund,
3. the West Virginia Municipal Bond Fund,
4. the Arizona Municipal Bond Fund,
5. the Michigan Municipal Bond Fund,
6. the Michigan Municipal Money Market Fund,
7. the Ohio Municipal Money Market Fund,
8. the Louisiana Municipal Bond Fund,
9. the Real Estate Fund, and
10. the Technology Fund.
SHARE CLASSES. Shares in the Funds of the Trust (other than the Institutional
Money Market Funds and the Money Market Funds) are generally offered in four
separate classes: Class I Shares, Class A Shares, Class B Shares and Class C
Shares. The following chart shows the share classes offered (or which are
anticipated to be offered) by each of the Funds as of the date of this Statement
of Additional Information:
6
<PAGE> 784
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FUND Class A Class B Class C Service Class S Class I
Class
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. Small Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
2. Small Cap Value X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
3. Mid Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
4. Mid Cap Value X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
5. Diversified Mid X X X X
Cap
- ---------------------------------------------------------------------------------------------------------------------------------
6. Large Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
7. Large Cap Value X X X
- ---------------------------------------------------------------------------------------------------------------------------------
8. Equity Income X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
9. Diversified Equity X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
10. Balanced X X X
- ---------------------------------------------------------------------------------------------------------------------------------
11. Equity Index X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
12. Market Expansion X X X X
Index
- ---------------------------------------------------------------------------------------------------------------------------------
13. International X X X X
Equity Index
- ---------------------------------------------------------------------------------------------------------------------------------
14. Diversified X X X X
International
- ---------------------------------------------------------------------------------------------------------------------------------
15. Real Estate X* X* X* X*
- ---------------------------------------------------------------------------------------------------------------------------------
16. Ultra Short-Term X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
17. Short-Term Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
18. Intermediate Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
19. Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
20. Income Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
21. Government Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
22. Treasury & Agency X X X
- ---------------------------------------------------------------------------------------------------------------------------------
23. High Yield Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
24. Short-Term X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
25. Intermediate Tax- X X X
Free Bond
- ---------------------------------------------------------------------------------------------------------------------------------
26. Tax-Free Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
27. Municipal Income X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
28. Arizona Municipal X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
29. Kentucky X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
30. Louisiana X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
31. Michigan X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
32. Ohio Municipal X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
33. West Virginia X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
34. Investor Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
35. Investor Growth & X X X X
Income
- ---------------------------------------------------------------------------------------------------------------------------------
36. Investor Balanced X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
37. Investor X X X X
Conservative Growth
- ---------------------------------------------------------------------------------------------------------------------------------
38. Cash Management X X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
39. Treasury Cash X X
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
40. Treasury Prime X X
Cash Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 785
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FUND Class A CLASS B Class C Service Class S CLASS I
Class
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
41. U.S. Government X X
Securities Cash
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
42. Municipal Cash X X
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
43. Prime Money X X X X X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
44. U.S. Treasury X X X X X
Securities Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
45. Municipal Money X X X X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
46. Michigan X X X
Municipal Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
47. Ohio Municipal X X X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
48. Treasury Prime X* X* X* X*
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
49. U.S. Government X* X* X* X*
Securities Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
50. Institutional X** X
Prime Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
51. Treasury Only X** X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
52. Government Money X** X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
53. Tax-Exempt Money X* X*
Market
- ---------------------------------------------------------------------------------------------------------------------------------
54. Technology X* X* X* X*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* As of the date of this Statement of Additional Information, the Fund
had not commenced operations.
** As of the date of this Statement of Additional Information, the shares
had not commenced operations.
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.
PEGASUS CONSOLIDATION. In March, 1999, the Funds of the Trust consolidated with
the Pegasus Funds pursuant to an Agreement and Plan of Reorganization. Except
for the Funds listed below, One Group Mutual Funds are considered to be the
surviving funds for accounting purposes. The following list shows the name of
the former Pegasus funds that are considered to be the surviving funds for
accounting purposes and the current name of such Funds:
8
<PAGE> 786
<TABLE>
<CAPTION>
NAME OF FORMER PEGASUS FUND ONE GROUP MUTUAL FUNDS' NAME
<S> <C> <C> <C>
1. Pegasus Multi-Sector Bond Fund 1. the Income Bond Fund
2. Pegasus Intermediate Bond Fund 2. the Intermediate Bond Fund
3. Pegasus Small-Cap Opportunity Fund 3. the Small Cap Value Fund
4. Pegasus Mid-Cap Opportunity Fund 4. the Diversified Mid Cap Fund
5. Pegasus International Equity Fund 5. the Diversified International
Fund
6. Pegasus Market Expansion Index Fund 6. the Market Expansion Index
Fund
7. Pegasus Bond Fund 7. the Bond Fund
8. Pegasus Short Municipal Bond Fund 8. the Short-Term Municipal Bond
Fund
9. Pegasus Municipal Bond Fund 9. the Tax-Free Bond Fund
10. Pegasus Michigan Municipal Bond Fund 10. the Michigan Municipal Bond
Fund
11. Pegasus Michigan Municipal Money 11. the Michigan Municipal Money
Market Fund Market Fund
12. Pegasus Cash Management Fund 12. the Cash Management Money
Market Fund
13. Pegasus Treasury Cash Management Fund 13. the Treasury Cash Management
Money Market Fund
14. Pegasus Treasury Prime Cash 14. the Treasury Prime Cash
Management Fund Management Money Market Fund
15. Pegasus U.S. Government Securities 15. the U.S. Government Securities
Cash Management Fund Cash Management Money Market
Fund
16. Pegasus Municipal Cash Management Fund 16. the Municipal Cash Management
Money Market Fund
</TABLE>
These 16 Funds are collectively referred to as the PREDECESSOR FUNDS. Individual
Predecessor Funds are identified in this Statement of Additional Information by
their One Group Mutual Funds' names.
9
<PAGE> 787
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.
Prepayment Risks. These securities involve prepayment risk, which is the risk
that the issuers of asset-backed securities may be able to repay principal in
advance if interest rates fall. Also, the underlying assets (for example, the
underlying credit card debt) may be refinanced or paid off prior to maturity
during periods of declining interest rates. If asset-backed securities are
pre-paid, a Fund may have to reinvest the proceeds from the securities at a
lower rate. In addition, 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).
10
<PAGE> 788
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.
Bond Funds. The Short-Term Bond Fund, the Intermediate Bond Fund, the
Bond Fund and the Ultra Short-Term Bond 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.
Institutional Money Market Funds. The Cash Management Money Market Fund
and the Municipal Cash Management Money Market Fund may purchase
commercial paper 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.
11
<PAGE> 789
(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 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 Bankers' Acceptances, Canadian Time Deposits and
Yankee Certificates of Deposits, and investments in Canadian Commercial Paper,
and Europaper. 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.
RISK FACTORS OF FOREIGN INVESTMENTS
Political and Exchange Risks. 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.
12
<PAGE> 790
Higher Transaction Costs. Foreign investments may entail higher
custodial fees and sales commissions than domestic investments.
Accounting and Regulatory Differences. 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.
Currency Risk. A substantial portion of the securities of the
International Funds will be denominated in foreign currencies. In
addition, the International Funds may hold funds in foreign currencies.
Thus, the value of an International 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 Funds 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 a Fund to achieve its
investment objective may depend, to a certain extent, on exchange rate
movements.
By investing in foreign securities, the International Funds attempt 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 a 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 Funds, 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 Funds seek increased diversification by combining
securities from various countries and geographic areas that offer different
investment opportunities and are affected by different economic trends.
o 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.
o The Diversified International Fund invests primarily in the
securities of companies located in Europe, Asia and Latin
America. The Fund may also invest in other regions and
countries that present attractive investment opportunities,
including developing countries. Because the Fund may invest
over 25% of its total assets in a single country, political
and economic developments in that country will have a greater
impact on the performance of the Fund than would be the case
if the Fund were more widely diversified.
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 Funds) and the Income
Bond, the High Yield Bond, the Bond and the Short-Term Bond Funds.
13
<PAGE> 791
FOREIGN CURRENCY TRANSACTIONS
The International Funds 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 Funds may
engage in such transactions in both U.S. and non-U.S. markets. To the extent a
Fund enters into such transactions in markets other than in the United States, a
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 Funds may enter into such
transactions only in connection with hedging strategies.
While a 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 a Fund's hedging
transactions will be effective. Furthermore, a 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.
The International Funds are 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. Each International
Fund's dealings in forward foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions.
Transaction Hedging. When the International Funds engage in
transaction hedging, they enter into foreign currency transactions with respect
to specific receivables or payables of the Funds generally arising in connection
with the purchase or sale of their portfolio securities. The International Funds
will engage in transaction hedging when they desire 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 Funds will attempt to protect themselves
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 Funds 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 Funds 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 Funds reserve 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 Funds 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 a
Fund the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives a 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 a Fund the right to assume a long position in
the futures contract until the expiration of the option. A call option on
currency gives a Fund the right to purchase a currency at the exercise price
until the expiration of the option.
14
<PAGE> 792
POSITION HEDGING. When engaging in position hedging, the
International Funds will enter into foreign currency exchange transactions to
protect against a decline in the values of the foreign currencies in which their
portfolio securities are denominated or an increase in the value of currency for
securities which Banc One Investment Advisors expects to purchase, when the Fund
holds cash or short-term investments. In connection with the position hedging, a
Fund may purchase or sell foreign currency forward contracts or foreign currency
on a spot basis. The International Funds may purchase U.S. exchange-listed put
or call options on foreign currency and foreign currency futures contracts and
buy or sell foreign currency futures contracts traded in the United States and
subject to regulation by the CFTC, although the International Funds have 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 Funds 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 a 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 International Funds have no current intention to do
so, the International Funds 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 Funds own or
expect 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 a 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
Funds, 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.
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<PAGE> 793
At the maturity of a forward contract, a 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 Funds 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. A 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.
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
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<PAGE> 794
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 Funds intend 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 Funds 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.
A 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
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 contracts 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 Funds will not speculate in foreign currency options,
futures or related options or currency swap contracts. Accordingly,
17
<PAGE> 795
the International Funds will not hedge a currency substantially in excess (as
determined by Banc One Investment Advisors) of the market value of the
securities denominated in such currency which they own, the expected acquisition
price of securities which they have committed or anticipate to purchase which
are denominated in such currency, and, in the cases of securities which have
been sold by a Fund but not yet delivered, the proceeds thereof in its
denominated currency. Further, the International Funds 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 Funds 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 Funds may invest in any such
options, contracts and products as may be developed to the extent consistent
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 a Fund's securities.
Liquidity. In addition, these instruments may not be liquid in all
circumstances. As a result, in volatile markets, the Funds 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.
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<PAGE> 796
Judgement of the Advisor and the International Sub-Advisor. Successful use
of hedging instruments by the International Funds is subject to the ability of
the Banc One Investment Advisors and/or the International Sub-Adviser, in the
case of the International Equity Index Fund 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, a Fund would be in a worse position than
if a hedging strategy had not been pursued. For example, if a 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, a 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 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.
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<PAGE> 797
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.
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
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<PAGE> 798
commodity pools or otherwise as vehicles for trading in the commodities futures
or commodity options markets; third, the Funds will disclose to all prospective
Shareholders the purpose of and limitations on their commodity futures trading;
fourth, the Funds will submit to the CFTC special calls for information.
Accordingly, registration as a commodities pool operator with the CFTC is not
required.
In addition to the margin restrictions discussed above,
transactions in futures contracts may involve the segregation of funds pursuant
to requirements imposed by the 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 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
21
<PAGE> 799
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.
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
22
<PAGE> 800
"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 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.
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<PAGE> 801
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.
Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. If a Fund desires to sell a
particular security from its portfolio on which it has written a call option it
will seek to effect a closing transaction prior to, or concurrently with, the
sale of the security. There is, of course, no assurance that a Fund will be able
to effect such closing transactions at a favorable price. If a Fund cannot enter
into such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security. This could result in higher transaction costs. A Fund will pay
transaction costs in connection with the writing of options to close out
previously written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration dates
of less than nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. From time to time, a
Fund may purchase an underlying security for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
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<PAGE> 802
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.
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
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<PAGE> 803
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 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 Investment
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<PAGE> 804
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 U.S. Treasury Securities Money Market Fund, the Treasury Only
Money Market Fund, the Treasury Cash Management Money Market Fund, and the
Treasury Prime Cash Management 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 U.S. Treasury
Securities Money Market Fund and the Treasury Cash Management Money Market Fund
may be subject to repurchase agreements.
The Government Money Market Fund and the U.S. Government
Securities Cash Management Money Market Fund invest 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.
With regard to the Money Market Funds and the Institutional Money
Market Funds, 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 top three 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
27
<PAGE> 805
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, the Michigan 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 (as defined by or permitted under Rule 2a-7). In
addition, each Fund (other than the Municipal Money Market Fund, the Ohio
Municipal Money Market Fund, the Michigan Municipal Money Market Fund and the
Tax-Exempt Money Market Fund) may not invest more than 5% of its total assets in
Second Tier Securities, with investment in the Second Tier Securities of any one
issuer further limited to the greater of 1% of the Fund's total assets or $1
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 and the Treasury Prime Cash Management 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
Some of the Funds 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
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<PAGE> 806
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.
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.
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<PAGE> 807
INDEX INVESTING BY THE EQUITY INDEX, MARKET EXPANSION INDEX AND
INTERNATIONAL EQUITY INDEX FUNDS
Equity Index Fund. The Equity Index Fund attempts to track the
performance of the S&P 500 Index (the "INDEX") 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 in the Index. "S&P 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 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.
Market Expansion Index Fund. The Market Expansion Index Fund
invests in a representative sampling of stocks of medium-sized and small U.S.
companies that are included in the Standard & Poor's SmallCap 600 Index and the
Standard & Poor's MidCap 400 Index (the "INDICES") and which trade on the New
York and American Stock Exchanges as well as over-the-counter stocks that are
part of the National Market System. (Not all of the stocks in the Indices are
included in the Fund). The Fund will attempt to achieve a correlation between
the performance of its portfolio and that of the combined Indices 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 combined Indices. The Fund's
ability to correlate its performance with the combined Indices, however, may be
affected by, among other things, changes in securities markets, the manner in
which the Indices are calculated by 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 other indices if such a standard of comparison is
deemed to be more representative of the performance of common stocks.
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<PAGE> 808
The Indices are determined, composed and calculated by S&P without
regard to the Market Expansion Index Fund. S&P is neither a sponsor of, nor in
any way affiliated with the Market Expansion Index Fund, and S&P makes no
representation or warranty, expressed or implied on the advisability of
investing in the Market Expansion Index Fund or as to the ability of the Indices
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
Indices or any data included therein.
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
Gross Domestic Product ("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
Capital 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.
INDEX SHARES
Certain of the Funds may invest in Index Shares. Index shares are
ownership interests in unit investment trusts and other pooled investment
vehicles that hold a portfolio of securities or stocks designed to track the
price performance and dividend yield. Index shares include Standard & Poor's
Depository Receipts ("SPDRS") and Nasdaq-100 Trusts (NASDAQ-100S). Nasdaq-100s
and SPDRs are interests in unit investment trusts. SPDRs 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.
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Nasdaq-100s invest in a securities portfolio that includes substantially all of
the securities of the Nasdaq-100 index. SPDRs and Nasdaq 100's are traded on the
American Stock Exchange, but may not be redeemed. The results of SPDRs and
Nasdaq-100s will not match the performance of the designated index due to
reductions in the performance attributable to transaction and other expenses,
including fees paid by the SPDR or Nasdaq-100s to service providers. SPDRs
distribute dividends on a quarterly basis.
SPDRs and Nasdaq-100s are not actively managed. Rather, a SPDR's
or Nasdaq-100s objective is to track the performance of a specified index.
Therefore, securities may be purchased, retained and sold 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 the SPDR or Nasdaq-100 was not fully invested in such securities.
A Fund will limit its investments in any one SPDR or Nasdaq-100s
to 5% of the Fund's total assets and 3% of the outstanding voting securities of
the SPDR or Nasdaq-100. Moreover, a Fund's investments in SPDRs and Nasdaq-100s
will not exceed 10% of the Fund's total assets, when aggregated with all other
investments in investment companies.
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 money market funds 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.
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). A Fund's 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 Participation and not an Assignment. A Fund may have difficulty
disposing of Assignments and Participations because to do so it will have
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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.
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
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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 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
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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 Balanced Fund, the Small Cap Value Fund, the
Diversified Mid Cap Fund, and the Diversified International 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 Short-Term Bond
Fund, the Ultra Short-Term Bond Fund, the Intermediate Bond Fund, and
the 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.
Municipal Bond Funds. The Municipal Bond Funds 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.
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, the Ohio Municipal
Money Market Fund, and the Michigan 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.
Institutional Money Market Funds. The Institutional Money Market
Funds (other than the Municipal Cash Management Money Market Fund and
the Cash Management Money Market Fund) may only invest in
mortgage-backed securities issued or guaranteed by the U.S.
government, or its agencies or instrumentalities. The Municipal Cash
Management Money Market Fund may invest in mortgage-backed securities
issued by private issuers including Guaranteed
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CMOs and REMIC pass-through securities. With respect to the
Institutional Money Market Funds, mortgage-backed securities must be
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.
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 prepayments 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 strategies.
The Bond Funds (other than the Treasury & Agency Fund), the
Municipal Bond Funds, and the Balanced 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.
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ADJUSTABLE RATE MORTGAGE LOANS. The Bond Funds and the Balanced
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 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
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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 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,
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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
inter-city rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation.
Certain debt obligations known as "INDUSTRIAL DEVELOPMENT BONDS"
under prior federal tax law may have been issued by or on behalf of public
authorities to obtain funds to provide certain privately operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to fund the construction, improvement, equipment or
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
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<PAGE> 817
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
lease, an installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Banc One Investment Advisors 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
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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 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 Michigan Municipal Money Market Fund, the
Municipal Income Fund, the Intermediate
Tax-Free Bond Fund, the Ohio Municipal Bond Fund, the Michigan Municipal Bond
Fund, the Kentucky Municipal Bond Fund, 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
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<PAGE> 819
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-Advantaged 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 1997 and a substantially similar percentage increase in
1998. Current State projections include continuing population gains averaging
approximately 2.7% per year through the year 2002.Arizona's employment rate
increased 6.7% in 1994, 6.1% in 1995, 5.6% in 1996,4.4% in 1997 and 4.7% in
1998. More significantly, Arizona was ranked the fastest growing state seven out
of 12 months during 1998 and ranked second during the other five months. Job
growth is expected to continue, but at a somewhat slower pace. The two-year
forecast indicates that 155,000 new jobs will be created in Arizona, which
translates into an average annual growth rate of 3.7% per year. The State's
unemployment rate was 5.5% in 1996, 4.0% in 1997 and 4.1% in 1998.
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 from $60.9 billion in 1990 to $100.6
billion in 1998, an increase of 65.2% and an average annual growth rate of 8.1%
per year.
Despite an increase in population, employment and aggregate
personal income, retail sales growth rates declined between 1994 and 1997, but
have recently begun to rise again. The retail sales growth rate was 11.8% for
fiscal year 1994-1995, 7.4% for fiscal year 1995-1996, 5% for 1996-1997, 7.8%
for fiscal year 1997-1998 and 8.2% for fiscal year 1998-1999.
After experiencing several years of budget shortfalls requiring
mid-year adjustments, the State of Arizona has had significant budget surpluses
each year from 1993 through 1998. However, during fiscal year 1999, a
significant portion of the accumulated surpluses were committed to construction
and renovation of public school
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facilities, reducing the projected surplus at June 30, 1998 to approximately $70
million. 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
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. This legislation should have no effect on the obligation or
ability of Arizona school districts to pay debt service on currently outstanding
bonds.
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, 1999, Kentucky had an unemployment rate of 4.6%,
slightly more than the 4.5% national average. For calendar year 1998, Kentucky's
per capita income ranked 39th 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 $731,323,000 as of June 30, 1998, which was
$535,699,000 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
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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.
Louisiana has reduced its per capita debt to more moderate levels in recent
years. Available general fund revenue was $5,788 million in fiscal year
1997/1998 and 1999/2000 will be $5,814 million and $5,879 million, respectively.
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.
Increases in personal income exceed the national rates during 1990
to 1994 on both a total and per capita basis, but these increases have slowed in
recent years. During the next two fiscal years, personal income in the state is
projected to increase by 4.5% and 4.3%, respectively. With regard to employment,
Louisiana's annual average employment growth rate was 2.3% during the 90's.
Employment is projected to increase by 1.4% and 1.3%, respectively, during the
next two fiscal years.
MICHIGAN MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "Michigan Municipal Securities" refers to debt securities
which are issued by or on behalf of Michigan 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 Michigan income tax.
Risk Factors Regarding Michigan Municipal Securities. The State of
Michigan's economy is principally dependent on manufacturing (particularly
automobiles, office equipment and other durable goods), tourism and agriculture,
and historically has been highly cyclical.
Total State wage and salary employment is estimated to have grown
by 1.9% in 1998. The rate of unemployment is estimated to have been 3.8% in
1998, below the national average for the fifth consecutive year. Personal income
grew at an estimated 5.1% annual rate in 1998, up from the 4.6% growth reported
for 1997.
During the past five years, improvements in the Michigan economy
have resulted in increased revenue collections which, together with restraints
on the expenditure side of the budget, have resulted in State General Fund
budget surpluses, most of which were transferred to the State's Counter-Cyclical
Budget and Economic Stabilization Fund. The balance of that Fund as of September
30, 1998 is estimated to have been in excess of $1.1 billion.
The Michigan Constitution limits the amount of total State
revenues that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar 1977 State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of
State spending paid to all units of local government to total State spending may
not be reduced below the proportion in effect in the 1978-79 fiscal year. The
State originally determined that portion to be 41.6%. If such spending does not
meet the required level in a given year, an additional appropriation for local
government
44
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units is required by the following fiscal year; which means the year following
the determinations of the shortfall, according to an opinion issued by the
State's Attorney General. Spending for local units met this requirement for
fiscal years 1986-87 through 1991-92. As the result of litigation, the State
agreed to reclassify certain expenditures, beginning with fiscal year 1992-93,
and has recalculated the required percentage of spending paid to local
government units to be 48.97%.
The Michigan Constitution limits State general obligation debt to
(i) short term debt for State operating purposes, (ii) short and long term debt
for the purpose of making loans to school districts, and (iii) long term debt
for voter-approved purposes.
The State has issued and has outstanding general obligation full
faith and credit bonds for Water Resources, Environmental Protection Program,
Recreation Program and School Loan purposes. As of September 30, 1998, the State
had approximately $874 million of general obligation bonds outstanding.
The State may issue notes or bonds without voter approval for the
purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligation bonds issued by local school districts.
The State is a party to various legal proceedings seeking damages
or injunctive or other relief. In addition to routine litigation, certain of
these proceedings could, if unfavorably resolved from the point of view of the
State, substantially affect State programs or finances. As of early 1999, these
lawsuits involved programs generally in the areas of corrections, tax
collection, commerce, and proceedings involving budgetary reductions to school
districts and governmental units, and court funding. Notable among these legal
proceedings are lawsuits brought by a number of school districts challenging the
constitutionality of certain State-mandated special education services without
corresponding funding.
The State Constitution also limits the extent to which
municipalities or political subdivisions may levy taxes upon real and personal
property through a process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and
school finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general property tax. All local school boards
are authorized, with voter approval, to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes on nonhomestead
property and nonqualified agricultural property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A and its implementing legislation shifted significant
portions of the cost of local school operations from local school districts to
the State and raised additional State revenues to fund these additional State
expenses. These additional revenues will be included within the State's
constitutional revenue limitations and may impact the State's ability to raise
additional revenues in the future.
A state economy during a recessionary cycle would also, as a
separate matter, adversely affect the capacity of users of facilities
constructed or acquired
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through the proceeds of private activity bonds or other "revenue" securities to
make periodic payments for the use of those facilities.
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.
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 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 Municipal Securities, the
West Virginia
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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. Coal mining,
chemicals and manufacturing make up an important part of that economy. The coal
industry, however, is under increased scrutiny which may affect the economic
feasibility of conducting mining operations in the future. State and local
governments 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.
In recent years, the State and local government have had adequate
financial resources. But, with little or no population growth, unemployment
statewide remaining above the national average, the continuing decline in school
enrollment, and an aging population, 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 options and futures contracts, 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 One Group.
PREFERRED STOCK
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.
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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.
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<PAGE> 826
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.
Repurchase Agreement Counterparties. For Funds other than the
International Funds, 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, the
High Yield Sub-Advisor deems creditworthy under guidelines approved by the Board
of Trustees. In the case of the International Funds, 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 Banc One Investment
Advisors, or in the case of the International Equity Index Fund, 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:
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<PAGE> 827
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o 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 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:
o The 4(2) paper must not be traded flat or in default as to
principal or interest;
o 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
o 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
o 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
One Group Mutual Funds, 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
o 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 Cash Management Money Market Funds, the U.S. Treasury Securities Money
Market Fund, the Municipal Money Market Fund, the Ohio Municipal Money Market
Fund, the Michigan Money Market Fund, the Treasury Prime Money Market Fund, the
U.S. Government Securities Money Market Fund, and 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
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<PAGE> 828
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 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.
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."
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<PAGE> 829
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.
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
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<PAGE> 830
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 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.
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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.
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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 to vary and provide for periodic adjustments in the interest
rate according to the terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, a Fund may demand
payment of principal and accrued interest. 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. Some of the Funds may
purchase EXTENDABLE COMMERCIAL NOTES. Extendable commercial notes are variable
rate notes which normally mature within a short period of time (e.g., 1 month)
but which may be extended by the issuer for a maximum maturity of thirteen
months.
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. Floating rate instruments 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.
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<PAGE> 833
(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.
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, please read "Ratings of Portfolios Securities". 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
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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 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.
RATING OF PORTFOLIO SECURITIES
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.
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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 A1+ possess a
particularly strong credit feature.
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F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
F3 Adequate capacity for timely repayment, but more susceptible to adverse
changes business, economic or financial conditions than for obligations
in higher categories.
B Capacity for timely repayment is susceptible to adverse changes in
business, economic or financial conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
Moody's
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
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.
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DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
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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.
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Non-Investment Grade
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.
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.
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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 & 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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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.
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DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
ba Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
caa Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca Speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues so rated
can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
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BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
N.R. No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
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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.
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.
<PAGE> 845
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
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SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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INVESTMENT 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 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: (i) 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; (ii) with
respect to the Real Estate Fund, this limitation does not apply to investments
in the real estate industry; and (iii) with respect to the Technology Fund, this
limitation does not apply to the technology sector. 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
70
<PAGE> 848
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 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 One Group funds, 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 and the Institutional Prime Money
Market Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with the Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of 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 and the Michigan 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 and the
Michigan 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 and the Institutional Prime Money Market
Fund, (i) this limitation
71
<PAGE> 849
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) this limitation does not apply to securities
issued by companies in the financial services industry; (iii) 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 (iv) 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, the
Institutional Prime Money Market Fund, the Ohio Municipal Money Market Fund, the
Michigan Municipal Money Market Fund, and 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, the Institutional Prime
Money Market Fund and the Municipal Money Market Fund.
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 (except the
Institutional Prime Money Market Fund):
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 (except the
Institutional Prime Money Market Fund) 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.
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<PAGE> 850
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.
The Tax-Free Bond Fund, the Short-Term Municipal Bond Fund, the
Arizona Municipal Bond Fund, the West Virginia Municipal Bond, the Louisiana
Municipal Bond Fund, the Ohio Municipal Bond Fund, the Kentucky Municipal Bond
Fund, and the Michigan 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, Louisiana Municipal Securities, and Michigan
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).
73
<PAGE> 851
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 or sell securities short 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 Funds 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 Funds 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 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.
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 (except for the Cash
Management 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.
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<PAGE> 852
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 or an Institutional 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 or an Institutional 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.
TEMPORARY DEFENSIVE POSITIONS.
To respond to unusual market conditions, the Funds may invest their assets in
cash or CASH EQUIVALENTS (see below) for temporary defensive purposes. These
investments may result in a lower yield than lower-quality or longer term
investments and may prevent the Funds from meeting their investment objectives.
The percentage of assets that a Fund may invest in cash equivalents is described
in the applicable Fund's prospectus.
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<PAGE> 853
Cash Equivalents are highly liquid, high quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. Government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, and bank money market deposit
accounts.
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 all of the Money Market Funds were zero for the period from the
commencement of their respective operations to June 30, 1999 and are expected
to remain zero.
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<PAGE> 854
The portfolio turnover rates of the Funds for the fiscal years ended June 30,
1999 and 1998 were as follows:
ONE GROUP MUTUAL FUNDS PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
--------
FUND 1998 1999
- ---- ---- ----
<S> <C> <C>
Equity Income...............................................................14.64%
Mid Cap Value..............................................................106.41%
Mid Cap Growth.............................................................158.43%
Equity Index.................................................................4.32%
Large Cap Value.............................................................47.35%
Balanced....................................................................46.04%
International Equity Index...................................................9.90%
Large Cap Growth...........................................................117.34%
Short-Term Bond.............................................................56.99%
Intermediate Tax-Free Bond.................................................109.03%
Municipal Income............................................................69.76%
Ohio Municipal Bond.........................................................10.49%
Government Bond.............................................................91.49%
Ultra Short-Term Bond.......................................................41.15%
Kentucky Municipal Bond......................................................5.81%
Arizona Municipal Bond......................................................20.89%
W. Virginia Municipal Bond..................................................16.69%
Louisiana Municipal Bond....................................................12.03%
Diversified Equity..........................................................62.37%
Small Cap Growth............................................................83.77%
Investor Growth..............................................................4.05%
Investor Growth & Income....................................................11.38%
Investor Conservative Growth.................................................3.22%
Investor Balanced............................................................9.71%
High Yield Bond................................................................NA*
Treasury & Agency...........................................................41.60%
Small Cap Value Fund.........................................................NA*** ##
Diversified Mid Cap..........................................................NA*** ##
Diversified International....................................................NA*** ##
Market Expansion Index.......................................................NA*** ##
Bond ........................................................................NA*** ##
Income Bond..................................................................NA*** ##
Intermediate Bond............................................................NA*** ##
Short-Term Municipal Bond....................................................NA*** ##
Tax-Free Bond................................................................NA*** ##
Michigan Municipal Bond......................................................NA** ##
Technology Fund..............................................................NA* NA**
Real Estate Fund.............................................................NA* NA**
</TABLE>
* As of June 30, 1998, the Fund had not commenced operations.
** Prior to March 1999, the Predecessor Fund had a fiscal year end of
December 31st. See the table below for information on portfolio
turnover for the fiscal years ending December 31, 1998 and 1999.
# As of June 30, 1999, the Fund had not commenced operations
## In March, 1999, the Predecessor Fund changed its fiscal year end from
December 31st to June 30th. The Portfolio Turnover Rate is for the
period beginning January 1, 1999 and ending June 30, 1999.
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<PAGE> 855
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 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.
Prior to the consolidation with the One Group Mutual Funds, the
fiscal year end for the Predecessor Funds was December 31st. The portfolio
turnover rates of these Funds for the fiscal years ended December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------
FUND 1998 1997
- ---- ---- ----
<S> <C> <C>
Small Cap Value Fund........................................................ 42.39% 58.29%
Diversified Mid Cap......................................................... 26.89% 37.54%
Diversified International................................................... 8.50% 3.56%
Market Expansion Index...................................................... 20.18%* NA**
Bond ....................................................................... 34.69% 17.60%
Income Bond................................................................. 41.69% 38.70%
Intermediate Bond........................................................... 50.32% 31.66%
Short-Term Municipal Bond................................................... 32.23%*** NA**
Tax-Free Bond............................................................... 22.05% 32.08%
Michigan Municipal Bond..................................................... 23.33% 37.84%
</TABLE>
* Portfolio turnover rate for the period July 31, 1998 through December
31, 1998.
** As of December 31, 1997, the Fund had not commenced operations.
*** Portfolio turnover rate for the period May 4, 1998 through December 31,
1998. Not annualized.
ADDITIONAL TAX INFORMATION CONCERNING ALL FUNDS
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with One Group's other funds. Each Fund intends to
meet the requirements necessary to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). If the Funds so qualify, they will pay no federal income tax on the
earnings they distribute to shareholders and they will eliminate or reduce to a
nominal amount the federal income taxes to which they 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, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities, or foreign currencies
(to the extent such currency gains are directly related to a Fund's principal
business of investing in stock or securities, or options or futures with respect
to stock or securities) 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 (including receivables),
U.S. government securities, securities of other regulated investment companies,
and other
78
<PAGE> 856
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 90% of the sum of (a) 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) its net tax-exempt
interest. 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, in order to requalify for taxation as a regulated
investment company, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make certain distributions.
Generally, regulated investment companies that do not distribute
in each calendar year an amount at least equal to the sum of (i) 98% of their
"ordinary income" (as defined) for the calendar year, (ii) 98% of their capital
gain net income (as defined) for the one-year period ending on October 31 of
such calendar year, and (iii) any undistributed amounts from the previous year,
are subject to a non-deductible excise tax equal to 4% of the undistributed
amounts. For purposes of the excise tax, a Fund is treated as having distributed
any amount on which it is subject to income tax for any taxable year ending in
such calendar year. Each Fund of the Trust intends to make sufficient
distributions to avoid liability for the excise tax.
Shareholders of the Funds will generally 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 (i.e., the excess, if any,
of net long-term capital gains over net short-term capital losses) 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. 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. 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.
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 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
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<PAGE> 857
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 including the
Funds of Funds. 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 to report
properly payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the Shareholder's ultimate U.S. tax liability.
The 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, 2000. 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 Funds 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.
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<PAGE> 858
The foregoing discussion and the discussion below regarding the
Tax-Advantaged Funds, the International Funds and the Funds of 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.
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.
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<PAGE> 859
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.
Michigan Taxes. Distributions received from the Michigan Municipal
Bond Fund are exempt from Michigan personal income tax to the extent they are
derived from interest on tax-exempt securities, under the current position
of the Michigan Department of Treasury. Such distributions, if received in
connection with a shareholder's business activity, may, however, be subject
to Michigan single business tax. For Michigan personal income tax and single
business tax purposes, Fund distributions attributable to any source other than
interest on tax-exempt securities will be fully taxable. Fund distributions may
be subject to the uniform city income tax imposed by certain Michigan cities.
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.
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<PAGE> 860
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.
ADDITIONAL TAX INFORMATION CONCERNING THE INTERNATIONAL FUNDS
Transactions of the International Funds 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 Funds 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 Funds. If the
International Funds elect to treat a passive foreign investment company as a
"qualified electing fund," different rules would apply, although the
International Funds do not expect to make such an election. Rather, the Funds
intend 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.
The qualified electing fund and mark-to-market elections may have
the effect of accelerating the recognition of income (without the receipt of
cash) and increase the amount required to be distributed for the Fund to avoid
taxation. Making either of these elections therefore may require a Fund to
liquidate other investments (including when it is not advantageous to do so) to
meet its distribution requirement, which also may accelerate the recognition of
gain and affect a Fund's total return.
FOREIGN TAX CREDIT
If more than 50% of an International 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 an
International 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
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<PAGE> 861
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 Funds 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.
ADDITIONAL TAX INFORMATION CONCERNING THE FUNDS OF FUNDS
A Fund of Funds will not be able to offset gains realized by one
Fund in which such Fund of Funds invests against losses realized by another Fund
in which such Fund of Funds invests. The use of a fund-of-funds structure could
therefore affect the amount, timing and character of distributions to
shareholders.
Depending on a Fund of Fund's percentage ownership in an
underlying Fund, both before and after a redemption, a redemption of shares of
an underlying Fund by a Fund of Funds may cause the Fund of Funds to be treated
as not receiving capital gain income on the amount by which the distribution
exceeds the tax basis of the Fund of Funds in the shares of the underlying Fund,
but instead to be treated as receiving a dividend taxable as ordinary income on
the full amount of the distribution. This could cause shareholders of the Fund
of Funds to recognize higher amounts of ordinary income than if the shareholders
had held the shares of the underlying Funds directly.
Although each Fund of Funds may itself be entitled to a deduction
for foreign taxes paid by a Fund in which such Fund of Funds invests (see
"Additional Tax Information Concerning the International Funds"), the Fund of
Funds will not be able to pass any such credit or deduction through to its own
shareholders.
The foregoing is only a general description of the federal tax
consequences of a fund-of-funds structure. Accordingly, prospective purchasers
of Shares of a Fund of Funds 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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<PAGE> 862
VALUATION
VALUATION OF THE MONEY MARKET AND INSTITUTIONAL MONEY MARKET FUNDS
The Money Market and Institutional Money Market Funds have elected
to use the amortized cost method of valuation pursuant to Rule 2a-7 under the
1940 Act. This involves valuing an instrument at its cost initially and
thereafter assuming a constant amortization to maturity of any discounts or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. This method may result in periods during which value,
as determined by amortized cost, is higher or lower than the price each Fund
would receive if it sold the instrument. The value of securities in the Funds
can be expected to vary inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market and Institutional Money
Market Funds will maintain a dollar-weighted average portfolio maturity
appropriate to their objective of maintaining a stable net asset value per
Share, provided that no Fund will purchase any security with a remaining
maturity of more than 397 days (securities subject to repurchase agreements and
certain variable or floating rate instruments may bear longer maturities) nor
maintain a dollar-weighted, average portfolio maturity which exceeds 90 days.
The Trust's Board of Trustees has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and a Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one half of one percent, the Rule
requires that the Board promptly consider what action, if any, should be
initiated. If the Trustees believe that the extent of any deviation from a
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, they will take such steps as
they consider appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include selling
portfolio instruments prior to maturity, shortening the average portfolio
maturity, withholding or reducing dividends, reducing the number of a Fund's
outstanding Shares without monetary consideration, or utilizing a net asset
value per Share determined by using available market quotations.
VALUATION OF THE EQUITY FUNDS, THE BOND FUNDS AND THE MUNICIPAL BOND FUNDS
Except as noted below, investments of the 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, securities of the
International Funds, the principal market for which is a securities exchange,
are valued at the last available sale price, or in the case of U.K. securities,
where depending on which principal market the security trades, the quoted value
will be the last available sale price or the latest mid-market price.
Additionally, securities which trade in Germany, but are not on the national
electronic exchange, receive a Kassa price, which is a mid-day broker quote.
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 Funds 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.
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<PAGE> 863
The value of a foreign security is determined in its national
currency as of the close of trading on its principal market, which value is then
converted into its U.S. dollar equivalent using the mean of the latest foreign
exchange bid and ask price at the time of the close of the London Stock
Exchange. 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 Banc One Investment Advisors 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, Class S 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, Class S and Service Class Shares is
calculated by determining the value of the respective Class's proportional
interest in the securities and other assets of the Fund, less (i) such Class's
proportional share of general liabilities and (ii) the liabilities allocable
only to such Class, and dividing such amount by the number of Shares of the
Class outstanding. The net asset value of a Fund's Class I, Class A, Class B,
Class C, Class S 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, Class S and Service Class Shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
All of the classes of Shares in each Fund (other than Class S and
Service Class shares) 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 organization authorized to act in a fiduciary,
advisory, custodial or agency 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.
Class S Shares may be purchased by broker-dealers, other financial
intermediaries, banks and other depository institutions on behalf of clients
requiring additional services, such as reports and other information related to
maintenance of shareholders accounts.
Service Class Shares are available only in the 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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<PAGE> 864
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. For Federal income tax purposes, an exchange
is treated as a sale of shares and generally results in a capital gain or loss.
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.
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 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.
Class S. Shares. Class S Shares may not exchange their Class S
Shares for shares of any other class, nor may shares of any other class be
exchanged for Class S 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.
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<PAGE> 865
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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<PAGE> 866
MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the
Board of Trustees of the Trust who were elected by the Shareholders of the
Trust. 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 Trust. There are currently eight 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 of the Trust,
their addresses, their ages, and principal occupations during the past five
years are set forth below.
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING THE PAST FIVE 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
Milwaukee, WI 53209
Charles I. Post 71 Trustee From July, 1986 to present, self
7615 4th Avenue West employed as a consultant.
Bradenton, FL 34209
Frederick W. Ruebeck 60 Trustee From June, 1988 to present,
Eli Lilly & Company Director of Investments, Eli
Lilly Corporate Center Lilly and Company.
307 East McCarty
Indianapolis, IN 46258
Robert A. Oden, Jr. 53 Trustee From 1995 to present, President,
Office of the President Kenyon College; from 1989 to 1995,
Ransom Hall Headmaster, The Hotchkiss School.
Kenyon College
Gambier, OH 43022
*John F. Finn 51 Trustee Since 1975, President of Gardner,
President Inc. (wholesale distributor to the
Gardner, Inc. outdoor power equipment industry).
1150 Chesapeake Avenue
Columbus, Ohio 43212
Marilyn McCoy 51 Trustee Vice President of Administration
Northwestern University and Planning, Northwestern
Office of the Vice President University (1985 to present).
Administration Planning Trustee of Pegasus Funds since
633 Clark St. Crown 2-112 1996.
Evanston, IL 60208
Julius L. Pallone 69 Trustee President, J.L. Pallone Associates
J.L. Pallone Associates (1994 to present) Trustee of
3000 Town Center Pegasus Funds since 1987.
Suite 732
Southfield, MI 48075
Donald L. Tuttle 65 Trustee Vice President (1995 to present)
Association of Management and Senior Vice President (1992 to
and Research 1995), Association for Investment
5 Boar's Head Lane Management and Research, Trustee
Charlottesville, VA 22901 of Pegasus Funds since 1993.
</TABLE>
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<PAGE> 867
* John F. Finn is an "interested person" as that term is defined in the
Investment Company Act of 1940.
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.
90
<PAGE> 868
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FROM THE FUND
POSITION FROM THE TRUST TRUST EXPENSES(2) RETIREMENT COMPLEX(3)
- -------- -------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C>
Peter C. Marshall, $49,750 N/A N/A $52,750
Chairman
Charles I. Post, $45,500 N/A N/A $48,500
Trustee
Frederick W. Ruebeck, $46,750(4) N/A N/A $49,750(4)
Trustee
Robert A. Oden, Jr., $46,750 N/A N/A $49,750
Trustee
John F. Finn, $46,750(4) N/A N/A $49,750(4)
Trustee
Marilyn McCoy $11,250(5) N/A N/A $12,000(5)
Trustee
Julius L. Pallone $11,250(5) N/A N/A $12,000(5)
Trustee
Donald L. Tuttle $11,250(6) N/A N/A $12,000(6)
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended June 30, 1999.
(2) The Trustees may defer all or a part of their compensation payable by
the Trust pursuant to the Deferred Compensation Plan (the "PLAN").
Under the Plan, the Trustees may specify Class I 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 funds of One Group Mutual Funds and the
portfolios of One Group(R) Investment Trust that were operational as of
June 30, 1999.
(4) Includes $35,000 of deferred compensation.
(5) Includes $11,250 of deferred compensation.
(6) Includes $5,625 of deferred compensation.
91
<PAGE> 869
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, their ages, and principal occupations during the past five
years are shown below.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING PAST 5 YEARS
- ---------------- --- -------------- -------------------
<S> <C> <C> <C>
Mark S. Redman 45 President, Treasurer From November, 1997 to
The One Group Services and Assistant Secretary present, President, The One
Company Group Services Company;
3435 Stelzer Road From June, 1995 to
Columbus, Ohio 43219 November, 1997, Officer,
The One Group Services
Company; From February,
1989 to present, employee
of BISYS Fund Services,
Inc. (FKA Winsbury Company)
James T. Gillespie 32 Vice President From September, 1998 to BISYS
Fund Services, present, employee, The One
Inc. Group Services Company;
3435 Stelzer Road From February, 1992 to
Columbus, Ohio 43219 September, 1998, employee,
BISYS Fund Services, Inc.
Bryan C. Haft 34 Vice President From January, 1999 to
BISYS Fund Services, present, employee, The One
Inc. Group Services Company;
3435 Stelzer Road From November, 1992 to
Columbus, Ohio 43219 January, 1999, employee,
BISYS Fund Services, Inc.
Charles L. Booth 39 Secretary From February, 1998, to BISYS
Fund Services, present, Chief Compliance
Inc. Officer and Vice President
3435 Stelzer Road Fund Compliance
Columbus, Ohio 43219 BISYS Fund Services, Inc.;
From April, 1988, to
February, 1998, employee,
BISYS Fund Services, Inc.
Alaina J. Metz 32 Assistant Secretary From June, 1995, to
BISYS Fund Services, present, Chief
Inc. Administrator,
3435 Stelzer Road Administration and
Columbus, Ohio 43219 Regulatory Services,
BISYS Fund Services, Inc.; from
May 1989 to June 1995, Supervisor,
Mutual Fund Legal
Department, Alliance
Capital Management.
</TABLE>
92
<PAGE> 870
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 High Yield Bond
Fund which is sub-advised by a Sub-Advisor). 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, Delaware, Florida, 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 One Group Mutual Funds
(formerly, One Group, The One Group and the Helmsman Fund) since 1985.
During the fiscal years ended June 30, 1999, 1998, and 1997, 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:
93
<PAGE> 871
ONE GROUP MUTUAL FUND ADVISORY FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------
1999 1998 1997
---------------- ------------------ -------------------
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
Prime Money Market $ 9,806,764 $1,675,435 $7,824,731 $1,899,772
Municipal Money Market $ 1,491,141 $ 596,454 $1,241,937 $ 593,593
Ohio Municipal Money Market $ 252,818 $ 60,211 $ 231,786 $ 36,034
Equity Income $ 6,571,128 -0- $4,104,562 $ 0
Mid Cap Value $ 4,758,742 -0- $4,129,523 $ 0
Mid Cap Growth $ 6,492,467 -0- $4,511,169 $ 0
Equity Index $ 992,672 $1,985,360 $ 547,238 $1,094,476
Large Cap Value $ 5,638,325 -0- $4,726,413 $ 0
Balanced $ 1,178,256 $ 191,626 $ 684,481 $ 142,861
International Equity Index $ 2,373,749 -0- $2,201,616 $ 837
Large Cap Growth $12,023,999 -0- $7,948,260 $ 0
Short-Term Bond $ 1,879,523 $1,700,459 $1,830,204 $1,830.204
Intermediate Tax-Free Bond $ 1,904,783 $1,025,646 $1,235,203 $ 776,825
Municipal Income $ 2,184,870 $ 624,243 $1,314,694 $ 387,974
Ohio Municipal Bond $ 544,952 $ 517,943 $ 389,001 $ 391,781
Government Bond $ 3,714,960 $ 80,216 $3,098,420 $ 194,800
Ultra Short-Term Bond $ 424,770 $ 699,133 $ 117,314 $ 342,966
Treasury Only Money Market $ 518,513 -0- $ 385,087 $ 0
Government Money Market $ 1,735,256 -0- $ 848,690 $ 0
Kentucky Municipal Bond $ 469,392 $ 117,349 $ 270,459 $ 78,137
Institutional Prime Money
Market NA### NA### NA## NA## NA# NA#
Tax-Exempt Money Market NA## NA## NA# NA#
Arizona Municipal Bond $ 1,007,240 $ 154,639 $ 390,737+++ $ 126,415+++
W. Virginia Municipal Bond $ 365,585 $ 103,485 $ 121,278+++ $ 66,525+++
Louisiana Municipal Bond $ 572,161 $ 355,668 $ 683,535 $ 394,121
Diversified Equity $ 4,485,408 -0- $2,309,475 $ 69,333
Small Cap Growth $ 902,099 -0- $ 699,896 $ 30,410
High Yield Bond * * NA## NA## NA# NA#
Investor Growth $ 35,565 $ 21,362 $ 1,552 $ 6,244++++
Investor Growth & Income $ 49,435 $ 17,732 $ 2,046 $ 8,237++++
Investor Conservative Growth $ 4,622 $ 18,489 $ 683 $ 2,750++++
Investor Balanced $ 53,241 $ 11,387 $ 3,107 $ 12,503++++
Treasury & Agency $ 232,442 $ 232,443 $ 99,224 $ 99,225+++
Small Cap Value ** ** NA NA NA NA
Diversified Mid Cap ** ** NA NA NA NA
Diversified International ** ** NA NA NA NA
Market Expansion Index ** ** NA NA NA NA
Bond ** ** NA NA NA NA
Income Bond ** ** NA NA NA NA
Intermediate Bond ** ** NA NA NA NA
Short-Term Municipal Bond ** ** NA NA NA NA
Tax-Free Bond ** ** NA NA NA NA
Michigan Municipal Bond
Michigan Municipal Money
Market ** ** NA NA NA NA
Cash Management Money
Market ** ** NA NA NA NA
Treasury Cash Management
Money Market ** ** NA NA NA NA
Treasury Prime Cash
Management Money Market ** ** NA NA NA NA
U.S. Government Securities
Cash Management Money
Market ** ** NA NA NA NA
Municipal Cash Management
Money Market ** ** NA NA NA NA
</TABLE>
94
<PAGE> 872
Technology
Real Estate Fund
U.S. Government Securities Money Market
Treasury Prime Money Market
### As of June 30, 1999, the Fund had not commenced operations.
## As of June 30, 1998, the Fund had not commenced operations.
# As of June 30, 1997, the Fund had not commenced operations.
* Fees for the period from November 13, 1998 to June 30, 1999
** Fee for the period from the consolidation with the Pegasus
Funds to June 30, 1999.
+++ Fees for the period from January 20, 1997 to June 30, 1997.
++++ Fees for the period from December 10, 1996 to June 30, 1997.
For the period beginning November 1, 1999 and ending October
31,2000, Banc One Investment Advisors and The One Group Services Company have
agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses as follows for the Funds listed below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Small Cap Growth 1.30% 2.05% 2.05% 1.05%
- ---------------------------------------------------------------------------------------------------------
2. Small Cap Value 1.19% 1.94% 1.94% .94%
- ---------------------------------------------------------------------------------------------------------
3. Mid Cap Growth 1.25% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
4. Mid Cap Value 1.21% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
5. Diversified Mid Cap 1.11% 1.86% 1.86% .86%
- ---------------------------------------------------------------------------------------------------------
6. Large Cap Growth 1.19% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
7. Large Cap Value 1.23% 1.98% 1.98% .98%
- ---------------------------------------------------------------------------------------------------------
8. Equity Income 1.23% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
9. Diversified Equity 1.21% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
10. Balanced 1.15% 1.90% 1.90% .90%
- ---------------------------------------------------------------------------------------------------------
11. Equity Index .65% 1.40% 1.40% .40%
- ---------------------------------------------------------------------------------------------------------
12. Market Expansion Index .82% 1.57% 1.57% .57%
- ---------------------------------------------------------------------------------------------------------
13. International Equity 1.20% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
Index 1.30% 2.05% 2.05% 1.05%
- ---------------------------------------------------------------------------------------------------------
14. Diversified International 1.55% 2.30% 2.30% 1.30%
- ---------------------------------------------------------------------------------------------------------
15. Technology 1.55% 2.30% 2.30% 1.30%
- ---------------------------------------------------------------------------------------------------------
16. Real Estate 1.35% 2.10% 2.10% 1.10%
- ---------------------------------------------------------------------------------------------------------
17. Ultra Short-Term Bond .75% 1.25% 1.25% .50%
- ---------------------------------------------------------------------------------------------------------
18. Short-Term Bond .80% 1.30% 1.30% .55%
- ---------------------------------------------------------------------------------------------------------
19. Intermediate Bond .83% 1.48% 1.48% .58%
- ---------------------------------------------------------------------------------------------------------
20. Bond .85% 1.50% 1.50% .60%
- ---------------------------------------------------------------------------------------------------------
21. Income Bond .92% 1.57% 1.57% .67%
- ---------------------------------------------------------------------------------------------------------
22. Government Bond .90% 1.55% 1.55% N/A
- ---------------------------------------------------------------------------------------------------------
23. Treasury & Agency .70% 1.20% 1.20% .45%
- ---------------------------------------------------------------------------------------------------------
24. High Yield Bond 1.15% 1.80% 1.80% .90%
- ---------------------------------------------------------------------------------------------------------
25. Short-Term Municipal Bond .80% 1.45% 1.45% .55%
- ---------------------------------------------------------------------------------------------------------
26. Intermediate Tax-Free .85% 1.60% 1.60% .60%
- ---------------------------------------------------------------------------------------------------------
27. Tax-Free Bond .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
28. Municipal Income .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
29. Arizona Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
30. Kentucky Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
31. Louisiana Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
32. Michigan Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
95
<PAGE> 873
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
33. Ohio Municipal Bond .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
34. West Virginia Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
35. Investor Growth .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
36. Investor Growth & Income .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
37. Investor Balanced .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
38. Investor Conservative Growth .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET AND INSTITUTIONAL MONEY MARKET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FUND Class A Class B Class C Service Class Class S Class I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
39. CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
40. TREASURY
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
41. TREASURY
PRIME CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
42. U.S.
GOVERNMENT
SECURITIES
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
42. MUNICIPAL
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
44. PRIME
MONEY MARKET .77% 1.52% 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
45. U.S.
TREASURY
SECURITIES
MONEY MARKET .77% 1.52% 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
46. MUNICIPAL
MONEY MARKET .72% NA 1.47% 1.02% NA .47%
- ------------------------------------------------------------------------------------------------------------------------------------
47. MICHIGAN
MUNICIPAL
MONEY MARKET .75% NA 1.50% 1.05% NA .50%
- ------------------------------------------------------------------------------------------------------------------------------------
48. OHIO
MUNICIPAL
MONEY MARKET .70% NA 1.45% 1.00% NA .45%
- ------------------------------------------------------------------------------------------------------------------------------------
49. TREASURY
PRIME MONEY
MARKET .77% NA 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
50. U.S.
GOVERNMENT
SECURITIES
MONEY MARKET .77% NA 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
51.
INSTITUTIONAL
PRIME MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
52. TREASURY
ONLY MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
53. GOVERNMENT
MONEY MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
54. TAX-
EXEMPT MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
96
<PAGE> 874
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 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 and Sub-Advisory Agreements were renewed by the Trust's
Board of Trustees at their quarterly meeting on August 19, 1999. The Advisory
and Sub-Advisory Agreements may be terminated 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.
Prior to the merger with the Funds, First Chicago NBD Investment
Management Company ("FCNIMCO") provided investment management services to the
Predecessors Funds of the Small Cap Value Fund, the Diversified Mid Cap Fund,
the Diversified International Fund, the Market Expansion Index Fund, the Bond
Fund, the Income Bond Fund, the Intermediate Bond Fund, the Short-Term Municipal
Bond Fund, the Tax-Free Bond Fund, the Michigan Municipal Bond Fund, the
Michigan Municipal Money Market Fund, and the Cash Management Funds. During a
portion of the year ended December 31, 1996, investment advisory services were
provided to the Small Cap Value Fund, the Diversified Mid Cap Fund, the
Diversified International Fund, the Market Expansion Index Fund, the Bond Fund,
the Income Bond Fund, the Intermediate Bond Fund, the Short-Term Municipal Bond
Fund, the Tax-Free Bond Fund, the Michigan Municipal Bond Fund, and the Michigan
Municipal Money Market Fund by NBD Bank.
Prior to the merger with the Funds, the fiscal year end for the
Predecessor Funds was December 31st. During the fiscal years ended December 31,
1998, 1997, and 1996, these Funds of the Trust paid the following investment
advisory fees to FCNIMCO and FCNIMCO voluntarily waived investment advisory fees
as follows.
97
<PAGE> 875
PREDECESSOR FUNDS' ADVISORY FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
1999(1) 1998 1997 1996
------- ---- ---- ----
FUND NET WAIVED NET WAIVED NET WAIVED NET WAIVED
- ---- --- ------ --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Value $2,003,921 0 $1,283,658 0 $ 349,224 *** $ 56,427 ***
Diversified Mid Cap $6,832,757 0 $5,355,678 0 $1,467,224 # 0
Diversified International $4,577,670 0 $3,752,409 0 $1,179,691 ## $ 26,973 ##
Market Expansion Index 0 $ 45,584 NA* NA* NA** NA**
Bond $5,674,695 0 $4,089,788 0 $1,092,756 # $ 49,503 #
Income Bond $ 827,079 0 $ 562,165 0 $ 265,891 # $ 16,303 #
Intermediate Bond $2,349,025 0 $1,890,923 0 $ 626,682 *** $ 49,186 ***
Short-Term Municipal Bond $ 144,978 $ 41,317 NA* NA* NA** NA**
Tax-Free Bond $2,358,313 0 $1,524,196 0 $ 531,933 ### $108,706 ###
Michigan Municipal Bond $ 686,184 $ 13,410 $ 228,576 $ 43,158 $ 66,088 # $ 11,150 #
Michigan Municipal Money Market $ 327,693 $ 36,792 $ 335,355 $ 44,602 $ 696,445 + $ 37,403 +
Cash Management Money Market $3,402,847 $907,915 $1,642,225 $279,533 $ 398,138 ++ $222,088 ++
Treasury Cash Management
Money Market $ 498,263 $136,100 $ 99,821 $ 33,327 NA** NA**
Treasury Prime Cash Management
Money Market $ 592,066 $207,054 $ 404,248 $105,789 $ 123,521 ++ $145,816 ++
U.S. Government Securities
Cash Management Money Market $2,465,211 $295,457 $1,369,324 $ 88,360 $ 325,009 ++ $297,097 ++
Municipal Cash Management
Money Market $ 804,693 $179,890 $ 107,285 $ 40,982 NA** NA**
</TABLE>
* As of the end of the fiscal year ended December 31, 1997, the Funds had
not commenced operations.
** As of the end of the fiscal year ended December 31, 1996, the Funds had
not commenced operations.
*** Fees for the period beginning September 21, 1996 to December 31, 1996.
# Fees for the period beginning September 23, 1996 to December 31, 1996.
## Fees for the period beginning August 24, 1996 to December 31, 1996.
### Fees for the period beginning September 14, 1996 to December 31, 1996.
+ Fees for the period beginning September 16, 1996 to December 31, 1996.
++ Fees for the period beginning July 13, 1996 to December 31, 1996.
(1) For the period beginning January 1, 1999 to March 22, 1999.
98
<PAGE> 876
For the period beginning January 1, 1996 and ending on the date specified below,
the Predecessor Funds paid FCNIMCO or NBD and FCNIMCO or NBD waived the
investment advisory fees indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR 1996
----------------
NBD FCNIMCO
--- -------
FUND NET WAIVED NET WAIVED END DATE
- ---- --- ------ --- ------ --------
<S> <C> <C> <C> <C> <C>
Small Cap Value NA NA $199,276 $147,469 September 21, 1996
Diversified Mid Cap $3,397,900 0 NA NA September 23, 1996
Diversified International $ 594,989 0 NA NA August 24, 1996
Market Expansion Index NA* NA* NA* NA* NA*
Bond $2,021,339 0 NA NA August 24, 1996
Income Bond NA NA $355,241 $183,139 September 23, 1996
Intermediate Bond $1,539,059 0 NA NA September 21, 1996
Short-Term Municipal Bond NA* NA* NA* NA* NA*
Tax-Free Bond NA NA $186,988 $273,829 September 14, 1996
Michigan Municipal Bond $ 196,723 $34,535 NA NA September 23, 1996
Michigan Municipal Money
Market $ 437,785 0 NA NA September 15, 1996
Cash Management Money
Market NA NA $311,040 $176,053 July 13, 1996
Treasury Cash Management
Money Market NA* NA* NA* NA* NA*
Treasury Prime Cash
Management Money Market NA NA $ 73,377 $102,644 July 13, 1996
U.S. Government Securities
Cash Management Money
Market NA NA $383,484 $139,491 July 13, 1996
Municipal Cash Management
Money Market NA* NA* NA* NA* NA*
</TABLE>
* As of the end of the fiscal year ended December 31, 1996, the Funds had
not commenced operations.
INDEPENDENCE INTERNATIONAL ASSOCIATES, INC.
Independence International Associates, Inc. ("INDEPENDENCE INTERNATIONAL")
served as investment Sub-Advisor to the International Equity Index Fund through
October 31, 1999 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 $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; and $ in sub-advisory fees from Banc One Investment Advisors for
the fiscal year ended June 30, 1999.
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. 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. For the fiscal year ended June 30, 1999,
Banc One Investment Advisors Corporation paid the Sub-Advisor $ in sub-advisory
fees.
99
<PAGE> 877
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment Company Institute v.
Camp that the federal statute commonly referred to as the Glass-Steagall Act
prohibits a national bank from operating a Fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "BOARD") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision: (a) forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"HOLDING COMPANY ACT") or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its Shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment 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 Balanced 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
100
<PAGE> 878
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, 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 investment 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 percentage of the
Trust's 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%.
101
<PAGE> 879
In the fiscal years ended June 30, 1999, 1998, and 1997, each of the Funds of
the Trust (except for the Funds identified below as having fiscal years
previously ending December 31st) that paid brokerage commissions and the amounts
paid for each year were as follows:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEAR ENDED JUNE 30,
--------------------------
FUND 1999 1998 1997
- ---- ---- ---- ----
<S> <C> <C> <C>
Equity Income $ 331,556 $ 395,450
Mid Cap Value $1,541,217 $1,570,859
Mid Cap Growth $2,455,346 $3,199,337
Equity Index $ 72,702 $ 162,178
Large Cap Value $ 722,191 $1,378,450
Balanced $ 154,837 $ 194,187
International Equity Index $ 514,660 $ 349,010
Large Cap Growth $2,935,851 $1,285,883
Small Cap Growth $ 180,460 $ 194,127
Diversified Equity $ 763,394 $1,005,409
Small Cap Value NA* NA*
Diversified Mid Cap NA* NA*
Diversified International NA* NA*
Market Expansion Index NA* NA*
</TABLE>
* Prior to the merger in March, 1999, the Fund has a fiscal year ending
December 31st.
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
FUND 1998 1997 1996
- ---- ---- ---- ----
<S> <C> <C> <C>
Small Cap Value $379,752 $280,426 $114,320
Diversified Mid Cap $803,740 $698,038 $621,056
Diversified International $288,664 $225,448 $358,776
Market Expansion Index $ 5,850 NA* NA*
</TABLE>
* As December 31, 1997 and 1998, the Fund had not commenced operations.
As of June 30, 1999, certain Funds owned securities of their regular broker
dealers (or parents) as shown below:
<TABLE>
<CAPTION>
FUND NAME OF BROKER-DEALER VALUE OF SECURITIES OWNED
- ---- --------------------- -------------------------
<S> <C> <C>
</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 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.
102
<PAGE> 880
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.
103
<PAGE> 881
The Trust paid fees for administrative services to The One Group Services
Company as Administrator for the fiscal years ended June 30, 1999, 1998, and
1997 as follows:
<TABLE>
<CAPTION>
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES -- NET
-------------------------------------------------
FISCAL YEAR ENDED
JUNE 30, 1999
THE ONE GROUP BANC ONE
SERVICE COMPANY INVESTMENT ADVISORS**
----------------------- -----------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market
Prime Money Market
Municipal Money Market
Ohio Municipal Money Market
Equity Income
Mid Cap Value
Mid Cap Growth
Equity Index
Large Cap Value
Balanced
International Equity Index
Large Cap Growth
Short-Term Bond
Intermediate Tax-Free Bond
Municipal Income
Ohio Municipal Bond
Government Bond
Ultra Short-Term Bond
Treasury Only Money Market
Government Money Market
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond
Kentucky Municipal Bond
W. Virginia Municipal Bond
Louisiana Municipal Bond
Diversified Equity
Small Cap Growth
High Yield Bond
Investor Growth
Investor Growth & Income
Investor Conservative Growth
Investor Balanced
Treasury & Agency
Small Cap Value
Diversified Mid Cap
Diversified International
Market Expansion Index
Bond
Income Bond
Intermediate Bond
Short-Term Municipal Bond
Tax-Free Bond
Michigan Municipal Bond
Michigan Municipal Money Market
Cash Management Money Market
Treasury Cash Management Money Market
Treasury Prime Cash Management Money Market
U.S. Government Securities Cash Management
Money Market
Municipal Cash Management Money Market
</TABLE>
* As of June 30, 1999, 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.
104
<PAGE> 882
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1998
THE ONE GROUP BANC ONE
SERVICE COMPANY 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
Equity Income $ 866,925 $ 0 $ 585,415 $ 0
Mid Cap Value $ 627,733 $ 0 $ 424,072 $ 0
Mid Cap Growth $ 856,657 $ 0 $ 578,193 $ 0
Equity Index $ 593,918 $ 631,314 $ 398,167 $ 0
Large Cap Value $ 743,765 $ 0 $ 502,444 $ 0
Balanced $ 93,135 $ 188,687 $ 62,825 $ 0
International Equity Index $ 495,338 $ 0 $ 334,504 $ 0
Large Cap Growth $1,589,738 $ 0 $1,070,862 $ 0
Short-Term Bond $ 582,384 $ 0 $ 393,556 $ 0
Intermediate Tax-Free Bond $ 476,747 $ 0 $ 322,115 $ 0
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 Bond $ 0 $ 334,196 $ 0 $ 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*
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
W. Virginia Municipal Bond $ 87,100 $ 24,557$ 58,836$0
Louisiana Municipal Bond $ 150,915 $ 0 $ 102,041 $ 0
Diversified Equity $ 591,870 $ 0 $ 399,405 $ 0
Small Cap Growth $ 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 Conservative Growth $ 0 $ 46,223 $ 0 $ 0
Investor Balanced $ 0 $ 129,257 $ 0 $ 0
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.
105
<PAGE> 883
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1997
THE ONE GROUP BANC ONE
SERVICE COMPANY INVESTMENT ADVISORS**
--------------- ---------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $4,041,160 $ 52,457 $ 0 $ 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
Equity Income $ 916,621 $ 0 $ 332,802 $ 0
Mid Cap Value $ 922,753 $ 0 $ 334,826 $ 0
Mid Cap Growth $1,007,999 $ 0 $ 365,770 $ 0
Equity Index $ 329,84 $ 574,004 $ 328,342 $ 0
Large Cap Value $1,056,104 $ 0 $ 383,222 $ 0
Balanced $ 94,269 $ 116,194 $ 76,370 $ 0
International Equity Index $ 662,008 $ 0 $ 240,084 $ 0
Large Cap Growth $1,775,503 $ 0 $ 644,453 $ 0
Short-Term 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 Bond $ 60,695 $ 95,720 $ 50,007 $ 0
Treasury Only Money Market $ 240,680 $ 0 $ 240,061 $ 0
Government Money Market $ 530,431 $ 0 $ 530,415 $ 0
Institutional Prime NA* NA* NA* NA*
Money Market
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
W. Virginia Municipal Bond $ 58,427 $ 10,580 $ 25,040 $ 0
Louisiana Municipal Bond $ 297,050 $ 0 $ 107,762 $ 0
Diversified Equity $ 531,250 $ 0 $ 192,876 $ 0
Small Cap Growth $ 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 Conservative Growth $ 0 $ 6,866 $ 0 $ 0
Investor Balanced $ 0 $ 31,220 $ 0 $ 0
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.
106
<PAGE> 884
Predecessor Funds by FCNIMCO and BISYS and, with respect to the Michigan
Municipal Money Market Fund for the period January 1, 1996 through September 16,
1996, NBD. These Funds paid fees for administrative services to FCNIMCO and
BISYS for the fiscal year ended December 31, 1998 as follows:
PREDECESSOR FUND -- ADMINISTRATION FEES*
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1998
FUND BISYS FCNIMCO
- ---- ----- -------
<S> <C> <C>
Small Cap Value $ 39,395 $ 390,017
Diversified Mid Cap $ 156,709 $1,551,480
Diversified International $ 78,747 $ 779,566
Market Expansion Index $ 1,366 $ 13,704
Bond $ 194,675 $1,933,336
Income Bond $ 28,474 $ 281,681
Intermediate Bond $ 81,371 $ 799,513
Short-Term Municipal Bond $ 6,375 $ 63,485
Tax-Free Bond $ 80,968 $ 803,400
Michigan Municipal Bond $ 23,985 $ 238,363
Michigan Municipal Money Market $ 16,724 $ 165,519
Cash Management Money Market $ 296,691 $2,936,381
Treasury Cash Management Money Market $ 43,660 $ 432,112
Treasury Prime Cash Management Money Market $ 55,000 $ 544,340
U.S. Government Securities Cash Management
Money Market $ 189,760 $1,878,075
Municipal Cash Management Money Market $ 67,765 $ 670,673
</TABLE>
* Fees for administration were not waived during the fiscal year ended
December 31, 1998.
Under the terms of an Administration Agreement dated as of April 12,
1996, FCNIMCO and BISYS were entitled jointly to a monthly administration fee at
an annual rate of .15% of each Fund's average daily net assets. For the fiscal
year ended December 31, 1997, the Predecessor Funds paid FCNIMCO as agent for
the co-administrators, the following administration fees:
107
<PAGE> 885
PREDECESSOR FUNDS -- ADMINISTRATION FEES*
FISCAL YEAR ENDED DECEMBER 31, 1997
FUND FCNIMCO
- ---- -------
Small Cap Value $ 275,070
Diversified Mid Cap $1,338,920
Diversified International $ 703,577
Market Expansion Index NA**
Bond $1,533,671
Income Bond $ 210,812
Intermediate Bond $ 709,096
Short-Term Municipal Bond NA**
Tax-Free Bond $ 571,573
Michigan Municipal Bond $ 101,900
Michigan Municipal Money Market $ 189,978
Cash Management Money Market $1,441,319
Treasury Cash Management Money Market $ 99,861
Treasury Prime Cash Management Money Market $ 382,527
U.S. Government Securities $1,093,263
Cash Management Money Market Municipal Cash Management $ 111,200
Money Market
* Fees for administration were not waived during the fiscal year ended
December 31, 1997.
** As of December 31, 1997, the Funds had not commenced operation.
108
<PAGE> 886
Under the terms of an Administration Agreement dated as of April 12,
1996, FCNIMCO and BISYS were entitled jointly to a monthly administration fee at
an annual rate of .15% of each Fund's average daily net assets. Beginning on the
dates indicated below and ending on December 31, 1996, the Predecessor Funds
paid FCNIMCO as agent for the co-administrators, the following administration
fees:
PREDECESSOR FUNDS -- ADMINISTRATION FEES*
FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FUND BEGINNING DATE FCNIMCO
- ---- -------------- -------
<S> <C> <C>
Small Cap Value September 21, 1996 $ 86,925
Diversified Mid Cap September 23, 1996 $366,806
Diversified International August 24, 1996 $226,250
Market Expansion Index NA** NA**
Bond August 24, 1996 $416,965
Income Bond September 23, 1996 $105,823
Intermediate Bond September 21, 1996 $ 34,354
Short-Term Municipal Bond NA** NA**
Tax-Free Bond September 14, 1996 $233,974
Michigan Municipal Bond September 23, 1996 $ 28,964
Michigan Municipal Money Market September 16, 1996 $ 66,924***
Cash Management Money Market July 13, 1996 $465,170
Treasury Cash Management
Money Market NA** NA**
Treasury Prime Cash Management
Money Market July 13, 1996 $202,003
U.S. Government Securities
Cash Management Money Market July 13, 1996 $466,617
Municipal Cash Management
Money Market NA** NA**
</TABLE>
* Fees for administration were not waived during the fiscal year ended
December 31, 1996.
** As of December 31, 1996, the Funds had not commenced operation.
*** Prior to September 16, 1996, NBD provided administrative services to
the Michigan Municipal Money Market Fund as a part of the previous
investment advisory agreement. No separate administration fees were
incurred.
For the period from January 1, 1996 through July 13, 1996, the predecessors to
the Pegasus Cash Management Fund, the Pegasus Treasury Prime Cash Management
Fund, and the Pegasus U.S. Government Securities Cash Management Fund paid
FCNIMCO administration fees of $363,320, $132,016 and $392,231, respectively.
Unless sooner terminated, the Administration Agreement between the
Trust and The One Group Services Company will continue in effect through
November 30, 2000. 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 may be terminated with respect to a particular Fund
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.
109
<PAGE> 887
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, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly owned subsidiary of the BISYS Group, 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, 2000 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 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.
110
<PAGE> 888
During the fiscal year ending June 30, 1999, 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:
<TABLE>
<CAPTION>
SERVICE
FUND DISTRIBUTOR CLASS A CLASS B CLASS C CLASS
- ---- ----------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market One Group Ser.
Prime Money Market One Group Ser.
Municipal Money Market One Group Ser.
Ohio Municipal Money Market One Group Ser.
Equity Income One Group Ser.
Mid Cap Value One Group Ser.
Mid Cap Growth One Group Ser.
Equity Index One Group Ser.
Large Cap Value One Group Ser.
Value One Group Ser.
International Equity Index One Group Ser.
Large Cap Growth One Group Ser.
Short-Term Bond One Group Ser.
Intermediate Tax-Free Bond One Group Ser.
Municipal Income One Group Ser.
Ohio Municipal Bond One Group Ser.
Government Bond One Group Ser.
Ultra Short-Term Bond One Group Ser.
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.
Tax-Exempt Money Market* One Group Ser.
Arizona Municipal Bond One Group Ser.
W. Virginia Municipal Bond One Group Ser.
Louisiana Municipal Bond One Group Ser.
Diversified Equity One Group Ser.
Small Cap Growth One Group Ser.
High Yield Bond One Group Ser.
Investor Growth One Group Ser.
Investor Growth & Income One Group Ser.
Investor Conservative Growth One Group Ser.
Investor Balanced One Group Ser.
Treasury & Agency One Group Ser.
Small Cap Value** One Group Ser.
Diversified Mid Cap** One Group Ser.
Diversified International** One Group Ser.
Market Expansion Index** One Group Ser.
Bond** One Group Ser.
Income Bond** One Group Ser.
Intermediate Bond** One Group Ser.
Short-Term Municipal Bond** One Group Ser.
Tax-Free Bond** One Group Ser.
Michigan Municipal Bond** One Group Ser.
Michigan Municipal Money Market** One Group Ser.
Cash Management Money Market*** One Group Ser.
Treasury Cash Management Money Market*** One Group Ser.
Treasury Prime Cash Management Money Market*** One Group Ser.
U.S. Government Securities Cash Management
Money Market*** One Group Ser.
Municipal Cash Management Money Market*** One Group Ser.
</TABLE>
* These Funds had not commenced operations as of June 30, 1999.
** For the period from March 22, 1999 to June 30, 1999.
*** For the period from March 29, 1999 to June 30, 1999.
111
<PAGE> 889
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 CDSC 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.
PREDECESSOR FUNDS' DISTRIBUTION AND SHAREHOLDER SERVICING PLANS
Prior to the merger with the Trust, the Predecessor Funds (other than
the predecessors to the Cash Management Funds) entered into servicing agreements
(the "SERVICE AGREEMENTS") with servicing agents (which could include the
Predecessor Fund's investment adviser and its affiliates) (collectively, the
"SERVICE AGENTS"). The Service Agreements provided that the Service Agents would
render shareholder administrative support services to their customers who were
the beneficial owners of the Predecessor Fund shares in consideration for such
Funds' payment of up to .25% (on an annualized basis) of the average daily net
asset value of the shares held by the Service Agents and, at the Predecessor
Fund's option, the Funds could reimburse the Service Agents' out-of-pocket
expenses (such fees and expenses being collectively referred to as the "SERVICE
PLAN"). The Predecessor Funds (other than the predecessors to the Cash
Management Funds) implemented the Service Plan with respect to Class A and Class
B Shares of the Predecessor Funds.
In addition, the Board of Trustees of the Predecessor Funds adopted a
plan under Rule 12b-1 under the 1940 Act (the "PEGASUS 12B-1 PLAN"). Pursuant to
the Pegasus 12b-1 Plan, the Funds other than the Cash Management Funds could pay
BISYS as distributor a fee of up to 0.75% of the average daily net asset value
attributable to Class B Shares and the Cash Management Funds could pay BISYS as
distributor a fee of up to 0.25% of the average daily net asset value
attributable to Service Shares. These fees were paid for advertising, marketing
and distributing such shares and for the provision of certain services to the
holders of such shares. Under the Pegasus 12b-1 Plan, BISYS was authorized to
make payments to certain financial institutions, securities dealers and other
financial industry professionals in respect of these services.
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<PAGE> 890
For the period beginning January 1, 1999 until the date the Predecessor
Funds merged with One Group Mutual Funds in March, the distribution fees paid by
the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SERVICE
SERVICES SERVICES 12b-1 PLAN FEES
FEES FEES FEES SERVICE
FUND CLASS A CLASS B CLASS C SHARES
- ---- ------- ------- ------- ------
<S> <C> <C> <C> <C>
Income Bond Fund
Intermediate Bond Fund
Small Cap Value Fund
Diversified Mid Cap Fund
Diversified International Fund
Market Expansion Index Fund
Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Michigan Municipal Bond
Michigan Municipal Money
Market Fund
Cash Management Money Market
Fund
Treasury Cash Management Money
Market Fund
Treasury Prime Cash Management
Money Market Fund
U.S. Government Securities Cash
Management Money Market Fund
Municipal Cash Management
Money Market Fund
</TABLE>
During the fiscal year ending December 31, 1998, the distribution fees
paid by the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SERVICE
SERVICES SERVICES 12b-1 PLAN FEES
FEES FEES FEES SERVICE
FUND CLASS A CLASS B CLASS C SHARES
- ---- ------- ------- ------- ------
<S> <C> <C> <C> <C>
Income Bond Fund $ 31,428 $ 1,505 $ 4,515 NA
Intermediate Bond Fund $212,255 $ 1,738 $ 5,214 NA
Small Cap Value Fund $ 72,458 $ 7,983 $ 23,950 NA
Diversified Mid Cap Fund $680,933 $ 14,688 $ 44,063 NA
Diversified International Fund $ 98,786 $ 5,653 $ 16,958 NA
Market Expansion Index Fund $ 9 NA $ 1 NA
Bond Fund $515,680 $ 15,036 $ 45,107 NA
Short-Term Municipal Bond Fund $ 225 $ 108 $ 324 NA
Tax-Free Bond Fund $ 99,279 $ 4,252 $ 12,756 NA
Michigan Municipal Bond $ 48,204 $ 3,291 $ 9,873 NA
Michigan Municipal Money
Market Fund $110,571 NA NA NA
Cash Management Money Market
Fund NA NA NA $2,930,146
Treasury Cash Management Money
Market Fund NA NA NA $ 749,800
Treasury Prime Cash Management
Money Market Fund NA NA NA $ 790,269
U.S. Government Securities Cash
Management Money Market Fund NA NA NA $1,139,266
Municipal Cash Management
Money Market Fund NA NA NA $ 154,695
</TABLE>
113
<PAGE> 891
CASH COMPENSATION TO SHAREHOLDER SERVICING AGENTS
The One Group Services Company compensates Shareholder Servicing Agents
who sell shares of the Funds. Compensation comes from sales charges, 12b-1 fees
and payments by The One Group Services Company from its own resources.
Occasionally, The One Group Services Company, at its own expense, also will
provide cash incentives which will be paid to select Shareholder Servicing
Agents. Those Shareholder Servicing Agents who may receive special incentives
and the amount of cash compensation that such Shareholder Servicing Agents
received for fiscal year ended June 30, 1999 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NAME OF SHAREHOLDER SERVICING AGENT AMOUNT OF CASH COMPENSATION
- -----------------------------------------------------------------------------------------
<S> <C>
Banc One Securities Corporation $
- -----------------------------------------------------------------------------------------
The Advisors Group $
- -----------------------------------------------------------------------------------------
United Planners Financial Services of $
America, LLC
- -----------------------------------------------------------------------------------------
The Legend Group $
- -----------------------------------------------------------------------------------------
Rosewood Retirement Advisory Services, LLC $
- -----------------------------------------------------------------------------------------
</TABLE>
The One Group Services Company pays additional compensation to Shareholder
Servicing Agents for sales of over $1 million dollars of Class A shares.
Shareholder Servicing Agents receive 1.00% of the purchase price of Class A
shares for sales of $1 million to $5 million, and 0.50% on amounts over $5
million.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Cash and securities owned by the Funds of the Trust are held by State Street
Bank and Trust Company, P.O. Box 8528, Boston, Massachusetts 02266-8528, ("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.
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 Funds 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.
114
<PAGE> 892
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.
THE SUBCUSTODIAN
Bank One Trust Company, N.A. (the "Subcustodian") serves as Subcustodian in
connection with the Trust's securities lending activities for domestic
securities, pursuant to a Subcustodian Agreement between the Trust, State Street
and the Subcustodian and a Securities Lending Agreement between the Trust, Banc
One Investment Advisors, and the Subcustodian. The Subcustodian serves as
Subcustodian in connection with the Trust's securities lending activities for
international securities, pursuant to a Subcustodian Agreement between the
Trust, State Street and the Subcustodian and a Securities Lending Agreement
between the Trust, Banc One Investment Advisors, and the Subcustodian. The
Subcustodian is an indirect subsidiary of Bank One Corporation and an affiliate
of Banc One Investment Advisors. The Subcustodian is entitled to a fee from the
Trust under the agreements, which is calculated on an annual basis and accrued
daily, equal to:
Domestic Fee
o .05% of the value of collateral received from the borrower for
each securities loan of U.S. Government and Agency Securities;
and
o .10% of the value of collateral received from the borrower for
each loan of equities and corporate bonds.
International Fee
o .15% of the value received from the borrower for each loan of
foreign securities.
EXPERTS
The financial statements for the fiscal year ended June 30, 1999 have been
audited by __________________________, 100 East Broad Street, Columbus, Ohio
43215, independent public accountants to the Trust, as indicated in their
reports with respect thereto, and will be incorporated herein by reference
pursuant to a filing made pursuant to Rule 485b, in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
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.
115
<PAGE> 893
The financial statements for the Predecessor Funds for the period ended December
31, 1998, were audited by the predecessor auditors for such Funds.
The Financial Statements for the periods or years ended December 31, 1995 and
prior with respect to the predecessors of the Small Cap Value Fund, the Income
Bond Fund, and the Tax-Free Bond Fund were audited by the predecessor auditors
for such Funds.
The financial statements for the predecessors of the Cash Management Money
Market Fund, Treasury Prime Cash Management Money Market Fund, and the U.S.
Government Securities Cash Management Money Market Fund for the periods or years
prior to December 31, 1995 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 has rendered legal services to Bank One Corporation and its
subsidiary banks.
116
<PAGE> 894
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 54 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 Equity Income Fund;
6. The Mid Cap Value Fund;
7. The Mid Cap Growth Fund;
8. The Diversified Equity Fund;
9. The Small Cap Growth Fund;
10. The Large Cap Value Fund;
11. The Large Cap Growth Fund;
12. The International Equity Index Fund;
13. The Equity Index Fund;
14. The Balanced Fund;
15. The Technology Fund;
16. The Real Estate Fund;
17. The Income Bond Fund;
18. The Short-Term Bond Fund;
19. The Intermediate Bond Fund;
20. The Government Bond Fund;
21. The Ultra Short-Term Bond Fund;
22. The High Yield Bond Fund;
23. The Investor Growth Fund;
24. The Investor Growth & 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 West Virginia Municipal Bond Fund;
31. The Kentucky Municipal Bond Fund;
32. The Louisiana Municipal Bond Fund;
33. The Arizona Municipal Bond Fund;
34. The Treasury Only Money Market Fund;
35. The Government Money Market Fund;
36. The Tax-Exempt Money Market Fund;
37. The Institutional Prime Money Market Fund;
38. The Treasury & Agency Fund;
39. The Small Cap Value Fund;
40. The Diversified Mid Cap Fund;
41. The Diversified International Fund;
42. The Market Expansion Index Fund;
43. The Bond Fund;
44. The Short-Term Municipal Bond Fund;
45. The Tax-Free Bond Fund;
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<PAGE> 895
46. The Michigan Municipal Bond Fund;
47. The Michigan Municipal Money Market Fund;
48. The Cash Management Money Market Fund;
49. The Treasury Cash Management Money Market Fund;
50. The Treasury Prime Cash Management Money Market Fund;
51. The U.S. Government Securities Cash Management Money Market Fund;
52. The Municipal Cash Management Money Market Fund;
53. The U.S. Government Securities Money Market Fund;
54. The Treasury Prime Money Market Fund
Generally, the Funds of the Trust (other than the Institutional Money Market
Funds, the Money Market Funds and the Cash Management Funds) offer shares in
four separate classes: Class I Shares, Class A Shares, Class B and Class C
Shares. The Institutional Money Market Funds (except for the Cash Management
Funds) may offer Class S Shares. Certain of the Money Market Funds offer Service
Class Shares. The classes of shares currently offered by the Funds can be
found on under the topic "The Trust" at the beginning of this Statement of
Additional Information. In addition, please read the relevant Prospectuses for
the 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.
1. Class C Shares are currently not available for purchase in all Funds of
the Trust.
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, Service Class Shares and Class S
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.
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<PAGE> 896
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).
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 One Group Mutual
Funds. Copies of the Annual Report 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 Fund, the U.S. Government Securities Money Market Fund, and the
Treasury Prime Money Market Fund because those Funds had not commenced
operations as of June 30, 1999.
119
<PAGE> 897
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
INCEPTION 7-DAY YIELD
CLASS I SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................09/09/85
Prime Money Market........................................................08/01/85
Municipal Money Market....................................................06/04/87
Ohio Municipal Money Market(1)............................................06/09/93
Michigan Municipal Money Market...........................................03/30/96
Treasury Only Money Market................................................04/16/93
Government Money Market...................................................06/14/93
Cash Management Money Market..............................................07/30/92
U.S Government Securities Cash Management Money Market....................06/02/92
Treasury Cash Management Money Market.....................................09/12/97
Treasury Prime Cash Management Money Market...............................03/22/95
Municipal Cash Management Money Market(1).................................08/18/97
Institutional Prime Money Market
<CAPTION>
INCEPTION 7-DAY YIELD
CLASS A SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................02/18/92
Prime Money Market........................................................02/18/92
Municipal Money Market....................................................02/18/92
Ohio Municipal Money Market(1)............................................01/26/93
Michigan Municipal Money Market(1)........................................01/23/91
Cash Management Money Market..............................................01/17/95
U.S Government Securities Cash Management Money Market....................01/17/95
Treasury Cash Management Money Market.....................................09/12/97
Treasury Prime Cash Management Money Market...............................03/22/95
Municipal Cash Management Money Market(1).................................08/18/97
INCEPTION 7-DAY YIELD
CLASS B SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................11/01/96
Prime Money Market........................................................11/01/96
</TABLE>
(1) A portion of the income may be subject to alternative minimum tax.
The tax equivalent yields for the classes of the Municipal Money Market, Ohio
Municipal Money Market, Michigan Municipal Money Market, Municipal Cash
Management 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, the Treasury Prime Money Market
Fund, and the U.S. Government Securities Money Market Fund because they had not
commenced operations as of June 30, 1999. The tax equivalent effective yield for
the classes of the Municipal Money Market Fund, Ohio Municipal Money Market
Fund, the Michigan Money Market Fund, Municipal Cash Management Money Market 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.
120
<PAGE> 898
TAX-EQUIVALENT YIELD
<TABLE>
<CAPTION>
7 DAY
CLASS I SHARES YIELD 28% TAX 39.6% TAX
- -------------- ----- ------- ---------
<S> <C> <C> <C>
Municipal Money Market .....................................
Ohio Municipal Money Market.................................
Michigan Municipal Money Market*............................
Municipal Cash Management Money Market*.....................
7 DAY
CLASS A SHARES YIELD 28% TAX 39.6% TAX
- -------------- ----- ------- ---------
Municipal Money Market......................................
Ohio Municipal Money Market.................................
Michigan Municipal Money Market*............................
Municipal Cash Management Money Market*.....................
</TABLE>
* Prior to the merger with the Fund, the Predecessor Fund had a fiscal
year end of 12/31/98.
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%.
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
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<PAGE> 899
over the applicable period that would equate the initial amount invested to the
ending redeemable value of the investment. The cumulative return is calculated
as the total dollar increase or decrease in the value of an account assuming
reinvestment of all distributions divided by the original initial investment.
The average annual return for a particular class of a Fund is computed by
determining the average annual compounded rate of return over the applicable
period that would equate the initial amount invested to the ending redeemable
value of the investment. The ending redeemable value includes dividends and
capital gain distributions reinvested at net asset value. The resulting
percentages indicated the positive or negative investment results that an
investor would have experienced from changes in share price and reinvestment of
dividends and capital gains distributions.
Performance information showing a Fund's and/or particular Class's distribution
rate may be presented from time to time in advertising and sales literature
regarding the Bond Funds and Equity Funds. The distribution rate is calculated
as follows:
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, 1999 (calculated as described
above) is as follows:
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<PAGE> 900
CLASS I SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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>
Short-Term Bond 09/04/90
Intermediate Tax-Free(2) 09/04/90
Ohio Municipal Bond(2) 07/02/91
Municipal Income(2) 02/09/93
Government Bond 02/08/93
Ultra Short-Term Bond 02/02/93
Kentucky Municipal Bond(2) 03/12/93
Louisiana Municipal Bond(2) 12/29/89
West Virginia Municipal Bond(1),(2) 12/31/83
Arizona Municipal Bond(2) 11/30/79
Treasury & Agency(1) 04/30/88
Income Bond(4) 03/05/93
Intermediate Bond(5) 12/31/83
Bond(5) 12/31/83
Short-Term Municipal Bond(5) 05/04/98
Tax-Free Bond(6) 03/01/88
Michigan Municipal Bond(2) 02/01/93
</TABLE>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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>
Mid Cap Value 03/02/89
Equity Income 07/02/87
Equity Index 07/02/91
Large Cap Value 03/01/91
Mid Cap Growth 03/02/89
International Equity Index(3) 10/28/92
Balanced 04/05/93
Large Cap Growth 02/28/92
Small Cap Growth 07/01/91
Diversified Equity 12/29/89
Small Cap Value(4)(5) 06/30/72
Diversified Mid Cap(5) 12/31/83
Diversified International(3)(5) 09/30/86
Market Expansion Index(5) 07/31/98
</TABLE>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
<TABLE>
<CAPTION>
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 12.73% - - - 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>
125
<PAGE> 901
CLASS A SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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>
Short-Term Bond 02/18/92
With Sales Charge
Intermediate Tax-Free(2) 02/18/92
With Sales Charge
Ohio Municipal Bond(2) 02/18/92
With Sales Charge
Municipal Income(2) 02/23/93
With Sales Charge
Government Bond 03/05/93
With Sales Charge
Ultra Short-Term Bond 03/10/93
With Sales Charge
Kentucky Municipal Bond(2) 01/20/95
With Sales Charge
Louisiana Municipal Bond(2) 12/29/89
With Sales Charge
West Virginia Municipal Bond(1,2) 01/21/97
With Sales Charge
Arizona Municipal Bond(1,2) 01/21/97
With Sales Charge
Treasury & Agency(1) 01/21/97
With Sales Charge
Bond(5) 12/31/83
With Sales Charge
Income Bond(4) 03/05/93
With Sales Charge
Intermediate Bond(5) 12/31/83
With Sales Charge
Short-Term Municipal Bond(5) 05/04/98
With Sales Charge
Tax-Free Bond(6) 03/01/88
With Sales Charge
Michigan Municipal Bond(2) 02/01/93
With Sales Charge
High Yield Bond
With Sales Charge 11/13/98
</TABLE>
126
<PAGE> 902
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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>
Mid Cap Value 02/18/92
With Sales Charge
Equity Income 02/18/92
With Sales Charge
Equity Index 02/18/92
With Sales Charge
Large Cap Value 02/18/92
With Sales Charge
Mid Cap Growth 02/18/92
With Sales Charge
International Equity Index(3) 04/23/93
With Sales Charge
Balanced 04/02/93
With Sales Charge
Large Cap Growth 02/22/94
With Sales Charge
Small Cap Growth 07/01/91
With Sales Charge
Diversified Equity 12/29/89
With Sales Charge
Small Cap Value(4)(5) 06/30/72
With Sales Charge
Diversified Mid Cap(5) 12/31/83
With Sales Charge
Diversified International 04/30/86
With Sales Charge
Market Expansion Index 07/31/98
With Sales Charge
</TABLE>
127
<PAGE> 903
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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
With Sales Charge
Investor Balanced 12/10/96
With Sales Charge
Investor Growth & Income 12/10/96
With Sales Charge
Investor Growth 12/10/96
With Sales Charge
</TABLE>
CLASS C SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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
With Sales Charge
Intermediate Bond
with Sales Charge Bond
with Sales Charge
Government Bond
with Sales Charge
High Yield Bond
with Sales Charge
</TABLE>
128
<PAGE> 904
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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>
Equity Income 11/04/97
With Sales Charge
Equity Index 11/04/97
With Sales Charge
Mid Cap Growth 11/04/97
With Sales Charge
International Equity
Index(3) 11/04/97
With Sales Charge
Large Cap Growth 11/04/97
With Sales Charge
Small Cap Growth 11/04/97
With Sales Charge
Diversified Equity 11/04/97
With Sales Charge
</TABLE>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
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
With Sales Charge
Investor Balanced 07/01/97
With Sales Charge
Investor Growth & Income 07/01/97
With Sales Charge
Investor Growth 07/01/97
With Sales Charge
</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 for the
Arizona Municipal Bond, Fund and 4/30/88 for the Treasury & Agency
Fund. Prior to the Mutual Funds' commencement of 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.
(4) Prior to September 21, 1996, the predecessor of the Small Cap Value
Fund and the Income Bond Fund had no operating history. Except as noted
below, performance for periods prior to such date is represented by the
performance of Prairie Special Opportunity and Prairie Intermediate
Bond Funds, respectively. On September 21, 1996, the assets and
liabilities of these Prairie Funds were
129
<PAGE> 905
transferred to the predecessors of the Small Cap Value Fund and the
Income Bond Fund.
(5) Performance of the predecessor to the Small Cap Value Fund for periods
prior to January 27, 1995 is represented by performance of a common
trust fund managed by First National Bank of Chicago before the
effective date of the registration statement of the Fund. Performance
of the predecessor to the Diversified Mid Cap Fund (6/1/91), the
Diversified International Fund (12/3/94), the Intermediate Bond Fund
(6/1/91), the Bond Fund (6/1/91), and Short-Term Municipal Bond Fund
(5/04/98) for periods to the dates shown here (inception of the Funds
under 1940 Act) is represented by performance of certain common trust
funds managed by NBD before the effective date of the registration
statement of these Funds. The common trust funds were not registered
under the 1940 Act and were not subject to certain restrictions that
are imposed by the 1940 Act and Sub-Chapter M of the Code. If the
common trust funds had been registered under the 1940 Act, performance
may have been adversely affected. The common trust funds did not charge
any expenses. Performance of the common trust funds (other than the
common trust fund that is the predecessor to the Diversified
International Fund) has been restated to reflect the maximum operating
expenses charged (absent waivers and expense reimbursements) by the
predecessor Prairie Fund upon its inception on January 27, 1995 in the
case of the Small Cap Value Fund or by the other Funds upon their
inception, as the case may be. Performance of the common trust fund
that is the predecessor to the Diversified International Fund has been
restated to reflect actual operating expenses charged after waivers and
expense reimbursements.
(6) Performance for periods prior to September 14, 1996 is represented by
the performance of the Prairie Municipal Bond Fund. On such date, the
assets and liabilities of the Prairie Municipal Bond Fund were
transferred to the predecessor of the Tax-Free Bond Fund.
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 Investment 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 materially identical 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 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
130
<PAGE> 906
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, including those identified in the Prospectuses, 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 BALANCED 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
131
<PAGE> 907
guarantees offered by leading banks and thrifts as monitored by Bank
Rate Monitor, and those of corporate bond and government security price
indices of various durations. Comparative information on the Consumer
Price Index may also be included.
The Bond Funds, the Funds of Funds and the Balanced 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 Balanced 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.
132
<PAGE> 908
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. 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.
133
<PAGE> 909
As of August 6, 1999, Bank One Corporation, One First National Plaza, Chicago,
Illinois 60670 (a Delaware 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
FUND OWNERSHIP
- ---- ---------
<S> <C>
Large Cap Growth Fund 86.19%
Mid Cap Value Fund 80.18%
Mid Cap Growth Fund 70.99%
Income Bond Fund 86.51%
Intermediate Tax-Free Bond Fund 97.20%
Prime Money Market Fund 50.88%
U.S. Treasury Securities Money Market Fund 19.02%
Municipal Money Market Fund 78.08%
Equity Income Fund 92.58%
Equity Index Fund 85.31%
Large Cap Value Fund 77.86%
Ohio Municipal Bond Fund 94.78%
Short-Term Bond Fund 88.34%
International Equity Index Fund 87.09%
Balanced Fund 71.81%
Ohio Municipal Money Market Fund 55.33%
Municipal Income 94.99%
Kentucky Municipal Bond Fund 93.43%
Government Bond Fund 83.81%
Ultra Short-Term Bond Fund 76.12%
Louisiana Municipal Bond Fund 86.00%
Diversified Equity Fund 77.70%
Small Cap Growth Fund 81.17%
Intermediate Bond Fund 91.06%
Arizona Municipal Bond Fund 95.55%
West Virginia Municipal Bond Fund 99.28%
Investor Growth Fund 52.72%
Investor Growth & Income Fund 46.76%
Investor Balanced Fund 53.50%
Investor Conservative Growth Fund 60.93%
Treasury Only Money Market Fund 15.78%
Government Money Market Fund 16.69%
Treasury & Agency Fund 97.15%
High Yield Bond Fund 52.67%
Bond Fund 78.20%
Cash Management Money Market Fund 54.62%
Diversified Mid Cap Fund 80.87%
Diversified International Fund 90.01%
Institutional Prime Money Market Fund 40.13%
Market Expansion Index Fund 96.60%
Michigan Municipal Bond Fund 99.66%
Michigan Municipal Money Market Fund 67.84%
Small Cap Value Fund 92.10%
Short-Term Municipal Bond Fund 99.46%
Tax-Free Bond Fund 98.05%
Treasury Cash Management Money Market Fund 4.38%
Treasury Prime Cash Management Money Market Fund 2.16%
US Government Securities Cash Management Money Market Fund 1.66%
Municipal Cash Management Money Market Fund 76.31%
</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 Government
Money Market Fund, the Treasury Only Money Market Fund, the U.S. Treasury
Securities Money Market Fund, the Treasury Cash Management Money Market Fund,
the Treasury Prime Cash Management Money Market Fund, and the U.S. Government
Securities Cash Management Money Market Fund) under the Investment Company
Act of 1940.
In addition, as of August 6, 1999, 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:
134
<PAGE> 910
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<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 Bond Fund 26.39% Record
For Thomas A Brand & Rev Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 33.33% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Arizona Municipal Bond Fund 99.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Balanced Fund 90.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation Balanced Fund 31.64% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Bond Fund 79.00% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Cash Management Money Market 38.04% Record &
9000 Haggerty Road Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Cash Management Money Market 37.69% Record &
9000 Haggerty Road Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Cash Management Money Market 69.40% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo Diversified Equity Fund 90.43% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
<PAGE> 911
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Diversified Equity Fund
BOIA - One Group Operations Class I 79.93% Record
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Services Co Diversified International 97.11% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class C
Strafe & Co. Diversified International 90.97% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
The One Group Services Co Diversified Mid Cap Fund 79.69% Record &
3435 Stelzer Road Class C Beneficial
Columbus OH 43219-6004
Strafe & Co. Diversified Mid Cap Fund 82.60% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co Equity Income Fund 94.73% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo Equity Index Fund 58.68% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 93.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Stzte Street Bank & Trust Co. Mid Cap Value Fund 46.55% Record &
Cust for the IRA of Yvonne H. Clarke Class C Beneficial
33 Jordan Rd.
Hastings HDSN, NY 10706-3919
Strafe & Co Mid Cap Value Fund 83.56% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
<PAGE> 912
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp FBO Mid Cap Growth Fund 90.00% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Mid Cap Growth Fund 81.00% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co Income Bond Fund 88.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co Intermediate Tax-Free Fund 99.38% Record
BOIA _ One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Institutional Prime Money 48.14% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Bank One Texas NA Institutional Prime Money 27.65% Record
1717 Main St. Market Fund
Dallas, TX 75201-4605
Pershing As Agent - Omnibus Account Prime Money Market Fund 39.67% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Strafe & Co Prime Money Market Fund 75.53% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.46% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
</TABLE>
<PAGE> 913
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent - Omnibus Account US Treasury Securities Money 29.47% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc US Treasury Securities Money 27.82% Record
Fbo Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
Donaldson Lufkin Jenrette US Treasury Securities Money 61.67% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co (N) US Treasury Securities Money 75.15% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent-Omnibus Account US Treasury Securities Money 50.46% Record
For Exclusive Benefit of Market Fund Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
The One Group Services Company US Treasury Securities Money 48.10% Record &
3435 Stelzer Road Market Fund Service Class Beneficial
Columbus, OH 43219-6004
Pershing As Agent - Omnibus Account Municipal Money Market Fund 48.87% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Strafe & Co Municipal Money Market Fund 96.72% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Pershing As Agent-Omnibus Account Municipal Money Market Fund 96.00% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
</TABLE>
<PAGE> 914
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Equity Income Fund 94.73% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo Equity Index Fund 58.68% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 93.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co Large Cap Growth Fund 90.12% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Donaldson Lufkin Jenrette Large Cap Value Fund 63.86% Record
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co Large Cap Value Fund 80.15% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Ohio Municipal Bond Fund 90.15% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. International Equity Index 88.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Short-Term Fund 90.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 915
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Louisiana Municipal Bond Fund 96.69% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Small Cap Growth Fund 80.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Small Cap Value Fund 44.76% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Small Cap Value Fund 31.69% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Small Cap Value Fund 93.45% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Tax-Free Bond Fund 99.61% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Treasury & Agency Fund 99.84% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Bank NA Treasury Cash Management 42.60% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
First National Bank of Chicago Treasury Cash Management 75.19% Record
Corporate Trust Administration Money Market Fund
1 F&B Plaza, Ste. 0126 Class I
Chicago, IL 60670
</TABLE>
<PAGE> 916
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Treasury Only Money Market 69.64% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Treasury Prime Cash 37.38% Record &
9000 Haggerty Rd Ste MI1-8217 Management Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
First National Bank of Chicago Treasury Prime Cash 42.04% Record
Corporate Trust Administration Management Money Market Fund
One N State St, 9th Fl Class I
Chicago, IL 60602-3300
Bank One US Government Securities 43.55% Record &
9000 Haggerty Rd Ste MI1-8217 Cash Management Money Market Beneficial
Belleville, MI 48111-1632 Fund
Class A
First National Bank of Chicago US Government Securities 73.10% Record
Corporate Trust Administration Cash Management Money Market
One N State St, 9th Fl Fund
Chicago, IL 60602-3300 Class I
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 98.83% Record
For Exclusive Benefit of Fund
One Group Customer Accounts Class A
1 Pershing Plaza
Jersey City, NJ 07399-0001
Strafe & Co. Ohio Municipal Money Market 97.08% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Municipal Income Fund 37.21% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 57.15% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Municipal Income Fund 98.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 917
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co.
BOIA - One Group Operations Kentucky Municipal Bond Fund 94.05% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. West Virginia Municipal Bond 99.12% Record
BOIA - One Group Operations Fund Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Government Bond Fund 54.00% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government Bond Fund 34.88% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Government Bond Fund 85.46% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Ultra Short Term Bond Fund 85.77% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Intermediate Bond Fund 40.20% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 76.04% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 93.13% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 918
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Investor Growth Fund Class I 68.99% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Growth & Income Fund 60.02% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
First Chicago NBD TTEE Investor Growth & Income Fund 28.93% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
Strafe & Co. Investor Balanced Fund 66.89% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Conservative Growth 84.89% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Government Money Market Fund 71.94% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO High Yield Bond Fund Class C 82.77% Record &
The One Investment Solution Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
Strafe & Co. High Yield Bond Fund 52.88% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co Market Expansion Index Fund 100.00% Record
BOIA-One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Michigan Municipal Bond Fund 99.99% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 919
25% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
NBD Michigan Michigan Municipal Money 31.73% Record &
9000 Haggerty Road Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Michigan Municipal Money 87.53% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
NBD Bank Municipal Cash Management 87.41% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Municipal Cash Management 100.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Short-Term Municipal Bond 50.61% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Strafe & Co. Short-Term Municipal Bond 99.92% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
AS A RESULT, THE AFOREMENTIONED PERSONS MAY BE DEEMED TO BE "CONTROLLING
PERSONS" OF THE CLASS OF SHARES OF THE FUND IN WHICH THEY OWN SUCH SHARES UNDER
THE 1940 ACT.
<PAGE> 920
THE TABLE BELOW INDICATES RECORD AND BENEFICIAL OWNERS OF OVER 5% OF ANY CLASS
OF SHARES OF ANY FUND OF THE TRUST.
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<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 Bond Fund 26.39% Record
For Thomas A Brand & Rev Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 11.36% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 10.93% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Gust Trust Under Agreement 1/17 Arizona Municipal Bond Fund 9.92% Record
Devens Gust & Mary Elizabeth Gust Class A
Co-Trustees
P.O. Box 25
Mule Creek, NM 88051-0025
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 7.97% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 6.37% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 5.23% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 33.33% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 17.01% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 11.67% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 921
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Carolyn S Ward Arizona Municipal Bond Fund 11.55% Record &
James D Ward JT TEN Class B Beneficial
825 W Annandale
Tucson, AZ 85737-6923
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 7.59% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 7.44% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Arizona Municipal Bond Fund 99.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Balanced Fund 7.17% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Balanced Fund 90.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation Balanced Fund 31.64% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Bond Fund 10.49% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co NA TTEE Bond Fund 6.91% Record
Market Square P/S Plan Class A
859 Willard Street MS B-3-B
Quincy, MA 02169-7428
Bank One Trust Co NA TTEE Bond Fund 6.38% Record
Elco Textron Inc Class A
859 Willard St MSE2C
Quincy, MA 02169-7428
</TABLE>
<PAGE> 922
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Kemper Service Co Bond Fund 17.33% Record
FBO Participating Kemflex Plans Class C
811 Main St
Kansas City, MO 64105-2005
Donaldson, Lufkin Jenrette Bond Fund 13.57% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO #H6A-776467 Bond Fund 12.83% Record
Margaret A Huddleston Class C
1110 21st Street
Portsmouth, OH 45662-2812
Donaldson, Lufkin Jenrette Bond Fund 9.57% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Sonia Charles Bond Fund 7.91% Record &
11523 West Briarwood Drive Class C Beneficial
Lakewood, CO 80226-3711
NFSC FEBO #H6A-778397 Bond Fund 7.06% Record
Lisa Huddleston Class C
1110 21st Street
Portsmouth, OH 45662-2812
Northwoodside Inc Bond Fund 5.38% Record
23464 Waynes Way Class C
Golden, CO 80401-9155
Strafe & Co. Bond Fund 79.00% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Henry Ford Investment Mgmt Bond Fund 6.46% Beneficial
100 E. Broad Street Class I
Columbus OH 43215-3607
Bank One Cash Management Money Market 38.04% Record &
9000 Haggerty Road Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Cash Management Money Market 37.69% Record &
9000 Haggerty Road Fund Beneficial
Belleville, MI 48111-1632 Class A
</TABLE>
<PAGE> 923
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First National Bank of Chicago Cash Management Money Market 13.63% Record &
Commercial Products Fund Beneficial
120 S Lasalle St Ste. 1626 Class A
Chicago, IL 60603-3406
Bank One Cash Management Money Market 9.32% Record &
9000 Haggerty Road Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Cash Management Money Market 69.40% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
First National Bank of Chicago Cash Management Money Market 18.48% Record
Corporate Trust Administration Fund
Cash Sweep Dept Class I
One N State St, 9th Fl
Chicago, IL 60602-3300
Banc One Securities Corp Fbo Diversified Equity Fund 11.98% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co.
BOIA - One Group Operations Diversified Equity Fund 7.30% Record
1111 Polaris Parkway Class A
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo Diversified Equity Fund 90.43% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Diversified Equity Fund
BOIA - One Group Operations Class I 79.93% Record
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co NA TTEE Diversified Equity Fund
First Chicago NBD Svgs & Invsmt Plan Class I 6.44% Record
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
</TABLE>
<PAGE> 924
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Diversified International 10.32% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class A
PO Box 710211
Columbus OH 43271-0211
The One Group Services Co Diversified International 97.11% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class C
Strafe & Co. Diversified International 90.97% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
NBD Bancorp Ret Plan Diversified International 7.94% Beneficial
100 E. Broad Street Fund
Columbus OH 43215-3607 Class I
The One Group Investor Growth & Income Fund Diversified International 5.48% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class I
Bank One Trust Co NA TTEE Diversified Mid Cap Fund 8.61% Record
American Axle & Manufacturing Inc Class A
Personal S/P Hourly Rate Association
900 Tower Dr
Troy, MI 48098-2810
Consolidated Natural Gas Diversified Mid Cap 7.70% Record
Attn: Latoya Young Class A
135 Santili Highway
AIM # 026-0027
Everett, MA 02149-1906
The One Group Services Co Diversified Mid Cap Fund 79.69% Record &
3435 Stelzer Road Class C Beneficial
Columbus OH 43219-6004
State Street Bank & Trust Co. Diversified Mid Cap Fund 17.97% Record
Cust for the IRA of Class C
L. Rita Kincaid
561 Westbury Woods Ct.
Westerville, OH 43081-7705
Strafe & Co. Diversified Mid Cap Fund 82.60% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 925
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First Chicago NBD TTEE Diversified Mid Cap Fund 10.81% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
NBD Bancorp Ret Plan Diversified Mid Cap Fund 7.94% Beneficial
100 E. Broad Street Class I
Columbus OH 43215-3607
Donaldson Lufkin Jenrette Equity Income Fund 15.26% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
UMB Bank Cust Fbo Equity Income Fund 8.08% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
Vista CA 92083-7952
Donaldson Lufkin Jenrette Equity Income Fund 6.56% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO # ALT-007870 Equity Income Fund 6.46% Record
Ragsdale Investments Limited Par Class C
5644 N Homestead Ln.
Scottsdale, AZ 85253-5013
Everen Securities, Inc. Equity Income Fund 6.29% Record
A/C 2266-9058 Class C
Clifford J Cutler PSP & Trust
111 East Kilbourn Ave.
Milwaukee, WI 53202-6611
Lillian M Tepas TTEE Equity Income Fund 6.21% Record
Under Declaration of TST Class C
510 Princeton Greens Ct.
Sun City Ctr, FL 33573-7024
Strafe & Co Equity Income Fund 94.73% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo Equity Index Fund 20.79% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
<PAGE> 926
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp Fbo Equity Index Fund 58.68% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 93.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 14.07% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Cons Power Union Welfare Benefit Equity Index Fund 8.15% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co Mid Cap Value Fund 5.30% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
BISYS Brokerage Services Inc Mid Cap Value Fund 6.09% Record
FBO Rapistan Demag Class A
PO Box 4054
Concord, CA 94524-4054
Stzte Street Bank & Trust Co. Mid Cap Value Fund 46.55% Record &
Cust for the IRA of Yvonne H. Clarke Class C Beneficial
33 Jordan Rd.
Hastings HDSN, NY 10706-3919
Donaldson Lufkin Jenrette Mid Cap Value Fund 23.60% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Mid Cap Value Fund 18.63% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Mid Cap Value Fund 10.36% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
</TABLE>
<PAGE> 927
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Mid Cap Value Fund 83.56% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
The One Group Investor Mid Cap Value Fund 7.38% Record &
Growth & Income Fund Class I Beneficial
The One Group Services Co.
3435 Stelzer Rd.
Columbus, OH 43219-6004
Banc One Corporation Mid Cap Value Fund 9.60% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Emp Ret Plan of NBD Bancorp Mid Cap Value Fund 7.29% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp FBO Mid Cap Growth Fund 20.89% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville, OH 43081-4903
Banc One Securities Corp FBO Mid Cap Growth Fund 90.00% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Mid Cap Growth Fund 81.00% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Corporation Mid Cap Growth Fund 10.45% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette Income Bond Fund 6.48% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Income Bond Fund 88.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Donaldson Lukfkin Jenrette Intermediate Tax-Free Fund 7.55% Record
Securities Corporation Inc. Class A
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 928
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Intermediate Tax-Free Fund 99.38% Record
BOIA _ One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Institutional Prime Money 48.14% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Bank One Texas NA Institutional Prime Money 27.65% Record
1717 Main St. Market Fund
Dallas, TX 75201-4605
Arrow Door Company Institutional Prime Money 13.10% Record
4200 Roger B Chaffee Memorial Blvd. Market Fund
Grand Rapids, MI 49548
Dominos Pizza Nat Adv Institutional Prime Money 11.88% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607
Dominos Pizza Inc cash Institutional Prime Money 10.03% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607
HSHS Healthcare Institutional Prime Money 5.95% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607
First National Bank of Chicago Institutional Prime Money 5.95% Record
Cash Management Dept. Market Fund
Ste 0256 6th Fl
525 W Monroe St
Chicago, IL 60661-3629
Pershing As Agent - Omnibus Account Prime Money Market Fund 39.67% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc Prime Money Market Fund 20.63% Record
Fbo Bank One Corporate Sweep Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
American National Bank Prime Money Market Fund 8.30% Record
Corporate Trust Division Class A
Attn: SEI Trust-First Chicago Team
1 Freedom Dr.
Oaks, PA 19456
</TABLE>
<PAGE> 929
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Prime Money Market Fund 75.53% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Company NA Prime Money Market Fund 6.19% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.46% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Pershing As Agent - Omnibus Account US Treasury Securities Money 29.47% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc US Treasury Securities Money 27.82% Record
Fbo Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
BISYS Fund Services Inc US Treasury Securities Money 15.23% Record
Fbo Bank One Securities Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
BISYS Fund Services Inc US Treasury Securities Money 14.67% Record
Fbo Bank One Texas Sweep Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
Donaldson Lufkin Jenrette US Treasury Securities Money 8.42% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 6.55% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 6.30% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
</TABLE>
<PAGE> 930
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette US Treasury Securities Money 6.13% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 5.70% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 61.67% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette US Treasury Securities Money 15.82% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette US Treasury Securities Money 13.70% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co (N) US Treasury Securities Money 75.15% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Bank one Trust Company NA US Treasury Securities Money 12.60% Record
Omnibus-Corporate Cash Sweep AC Market Fund
235 W Schrock Rd Class I
Westerville OH 43081-2874
First National Bank of Chicago US Treasury Securities Money 7.17% Record
Corporate Trust Administration Market Fund
1 F&B Plaza, Ste. 0126 Class I
Chicago, IL 60670
Pershing As Agent-Omnibus Account US Treasury Securities Money 50.46% Record
For Exclusive Benefit of Market Fund Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
The One Group Services Company US Treasury Securities Money 48.10% Record &
3435 Stelzer Road Market Fund Service Class Beneficial
Columbus, OH 43219-6004
Pershing As Agent - Omnibus Account Municipal Money Market Fund 48.87% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
</TABLE>
<PAGE> 931
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Fund Services Inc Municipal Money Market Fund 24.62% Record
FBO Bank One Corporate Sweep Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Municipal Money Market Fund 96.72% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Pershing As Agent-Omnibus Account Municipal Money Market Fund 96.00% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Donaldson Lufkin Jenrette Equity Income Fund 15.26% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
UMB Bank Cust Fbo Equity Income Fund 8.08% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
Vista CA 92083-7952
Donaldson Lufkin Jenrette Equity Income Fund 6.56% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO # ALT-007870 Equity Income Fund 6.46% Record
Ragsdale Investments Limited Par Class C
5644 N Homestead Ln.
Scottsdale, AZ 85253-5013
Everen Securities, Inc. Equity Income Fund 6.29% Record
A/C 2266-9058 Class C
Clifford J Cutler PSP & Trust
111 East Kilbourn Ave.
Milwaukee, WI 53202-6611
Lillian M Tepas TTEE Equity Income Fund 6.21% Record
Under Declaration of TST Class C
510 Princeton Greens Ct.
Sun City Ctr, FL 33573-7024
Strafe & Co Equity Income Fund 94.73% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 932
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp Fbo Equity Index Fund 20.79% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 58.68% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 93.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 14.07% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Cons Power Union Welfare Benefit Equity Index Fund 8.15% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp. FBO Large Cap Growth Fund 6.59% Record
The One Investment Solution Class C
733 Greencrest Dr.
Westerville, OH 43081
Strafe & Co Large Cap Growth Fund 90.12% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Sec Svgs Plan Large Cap Growth Fund 8.38% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Corporation Large Cap Growth Fund 7.20% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette Large Cap Value Fund 63.86% Record
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Large Cap Value Fund 7.80% Record
PO Box 2052 Class C
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 933
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Large Cap Value Fund 5.24% Record
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Large Cap Value Fund 5.13% Record
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co Large Cap Value Fund 80.15% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Corporation Large Cap Value Fund 18.58% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
The One Group Investor Growth & Income Fund Large Cap Value Fund 7.71% Record &
The One Group Services Company Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
The One Group Investor Growth Fund Large Cap Value Fund 5.52% Record &
3435 Stelzer Road Class I Beneficial
Columbus, OH 43219-6004
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 7.17% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 5.35% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Ohio Municipal Bond Fund 90.15% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Key Trust Comp of OH CUST TTEE Ohio Municipal Bond Fund 6.69% Record
NES Group Class I
PO Box 98470
Cleveland, OH 44101-4870
NES Group Inc Corp Investmt Act Ohio Municipal Bond Fund 6.66% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
<PAGE> 934
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Firstar Trust Co TTEE International Equity Index 10.41% Record
FBO Milwaukee Foundation - Equity Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
Banc One Securities Corp Fbo International Equity Index 5.54% Record
The One Investment Solution Fund
733 Greencrest Dr Class A
Westerville OH 43081-4903
Banc One Securities Corp Fbo International Equity Index 8.58% Record
The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Strafe & Co. International Equity Index 88.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation International Equity Index 14.71% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Strafe & Co. Short-Term Bond Fund 9.79% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Wallace & Co Short-Term Bond Fund 5.20% Record
PO Box 21119 Class A
Shreveport, LA 71152-0001
Strafe & Co. Short-Term Fund 90.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Louisiana Municipal Bond Fund 96.69% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bancroft Enterprises Louisiana Municipal Bond Fund 5.42% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
<PAGE> 935
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Lawrence Mazerac Jr Louisiana Municipal Bond Fund 5.36% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Melvin Skol Small Cap Growth Fund 13.26% Record &
2811 Scley St Class C Beneficial
Erie, PA 16508-1719
Judith M Torrico Small Cap Growth Fund 11.88% Record &
101 Nicholson St Class C Beneficial
Buffalo, NY 14214-1128
Donaldson Lufkin Jenrette Small Cap Growth Fund 6.77% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
William G Hines Small Cap Growth Fund 6.72% Record
Ruth M Hines Jt Ten Class C
4101 McLaughlin Rd.
McKean, PA 16426-2034
State Street Bank & Trust Co Small Cap Growth Fund 5.57% Record
Cust for the IRA of Class C
Lyle Henretty
1019 Fairway Blvd.
Columbus, OH 43213-2522
State Street Bank & Trust Co Small Cap Growth Fund 5.17% Record
Cust for the IRA of Class C
Linda L Cole
14 Penguin Ct
Woodlands TX 77380-1827
Strafe & Co. Small Cap Growth Fund 80.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Investor Growth Fund Small Cap Growth Fund 7.21% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
The One Group Investor Growth & Income Fund Small Cap Growth Fund 5.13% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
Firstar Trust Company Small Cap Growth Fund 5.03% Record &
FBO Milwaukee Foundation Class I Beneficial
PO Box 1787
Milwaukee WI 53201-1787
</TABLE>
<PAGE> 936
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Small Cap Value Fund 12.93% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co NA TTEE Small Cap Value Fund 12.16% Record
Bankers Systems Inc Class A
Employees Profit Sharing Plan
107 N Cross Street, Ste. 2092
Wheaton, IL 60187-5317
Donaldson Lufkin Jenrette Small Cap Value Fund 44.76% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Small Cap Value Fund 31.69% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Small Cap Value Fund 19.26% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
Strafe & Co. Small Cap Value Fund 93.45% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
BF Goodrich Pension Small Cap Value Fund 10.33% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette Tax-Free Bond Fund 6.67% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Tax-Free Bond Fund 99.61% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Treasury & Agency Fund 8.96% Record
Securities Corporation Inc. Class A
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 937
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Treasury & Agency Fund 5.90% Record
Securities Corporation Inc. Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Treasury & Agency Fund 99.84% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Bank NA Treasury Cash Management 42.60% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Treasury Cash Management 21.43% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Treasury Cash Management 20.44% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
First National Bank of Chicago Treasury Cash Management 15.51% Record
9000 Haggerty Rd Money Market Fund
Belleville, MI 48111-8217 Class A
First National Bank of Chicago Treasury Cash Management 75.19% Record
Corporate Trust Administration Money Market Fund
1 F&B Plaza, Ste. 0126 Class I
Chicago, IL 60670
Strafe & Co. Treasury Cash Management 12.35% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
First National Bank of Chicago Treasury Cash Management 9.01% Record
Corporate Trust Administration Money Market Fund
One N State St Class I
Chicago, IL 60602-3300
Banc One Leasing Treasury Cash Management 7.28% Beneficial
100 E. Broad Street Money Market Fund
Columbus, OH 43215 Class I
Strafe & Co. Treasury Only Money Market 69.64% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 938
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Fund Services Inc Treasury Only Money Market 13.09% Record
FBO Bank One Corporate Sweep Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BISYS Fund Services Inc Treasury Only Money Market 5.48% Record
FBO Bank One Corporate Sweep Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Bank One Treasury Prime Cash 37.38% Record &
9000 Haggerty Rd Ste MI1-8217 Management Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
American National Bank Treasury Prime Cash 19.67% Record &
1 Freedom Dr Management Money Market Fund Beneficial
Oaks, PA 19456 Class A
First National Bank of Chicago Treasury Prime Cash 17.27% Record
Attn Cash Sweep Coordinator Management Money Market Fund
One N State St., 9th Floor Class A
Chicago, IL 60602-3300
First National Bank of Chicago Treasury Prime Cash 13.51% Record &
9000 Haggerty Rd Management Money Market Fund Beneficial
Belleville, MI 48111-8217 Class A
Bank One Treasury Prime Cash 5.99% Record &
9000 Haggerty Rd Ste MI1-8217 Management Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
First National Bank of Chicago Treasury Prime Cash 42.04% Record
Corporate Trust Administration Management Money Market Fund
One N State St, 9th Fl Class I
Chicago, IL 60602-3300
Hella North America Holding Inc Treasury Prime Cash 22.35% Record &
1101 Vincennes Ave Management Money Market Fund Beneficial
PO Box 398 Class I
Flora, IL 62839-0398
</TABLE>
<PAGE> 939
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Treasury Prime Cash 16.27% Record
BOIA - One Group Operations Management Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
First National Bank of Chicago Treasury Prime Cash 15.45% Record &
525 W Monroe St Management Money Market Fund Beneficial
Chicago, IL 60661-3629 Class I
Bank One US Government Securities 43.55% Record &
9000 Haggerty Rd Ste MI1-8217 Cash Management Money Market Beneficial
Belleville, MI 48111-1632 Fund
Class A
First National Bank of Chicago US Government Securities 20.98% Record &
9000 Haggerty Rd Cash Management Money Market Beneficial
Belleville, MI 48111-8217 Fund
Class A
American National Bank US Government Securities 16.13% Record &
1 Freedom Dr Cash Management Money Market Beneficial
Oaks, PA 19456 Fund
Class A
Bank One US Government Securities 9.17% Record &
9000 Haggerty Rd Ste MI1-8217 Cash Management Money Market Beneficial
Belleville, MI 48111-1632 Fund
Class A
First National Bank of Chicago US Government Securities 73.10% Record
Corporate Trust Administration Cash Management Money Market
One N State St, 9th Fl Fund
Chicago, IL 60602-3300 Class I
First National Bank of Chicago US Government Securities 7.94% Record
Corporate Trust Administration Cash Management Money Market
1 F&B Plaza, Ste. 0126 Fund
Chicago, IL 60670 Class I
Peter Xilas US Government Securities 7.83% Record
ISAC-IDAPP Cash Management Money Market
1755 Lake Cook Rd. Fund
Deerfield, IL 60015-5215 Class I
Strafe & Co. US Government Securities 6.29% Record
BOIA - One Group Operations Cash Management Money Market
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
</TABLE>
<PAGE> 940
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 98.83% Record
For Exclusive Benefit of Fund
One Group Customer Accounts Class A
1 Pershing Plaza
Jersey City, NJ 07399-0001
Strafe & Co. Ohio Municipal Money Market 97.08% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Henny Penny Corp Ohio Municipal Money Market 12.77% Beneficial
100 E. Broad Street Fund
Columbus, OH 43215-3607 Class I
Douglas & Lois Peacock Ohio Municipal Money Market 7.58% Beneficial
100 E. Broad Street Fund
Columbus, OH 43215-3607 Class I
Harriet J. Goldberg Custody Ohio Municipal Money Market 7.20% Beneficial
100 E. Broad Street Fund
Columbus, OH 43215-3607 Class I
Akron Stadium Reserve Account Ohio Municipal Money Market 6.46% Beneficial
100 E. Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Securities Corp FBO Municipal Income Fund 37.21% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 57.15% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Municipal Income Fund 98.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette
Securities Corporation Inc Kentucky Municipal Bond Fund 16.98% Record
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Kentucky Municipal Bond Fund 5.79% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 941
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co.
BOIA - One Group Operations Kentucky Municipal Bond Fund 94.05% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
James F. Duncan West Virginia Municipal Bond 11.31% Record
PO Box 2330 Fund Class A
Clarksburg, WV 26302-2330
Donaldson Lufkin Jenrette West Virginia Municipal Bond 10.88% Record
Securities Corporation Inc Fund Class A
PO Box 2052
Jersey City, NJ 07303-2052
Dean Witter For The Benefit Of West Virginia Municipal Bond 8.97% Record
Investments Inc. Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Donaldson Lufkin Jenrette West Virginia Municipal Bond 7.32% Record
Securities Corporation Inc Fund Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 7.03% Record
Securities Corporation Inc Fund Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 6.79% Record
Securities Corporation Inc Fund Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 5.72% Record
Securities Corporation Inc Fund Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 8.66% Record
Securities Corporation Inc. Fund Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. West Virginia Municipal Bond 99.12% Record
BOIA - One Group Operations Fund Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Government Bond Fund 54.00% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 942
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Government Bond Fund 34.88% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government Bond Fund 6.92% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Government Bond Fund 85.46% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Investment Company Institute Ultra Short Term Bond Fund 7.71% Record
1401 H St NW Class A
Washington, DC 20005-2110
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 7.44% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 5.48% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Ultra Short Term Bond Fund 85.77% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Investor Balanced Fund Ultra Short Term Bond Fund 5.84% Record &
3435 Stelzer Road Class I Beneficial
Columbus, OH 43219-6004
RC Archdiose Ultra Short Term Bond Fund 5.64% Beneficial
100 E. Broad Street Class I
Columbus, OH 43215
Banc One Securities Corp FBO Intermediate Bond Fund 40.20% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
<PAGE> 943
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Intermediate Bond Fund 7.29% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Intermediate Bond Fund 76.04% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 93.13% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
INVESCO Trust Co Investor Growth Fund 5.46% Record
Hudson, Potts & Bernstein Class A
LLC Employees Profit Sharing Plan
PO Box 77405
Atlanta, GA 30357-1405
Strafe & Co. Investor Growth Fund Class I 68.99% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Grwth Investor Growth Fund 24.81% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Bank One TTEE Investor Growth Fund 11.69% Record
Brillion Iron Works P/S Class I
190 Heatherdown Drive
Westerville OH 43081-2868
Virginia R Corrin Investor Growth Fund 7.71% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Ind. Fam Coll. Sav. Plan Investor Growth Fund 7.05% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
First Chicago NBD TTEE Investor Growth & Income Fund 9.99% Record
Clarian Health Partners Inc Class A
Defined Contribution Plan
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
</TABLE>
<PAGE> 944
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Brokerage Services Inc Investor Growth & Income Fund 7.19% Record
FBO Kelly Retirement Plus Class A
PO Box 4054
Concord, CA 94524-4054
Donaldson Lufkin Jenrette Investor Growth & Income Fund 6.66% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Growth & Income Fund 5.47% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Investor Growth & Income Fund 60.02% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
First Chicago NBD TTEE Investor Growth & Income Fund 28.93% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
Banc One Sec Svgs Plan Investor Growth & Income Fund 12.05% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Revco D.S., Inc. Serp - Trust A Investor Growth & Income Fund 5.46% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
DWPLLC/Target BNF-Bal Fd Investor Growth & Income Fund 5.12% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Investor Balanced Fund 6.12% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Investor Balanced Fund 5.77% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Investor Balanced Fund 66.89% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 945
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First Chicago NBD TTEE Investor Balanced Fund 16.97% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
Kenosha Carpenters #161 Pens-Mgd Investor Balanced Fund 7.84% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Centennial Liquor Retirement Plan Investor Balanced Fund 6.96% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette Investor Conservative Growth 6.52% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Conservative Growth 5.69% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Conservative Growth 5.38% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Conservative Growth 5.32% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co. Investor Conservative Growth 84.89% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Con Grwth Investor Conservative Growth 24.91% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Kenosha Carpenters #161 Pens-Mgd Investor Conservative Growth 13.30% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Bank One Inv Option Plan Investor Conservative Growth 9.85% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Strafe & Co. Government Money Market Fund 71.94% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
<PAGE> 946
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BWC - JP Morgan Government Money Market Fund 8.95% Beneficial
100 E. Broad Street
Columbus, OH 43215-3607
BISYS Fund Services Inc Government Money Market Fund 8.10% Record
FBO Bank One Corporate Sweep
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BWC - Western Asset Government Money Market Fund 5.83% Beneficial
100 E. Broad Street
Columbus, OH 43215-3607
Bank One Texas NA Government Money Market Fund 5.70% Record &
1717 Main St Beneficial
Dallas TX 75201-4605
BWC - John Hancock Government Money Market Fund 5.27% Beneficial
100 E. Broad Street
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette High Yield Bond Fund Class B 7.58% Record
PO Box 2052
Jersey City, NJ 07303-2052
Banc One Securities Corp FBO High Yield Bond Fund Class C 82.77% Record &
The One Investment Solution Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
Donaldson Lufkin Jenrette High Yield Bond Fund Class C 12.46% Record &
PO Box 2052 Beneficial
Jersey City, NJ 07303-2052
Strafe & Co. High Yield Bond Fund 52.88% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Investor Growth & Income Fund High Yield Bond Fund 17.68% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
The One Group Investor Balanced Fund High Yield Bond Fund 16.16% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
</TABLE>
<PAGE> 947
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Empl Ret Plan of NBD Bancorp High Yield Bond Fund 10.59% Beneficial
100 E. Broad Street Class I
Columbus OH 43215-3607
Banc One Corporation High Yield Bond Fund 7.65% Beneficial
100 E. Broad Street Class I
Columbus OH 43215-3607
The One Group Investor Growth Fund High Yield Bond Fund 7.40% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
Donaldson Lufkin Jenrette Market Expansion Index Fund 16.68% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 16.57% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Northern Trust as TTEE Market Expansion Index Fund 8.56% Record
FBO William B Cunningham Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Market Expansion Index Fund 7.77% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Jose B Zavala Market Expansion Index Fund 6.82% Record
Maria E. Zavala JT TEN Class A
1238 Selma
Westland, MI 48186-4031
Northern Trust as TTEE Market Expansion Index Fund 5.19% Record
FBO Eli Kaplan Trust B Class A
A/C 03-01333
PO Box 92956
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Market Expansion Index Fund 5.18% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 6.64% Record
PO Box 2052 Class B
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 948
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Market Expansion Index Fund 6.11% Record
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 5.61% Record
PO Box 2052 Class B
Jersey City, NJ 07303-2052
State Street Bank & Trust Co Market Expansion Index Fund 24.13% Record
Cust for the IRA of Class C
Patricia L Burke
716 Running Creek Dr
Arlington, TX 76001-7524
State Street Bank & Trust Co Market Expansion Index Fund 18.64% Record
Cust for the 403(b) of Class C
Lois J Hayward
14110 Patterson Dr
Shelby TWP, MI 48315-4292
Donaldson Lufkin Jenrette Market Expansion Index Fund 16.43% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 15.85% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Market Expansion Index Fund 14.06% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
Strafe & Co Market Expansion Index Fund 100.00% Record
BOIA-One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dow Chemical Market Expansion Index Fund 6.79% Beneficial
100 E. Broad Street Class I
Columbus, OH 43215
Wendy M Alterman Michigan Municipal Bond Fund 5.83% Record &
271 Lone Pine Class A Beneficial
Bloomfield, MI 48304-3428
Donaldson Lufkin Jenrette Michigan Municipal Bond Fund 7.14% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 949
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Michigan Municipal Bond Fund 99.99% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Michigan Michigan Municipal Money 31.73% Record &
9000 Haggerty Road Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Pershing As Agent - Omnibus Account Michigan Municipal Money 19.89% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
James R Donahey Michigan Municipal Money 8.46% Record &
Pat J Donahay JT TEN Market Fund Beneficial
421 Highland Class A
Ann Arbor, MI 48104-1729
Emmet E Tracy Jr Michigan Municipal Money 5.40% Record &
Marilyn H Tracy JT TEN Market Fund Beneficial
21 Kercheval Suite 370-C Class A
Grosse Pointe, MI 48236-3698
Strafe & Co. Michigan Municipal Money 87.53% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Brown Corp of America Michigan Municipal Money 9.31% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607 Class I
OK Thompson Michigan Municipal Money 7.47% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607 Class I
Inner Lake & Co Michigan Municipal Money 5.03% Record
C/O State Street Bank Market Fund
1 Heritage Drive Class I
North Quincy, MA 02171-2105
NBD Bank Municipal Cash Management 87.41% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
</TABLE>
<PAGE> 950
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One Municipal Cash Management 7.62% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Municipal Cash Management 100.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Short-Term Municipal Bond 50.61% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 21.01% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 5.92% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 22.17% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 15.32% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 14.06% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 9.58% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 7.64% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 7.22% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
</TABLE>
<PAGE> 951
5% SHAREHOLDERS AS OF AUGUST 6, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Short-Term Municipal Bond 6.55% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond 6.25% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Strafe & Co. Short-Term Municipal Bond 99.92% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Haworth Inc Short-Term Municipal Bond 7.87% Beneficial
100 E. Broad Street Fund
Columbus OH 43215-3607 Class I
Bruce Becker Rev Trust Short-Term Municipal Bond 7.50% Beneficial
100 E. Broad Street Fund
Columbus OH 43215-3607 Class I
</TABLE>
As a group, the Trustee and Officers of the Trust owned less than 1% of the
Shares of each class of the Trust.
FINANCIAL STATEMENTS
The financial statements of the Trust will be incorporated by reference into
this Statement of Additional Information pursuant to a filing made under Rule
485b. The financial statements for the fiscal year ended June 30, 1999 have been
audited by _________________________, independent public accountants to the
Trust, as indicated in their reports with respect thereto, and will be
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
<PAGE> 952
Registration Statement
of One Group(R) Mutual Funds
on Form N-1A
PART C
Item 23. Exhibits
--------
-1-
<PAGE> 953
(a) Amended and Restated Declaration of Trust dated as of February
18, 1999 is incorporated by reference to Exhibit (1) to the
Registrant's Registration Statement on Form N-1A (filed March
12, 1999).
(b) 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.
(c) 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
-2-
<PAGE> 954
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 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
-3-
<PAGE> 955
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 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
-4-
<PAGE> 956
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.
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
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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
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.
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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
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
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<PAGE> 959
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
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 'One Group(R) Mutual Funds' and 'Trustees
of One Group(R) Mutual Funds' 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 'One Group(R) Mutual Funds' entered
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<PAGE> 960
into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not
individually, but in such capacities, and are not
binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing
with any series of Shares of the Trust must look
solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the
Trust."
The 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 or otherwise, the Trustees
shall distribute the remaining proceeds ratably among the
holders of the Shares of the series or class then outstanding.
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<PAGE> 961
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
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.
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<PAGE> 962
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.
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
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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.
(d)(1) 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.
(d)(2) Amended and Restated Schedule A to the Investment Advisory
Agreement between Registrant and Banc One Investment Advisors
Corporation dated May 20, 1999 is filed herewith.
(d)(3) 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.
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<PAGE> 964
(d)(4) 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.
(e)(1) 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).
(e)(2) Revised Schedules A-E to the Distribution Agreement between
the Registrant and The One Group Services Company are filed
herewith.
(e)(3) 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).
(e)(4) 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).
(e)(5) 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).
(e)(6) Amendment to Agency and Services Delegation Agreement between
INVESCO Trust Company and Registrant is filed herewith.
(e)(7) Processing Agreement by and between Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation and The
One Group dated as of February, 1999 is incorporated by
reference to Exhibit (6)(f) to Registrant's Registration
Statement on Form N-1A (filed March 12, 1999).
(f) Deferred Compensation Plan for Trustees of The One Group is
incorporated by reference to Exhibit (7) to Post-Effective
Amendment No. 47 (filed December 23, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(1) 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.
(g)(2) 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.
(g)(3) 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.
(g)(4) First Amendment to the Subcustodian Agreement dated as of
December, 1996 between State Street Bank and Trust Company,
Bank One Trust Company,
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<PAGE> 965
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.
(g)(5) 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.
(g)(6) Sub-Custodian Agreement dated as of March 19, 1999, between
State Street Bank and Trust Company, NBD Bank and One Group
Mutual Funds is incorporated by reference to Exhibit (8)(f)
to Post-Effective Amendment No.49 (filed April 27, 1999) to
the Registrant's Registration Statement on Form N-1A.
(h)(1) 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).
(h)(2) Revised Schedule A to the Management and Administration
Agreement between the Registrant and The One Group Services
Company is filed herewith.
(h)(3) 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.
(h)(4) 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.
(h)(5) 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).
(h)(6) Revised Schedule A to the Fund Accounting Agreement between
the Registrant and The One Group Services Company is filed
herewith.
(h)(7) 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).
(h)(8) Revised Schedule A to the Sub-Administration Agreement between
The One Group Services Company and Banc One Investment
Advisors Corporation is filed herewith.
(h)(9) Agency Services and Delegation Agreement dated January 1, 1996
between the Registrant and BISYS Qualified Plan Services is
incorporated by reference
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<PAGE> 966
to Exhibit (9)(g) to Post-Effective Amendment No. 37 (filed
June 13, 1996) to the Registrant's Registration Statement on
Form N-1A.
(h)(10) Amendment to Agency Services and Delegation Agreement between
Registrant and BISYS Qualified Plan Services is filed
herewith.
(h)(11) Order Processing Agreement between Registrant and Bank One
Trust Company, NA is filed herewith.
(h)(12) Shareholder Servicing Agreement between The One Group Services
Company and Bank One Corporation 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.
(h)(13) 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.
(h)(14) 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.
(h)(15) 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.
(h)(16) Securities Lending Agreement for Non-ERISA Accounts dated as
of August 1995 between the Registrant, Banc One Investment
Advisors Corporation, and Bank One Trust Company, N.A. 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.
(h)(17) 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.
(h)(18) 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
-15-
<PAGE> 967
reference to Exhibit (9)(r) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(h)(19) 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.
(h)(20) 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.
(h)(21) Fund Alliance Agreement by and between The One Group, The One
Group Services Company, and Putnam Fiduciary Trust Company is
incorporated by reference to Exhibit (9)(u) to Post-Effective
Amendment No.49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(22) Agency Agreement dated as of March 18, 1997 between Pegasus
Funds and BISYS Fund Services, Inc. is incorporated by
reference to Exhibit (9)(v) to Post-Effective Amendment No.49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(23) Amendment dated April 1, 1999, to the Agency Agreement dated
as of March 18, 1997 between Pegasus Funds and BISYS Fund
Services, Inc. is incorporated by reference to Exhibit (9)(w)
to Post-Effective Amendment No.49 (filed April 27, 1999) to
Registrant's Registration Statement on Form N-1A.
(h)(24) Agency Agreement dated as of March 11, 1997 between Pegasus
Funds and NBD Bank is incorporated by reference to Exhibit
(9)(x) to Post-Effective Amendment No.49 (filed April 27,
1999) to Registrant's Registration Statement on Form N-1A.
(h)(25) Amendment to the Agency Agreement dated as of March 11, 1997
between Pegasus Funds and NBD Bank is incorporated by
reference to Exhibit (9)(y) to Post-Effective Amendment No.49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(26) Agency Agreement dated as of November 1, 1996 between Pegasus
Funds and Putnam Fiduciary Trust Company is incorporated by
reference to Exhibit (9)(z) to Post-Effective Amendment No.49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(27) Fifth Amendment dated March 19, 1999, to the Agency Agreement
dated as of November 1, 1996 between Pegasus Funds and Putnam
Fiduciary Trust Company is incorporated by reference to
Exhibit (9)(aa) to Post-Effective Amendment No.49 (filed April
27, 1999) to Registrant's Registration Statement on Form N-1A.
(h)(28) Form of Agency Distribution Agreement between The One Group
Services Company and various shareholder servicing agents is
incorporated by reference to Exhibit (9)(bb) to Post-Effective
Amendment No.49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(29) Sub-Transfer Agency Agreement between One Group Mutual Funds
and the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corporation, is filed herewith.
(h)(30) Form of Sub-Transfer Agency Agreement is incorporated by
reference to Exhibit (9)(dd) to Post-Effective Amendment No.49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(31) Form of Order Processing Agreement is incorporated by
reference to Exhibit (9)(ee) to Post-Effective Amendment No.49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(32) Services Agreement between One Group Mutual Funds, Bank One
Trust Company, NA, Kemper Services Company, Kemper
Distributors, Inc. and The One Group Services Company is filed
herewith.
(h)(33) Sub-Transfer Agency Agreement between Nationwide Investment
Services and One Group Mutual Funds is filed herewith.
(i) Opinion and consent of counsel is filed herewith.
(j)(1) Consent of PricewaterhouseCoopers LLP will be filed with
485(b) filing.
(j)(2) Consent of Ropes & Gray is filed herewith.
(k) None
(l) 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.
(m)(1) 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.
(m)(2) Revised Schedule A to the Distribution and Shareholder
Services Plan - Class A and Service Class Shares is filed
herewith.
(m)(3) 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.
(m)(4) Revised Schedules A and B to the Distribution and Shareholder
Services Plan - Class B and Class C Shares is filed herewith.
-16-
<PAGE> 968
(n) Multiple Class Plan for the Registrant adopted by the Board of
Trustees on May 22, 1995, as amended May 20, 1999 is
filed herewith.
Item 24. 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 25. 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.
-17-
<PAGE> 969
Item 26. 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 One 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 Delaware. 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.
Banc One Investment Advisors
----------------------------
<TABLE>
<CAPTION>
Position with Banc Other
One Investment Advisors Substantial Occupation Type of Business
----------------------- ---------------------- ----------------
<S> <C> <C>
David J. Kundert, Chairman, Chairman, Bank One Investment
President, and CEO Trust Company, NA,
100 East Broad
Street, Columbus,
Ohio 43215
</TABLE>
-18-
<PAGE> 970
<TABLE>
<S> <C> <C>
Frederick L. Cullen, Director Chairman/CEO Bank One, NA, 100 East Banking
Broad Street, Columbus, Ohio 43215;
Chairman and Chief Operating Officer,
Banc One Ohio Corporation, 100 East
Broad Street, Columbus, Ohio 43215
Kenneth T. Stevens, Director CEO, Bank One Retail Group Banking
1111 Polaris Parkway
Columbus, Ohio 43240
Peter W. Atwater, Director Former Treasurer, Investment
and Chief Operating Officer Bank One Corporation,
100 East Broad Street,
Columbus, Ohio 43215
David R. Meuse, Director Chairman/CEO Banc One Investment
Capital Holding
Corporation, 150 East
Gay Street, Columbus,
Ohio 43215
William G. Jurgenson, Director Executive Vice President Banking
First National Bank of Chicago,
1 First National Plaza,
Chicago, Illinois 60670
William P. Boardman, Director Senior Executive Vice President Banking
and Head of Acquisitions,
BANK ONE CORPORATION
One First National Plaza,
Chicago, Illinois 60670
Richard W. Vague, Director Chairman & CEO, Credit Card
First USA
201 North Market Street
Wilmington, Delaware 19801
</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.
-19-
<PAGE> 971
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
Peter W. Atwater Banc One Investment
Advisors, Senior
Managing Director,
1111 Polaris Parkway,
Columbus, OH 43271
Gary Madich, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Columbus, Ohio 43271
</TABLE>
-20-
<PAGE> 972
<TABLE>
<S> <C> <C>
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
President -- Portfolio Manager Pacholder Investment
Associates, Inc.,
Executive Vice
President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
</TABLE>
Item 27. 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
Name Services Company Positions 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
Michael D. Burns Vice President None
Steven Ludwig Compliance Officer None
Robert Tuch Assistant Secretary None
David P. Blackmore Vice President/ None
Chief Financial Officer
</TABLE>
-21-
<PAGE> 973
<TABLE>
<S> <C> <C>
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records
--------------------------------
(1) Banc One Investment Advisors Corporation, 1111 Polaris
Parkway, P.O. Box 710211, Columbus, Ohio 43271-0211
(records relating to its functions as Investment Adviser
and Sub-Administrator).
(2) Independence International Associates, Inc., 75 State
Street, Boston, MA 02109 (records relating to its
functions as Sub-Investment Adviser to the International
Equity Index Fund).
(3) Banc One High Yield Partners, LLC, 1111 Polaris Parkway,
P.O. Box 710211, Columbus, Ohio 43271-0211 and 8044
Montgomery Road, Suite #382, Cincinnati, Ohio 45236
(records relating to its functions as Sub-Investment
Advisor to the High Yield Bond Fund).
(4) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Distributor for all Funds).
(5) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Administrator for all Funds).
(6) State Street Bank and Trust Company, 470 Atlantic
Avenue, Fifth Floor, Boston, MA 02205-9087 (records
relating to its functions as custodian and transfer
agent to all Funds).
(7) Ropes & Gray, One Franklin Square, 1301 K Street, N.W.,
Suite 800 East, Washington, D.C. 20005 (Declaration of
Trust, Code of Regulations, and Minute Books).
Item 29. Management Services
-------------------
N/A
Item 30. 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.
-22-
<PAGE> 974
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.
-23-
<PAGE> 975
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 49 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
23th day of August, 1999.
One Group(R) Mutual Funds
(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 August 23, 1999
- ------------------
* Mark S. Redman
/s/ Peter C. Marshall Trustee August 23, 1999
- ---------------------
*Peter C. Marshall
/s/ Charles I. Post Trustee August 23, 1999
- --------------------
*Charles I. Post
/s/ Frederick W. Ruebeck Trustee August 23, 1999
- -------------------------
*Frederick W. Ruebeck
/s/ Robert A. Oden Trustee August 23, 1999
- ------------------
*Robert A. Oden
/s/ John F. Finn Trustee August 23, 1999
- ----------------
*John F. Finn
/s/ Marilyn McCoy Trustee August 23, 1999
- -----------------
*Marilyn McCoy
/s/ Donald L. Tuttle Trustee August 23, 1999
- --------------------
*Donald L. Tuttle
/s/ Julius L. Pallone Trustee August 23, 1999
- ---------------------
*Julius L. Pallone
*By: /s/ Alan G. Priest
------------------
Alan G. Priest
Attorney-in-Fact, pursuant to powers of attorney filed herewith.
</TABLE>
-24-
<PAGE> 976
POWER OF ATTORNEY
-----------------
Mark S. Redman, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ Mark S. Redman
------------------
Mark S. Redman
-25-
<PAGE> 977
POWER OF ATTORNEY
-----------------
Peter C. Marshall, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group(R) (the "Group"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Group, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Group any and all amendments
to the Group's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 21, 1998
/s/ Peter C. Marshall
---------------------
Peter C. Marshall
-27-
<PAGE> 978
POWER OF ATTORNEY
-----------------
Charles I. Post, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ Charles I. Post
-------------------
Charles I. Post
-28-
<PAGE> 979
POWER OF ATTORNEY
-----------------
Frederick W. Ruebeck, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group(R) (the "Group"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Group, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Group any and all amendments
to the Group's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 21, 1998
/s/ Frederick W. Ruebeck
------------------------
Frederick W. Ruebeck
-29-
<PAGE> 980
POWER OF ATTORNEY
-----------------
Robert A. Oden, Jr., whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group(R) (the "Group"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Group, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Group any and all amendments
to the Group's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 21, 1998
/s/ Robert A. Oden, Jr.
-----------------------
Robert A. Oden, Jr.
-30-
<PAGE> 981
POWER OF ATTORNEY
-----------------
John F. Finn, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 21, 1998
/s/ John F. Finn
----------------
John F. Finn
-31-
<PAGE> 982
POWER OF ATTORNEY
-----------------
Marilyn McCoy, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ Marilyn McCoy
-----------------
Marilyn McCoy
-31-
<PAGE> 983
POWER OF ATTORNEY
-----------------
Donald L. Tuttle, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ Donald L. Tuttle
--------------------
Donald L. Tuttle
-31-
<PAGE> 984
POWER OF ATTORNEY
-----------------
Julius L. Pallone, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group(R) (the "Group"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Group, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Group any and all amendments
to the Group's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 19, 1999
/s/ Julius L. Pallone
---------------------
Julius L. Pallone
-31-
<PAGE> 985
Exhibits
(d)(2) Amended and Restated Schedule A to the Investment Advisory
Agreement between One Group Mutual Funds and Banc One Investment
Advisors Corporation dated May 20, 1999
(e)(2) Revised Schedules A-E to the Distribution Agreement between One
Group Mutual Funds and The One Group Services Company dated May 20,
1999.
(e)(6) Amendment to the Agency Services and Delegation Agreement
between One Group Mutual Funds and INVESCO Retirement Plan Services.
(h)(2) Revised Schedule A to the Management and Administration Agreement
between One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
(h)(6) Revised Schedule A to the Fund Accounting Agreement between One
Group Mutual Funds and The One Group Services Company dated May 20,
1999.
(h)(8) Revised Schedule A to the Sub-Administration Agreement between One
Group Services Company and Banc One Investment Advisors Corporation
dated May 20, 1999.
(h)(10) Amendment to the Agency Services and Delegation Agreement between One
Group Mutual Funds and BISYS Qualified Plan Services.
(h)(11) Order Processing Agreement between One Group Mutual Funds and Bank
One Trust Company, NA.
(h)(29) Sub-Transfer Agency Agreement between Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation and One Group
Mutual Funds.
(h)(32) Services Agreement between One Group Mutual Funds. Bank One Trust
Company, NA, Kemper Services Company, Kemper Distributors, Inc. and
The One Group Services Company.
(h)(33) Sub-Transfer Agency Agreement between Nationwide Investment
Services Corporation and One Group Mutual Funds.
(i) Opinion and Consent of Ropes & Gray.
(j)(2) Consent of Ropes & Gray.
1
<PAGE> 986
(m)(2) Revised Schedule A to the Distribution and Shareholder Services Plan
between One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
(m)(4) Revised Schedules A and B to the Distribution and Shareholder
Services Plan Class B and Class C shares between One Group Mutual
Funds and The One Group Services Company dated May 20, 1999.
(n) Multiple Class Plan for One Group Mutual Funds, as amended May 20,
1999.
2
<PAGE> 1
Exhibit (d)(2)
Amended and Restated Schedule A to the Investment Advisory Agreement
between One Group Mutual Funds and Banc One Investment Advisors Corporation
dated August 19, 1999
<PAGE> 2
Amended and Restated
Schedule A
to the
Investment Advisory Agreement between The One Group
and Banc One Investment Advisors Corporation
dated August 19, 1999
Name of Fund Compensation
- ------------ ------------
The Treasury Money Market Annual rate of eight one-hundredths of one
Fund percent (.08%) of The Treasury Money
Market Fund's average daily net assets.
The Treasury Only Money Annual rate of eight one-hundredths of one
Market Fund percent (.08%) of The Treasury Only Money
Market Fund's average daily net assets.
The Government Money Market Annual rate of eight one-hundredths of one
Fund percent (.08%) of The Government Money
Market Fund's average daily net assets.
The Tax Exempt Money Market Annual rate of eight one-hundredths of one
Fund percent (.08%) of The Tax Exempt Money
Market Fund's average daily net assets.
The Institutional Prime Money Annual rate of ten one-hundredths of one
Market Fund percent (.10%) of The Institutional
Prime Money Market Fund's average daily
net assets.
The U.S. Treasury Securities Annual rate of thirty-five one-hundredths
Money Market Fund of one percent (.35%) of The U.S. Treasury
Securities Money Market Fund's
average daily net assets.
The U.S. Government Securities Annual rate of thirty-five one-hundredths
Money Market Fund of one percent (.35%) of The U.S. Treasury
Securities Money Market Fund's
average daily net assets.
The Treasury Prime Annual rate of thirty-five one-hundredths
Money Market Fund of one percent (.35%) of The U.S. Treasury
Securities Money Market Fund's
average daily net assets.
<PAGE> 3
The Prime Money Market Annual rate of thirty-five one-hundredths
Fund of one percent (.35%) of The Prime Money
Market Fund's average daily net assets.
The Municipal Money Market Annual rate of thirty-five one-hundredths
Fund of one percent (.35%) of The Municipal
Money Market Fund's average daily net
assets.
The Ohio Municipal Money Annual rate of thirty one-hundredths of
Market Fund one percent (.30%) of The Ohio Municipal
Money Market Fund's average daily net
assets.
The Michigan Municipal Money Annual rate of thirty five one-hundredths of
Market Fund one percent (.35%) of The Michigan Municipal
Money Market Fund's average daily net
assets.
The Cash Management Money Annual rate of twenty one-hundredths of
Market Fund one percent (.20%) of The Cash Management
Money Market Fund's average daily net
assets.
The Treasury Cash Management Annual rate of twenty one-hundredths of
Money Market Fund one percent (.20%) of The
Treasury Cash Management Money Market
Fund's average daily net assets.
The Treasury Prime Cash Annual rate of twenty one-hundredths of
Management Money Market Fund one percent (.20%) of The Treasury Prime
Cash Management Money Market Fund's average
daily net assets.
The U.S. Government Cash Annual rate of twenty one-hundredths of one
Management Money Market Fund percent (.20%) of The U.S. Government Cash
Management Money Market Fund's average daily
net assets.
The Municipal Cash Management Annual rate of twenty one-hundredths of
Money Market Fund one percent (.20%) of The Municipal Cash
Money Market Fund's average daily net
assets.
<PAGE> 4
The Balanced Fund Annual rate of sixty-five one-hundredths
of one percent (.65%) of The Asset
Allocation Fund's average daily net assets.
The Income Equity Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Income Equity Fund's average
daily net assets, seventy one-hundredths of
one percent (.70%) on the next $500 million
of The Income Equity Fund's average daily
net assets, and sixty-five (.65%) on The
Income Equity Fund's average daily net
assets thereafter.
The Mid Cap Value Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Mid Cap Value Fund's average
daily net assets, seventy one-hundredths of
one percent (.70%) on the next $500 million
of The Mid Cap Fund's average daily net
assets, and sixty-five (.65%) on The Mid Cap
Value Fund's average daily net assets
thereafter.
The Mid Cap Growth Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Mid Cap Growth Fund's average
daily net assets, seventy one-hundredths of
one percent (.70%) on the next $500 million
of The mid Cap Growth Fund's average daily
net assets, and sixty-five (.65%) on The
Mid Cap Growth Fund's average daily net
assets thereafter.
The International Equity Annual rate of fifty-five one-hundredths
Index Fund of one percent (.55%) of The International
Equity Index Fund's average daily net
assets.
The Equity Index Fund Annual rate of thirty one-hundredths of one
percent (.30%) of The Equity Index Fund's
average daily net assets.
The Large Cap Value Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first
$1.5 billion of The Large Cap Value Fund's
average daily net assets, seventy
one-hundredths of one percent (.70%) on the
next $500 million of The Large Cap
<PAGE> 5
Values Fund's average daily net assets,
and sixty-five (.65%) on The Large Cap Value
Fund's average daily net assets thereafter.
The Diversified Equity Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Diversified Equity Fund's
average daily net assets, seventy one-
hundredths of one percent (.70%) on the next
$500 million of The Diversified Equity
Fund's average daily net assets, and sixty-
five (.65%) on The Diversified Equity
Fund's average daily net assets thereafter.
The Small Cap Growth Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Small Cap Growth Fund's
average daily net assets, seventy one-
hundredths of one percent (.70%) on the
next $500 million of The Small Cap Growth
Fund's average daily net assets, and
sixty-five (.65%) on The Small Cap Growth
Fund's average daily net assets thereafter.
The Large Cap Growth Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Large Cap Growth Fund's
average daily net assets, seventy one-
hundredths of one percent (.70%) on the next
$500 million of The Large Cap Growth Fund's
average daily net assets, and sixty-five
(.65%) on The Large Cap Growth Fund's
average daily net assets thereafter.
The Diversified Mid Cap Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Diversified Mid Cap Fund's
average daily net assets, seventy one-
hundredths of one percent (.70%) on the
next $500 million of The Diversified
Mid Cap Fund's average daily net assets, and
sixty- five (.65%) on The Diversified Mid
Cap Fund's average daily net assets
thereafter.
The Small Cap Value Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) on the first $1.5
billion of The Small Cap Value Fund's
average daily net assets, seventy one-
hundredths of one percent (.70%) on the next
$500 million of The Small Cap
<PAGE> 6
Value Fund's average daily net assets, and
sixty-five (.65%) on The Small Cap Value
Fund's average daily net assets thereafter.
The Diversified International Fund Annual rate of eighty one-hundredths of
one percent (.80%) of The Diversified
International Fund's average daily net
assets.
The Market Expansion Index Fund Annual rate of thirty five one-hundredths of
one percent (.35%) of The Small Cap Index
Fund's average daily net assets.
The Technology Fund Fund Annual rate of one percent (1.00%) of The
Technology Fund's average daily net assets.
The Real Estate Fund Annual rate of seventy-four one-hundredths
of one percent (.74%) of The U.S. Treasury
Securities Money Market Fund's average daily
net assets.
The Income Bond Fund Annual rate of sixty one-hundredths of one
percent (.60%) of The Income Bond Fund's
average daily net assets.
The Short-Term Bond Annual rate of sixty one-hundredths of one
Fund percent (.60%) of The Limited Volatility
Bond Fund's average daily net assets.
The Government Bond Fund Annual rate of forty-five one-hundredths of
one percent (.45%) of The Government Bond
Fund's average daily net assets.
The Ultra Short-Term Bond Annual rate of fifty-five one-hundredths
Fund of one percent (.55%) of The Ultra Short-
Term Income Fund's average daily net assets.
The Treasury & Agency Annual rate of forty one-hundredths of one
Fund percent (.40%) of the Treasury & Agency
Fund's average daily net assets.
The High Yield Bond Fund Annual rate of seventy-five one-hundredths
of one percent (.75%) of the High Yield Bond
Fund's average daily net assets.
The Intermediate Bond Annual rate of sixty one-hundredths
Fund of one percent (.60%) of The Intermediate
<PAGE> 7
Bond Fund's average daily net assets.
The Bond Fund Annual rate of sixty one-hundredths of one
percent (.60%) of the Bond Fund's average
daily net assets.
The Intermediate Tax-Free Annual rate of sixty one-hundredths of one
Bond Fund percent (.60%) of The Intermediate Tax-
Free Bond Fund's average daily net assets.
The Ohio Municipal Bond Annual rate of sixty one-hundredths of one
Fund percent (.60%) of The Ohio Municipal Bond
Fund's average daily net assets.
The Municipal Income Fund Annual rate of forty-five one-hundredths
of one percent (.45%) of The Municipal
Income Bond Fund's average daily net assets.
The Texas Municipal Bond Annual rate of forty-five one-hundredths
Fund of one percent (.45%) of The Texas Tax-
Free Bond Fund's average daily net assets.
The West Virginia Municipal Annual rate of forty-five one-hundredths
Bond Fund of one percent (.45%) of The West Virginia
Tax-Free Bond Fund's average daily net
assets.
The Kentucky Municipal Bond Annual rate of forty-five one-hundredths
Fund of one percent (.45%) of The Kentucky
Municipal Bond Fund's average daily net
assets.
The Louisiana Municipal Bond Annual rate of sixty one-hundredths of one
percent (.60%) of The Louisiana Municipal
Bond Fund's average daily net assets.
The Arizona Municipal Bond Annual rate of forty-five one-hundredths
Fund of one percent (.45%) of The Arizona
Municipal Bond Fund's average daily
net assets.
The Tax Free Bond Annual rate of forty-five one-hundredths
Fund of one percent (.45%) of The Tax-Free
Bond Fund's average daily net assets.
The Michigan Municipal Bond Annual rate of forty-five one-hundredths
Fund of one percent (.45%) of The Michigan
Municipal Bond Fund's average daily net
assets.
<PAGE> 8
The Short Term Municipal Bond Annual rate of sixty one-hundredths of one
Fund percent (.60%) of The Short-Term Municipal
Bond Fund's average daily net assets.
Investor Aggressive Growth Annual rate of five one-hundredths of one
Fund percent (.05%) of The Investor Aggressive
Growth Fund's average daily net assets.
Investor Conservative Growth Annual rate of five one-hundredths of one
Fund percent (.05%) of The Investor Conservative
Growth Fund's average daily net assets.
Investor Growth & Income Annual rate of five one-hundredths of one
Fund percent (.05%) of The Investor Growth &
Income Fund's average daily net assets.
Investor Growth Fund Annual rate of five one-hundredths of one
percent (.05%) of The Investor Growth Fund's
average daily net assets.
Investor Balanced Annual rate of five one-hundredths of one
Fund percent (.05%) of the Investor Balanced
Fund's average daily net assets.
Investor Fixed Income Annual rate of five one-hundredths of one
Fund percent (.05%) of The Investor Fixed Income
Fund's average daily net assets.
THE ONE GROUP
(formerly The Helmsman Fund)
By: Mark S. Redman
-----------------------
Dated: August 19, 1999
----------------------
BANC ONE INVESTMENT ADVISORS
CORPORATION
By: Mark A. Beeson
-----------------------
Dated: August 19, 1999
---------------------
<PAGE> 1
Exhibit (e)(2)
Revised Schedules A-E to the Distribution Agreement
between One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
<PAGE> 2
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
NAME OF THE FUND
- ----------------
MONEY MARKET FUNDS
- ------------------
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
TREASURY PRIME MONEY MARKET FUND
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
Institutional Prime Money Market Fund
Treasury Money Market Fund
Treasury Only Money Market Fund
Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Government Money Market Fund
Tax Exempt Money Market Fund
EQUITY FUNDS
- ------------
Equity Income Fund
Mid Cap Value Fund (formerly the Disciplined Value Fund)
Mid Cap Growth Fund (formerly the Growth Opportunities Fund)
International Equity Index Fund
Large Cap Value Fund (formerly the Large Company Value Fund)
Equity Index Fund
Balanced Fund (formerly the Asset Allocation Fund)
Large Cap Growth Fund (formerly the Large Company Growth Fund)
Diversified Equity Fund (formerly the Value Growth Fund)
Small Cap Growth Fund (formerly the Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
REAL ESTATE FUND
TECHNOLOGY FUND
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
<PAGE> 3
FIXED INCOME FUNDS
- ------------------
Income Bond Fund
Short-Term Bond Fund) (formerly the Limited Volatility Bond Fund)
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
Government Bond Fund
Ultra Short-Term Bond Fund
Treasury & Agency Fund
High Yield Bond Fund
Bond Fund
Municipal Income Fund
Texas Municipal Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Intermediate Bond Fund
Arizona Municipal Bond Fund
Louisiana Municipal Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Investor Fixed Income Fund
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
-------------------------- --------------------------
<PAGE> 4
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
Shares Subject to Front-End Sales Load
--------------------------------------
NAME OF THE FUND
- ----------------
EQUITY FUNDS
- ------------
Equity Income Fund
Mid Cap Value Fund (formerly the Disciplined Value Fund)
Mid Cap Growth Fund (formerly the Growth Opportunities Fund)
International Equity Index Fund
Large Cap Value Fund (formerly the Large Company Value Fund)
Equity Index Fund
Balanced Fund (formerly the Asset Allocation Fund)
Large Cap Growth Fund (formerly the Large Company Growth Fund)
Diversified Equity Fund (formerly the Value Growth Fund)
Small Cap Growth Fund (formerly the Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
REAL ESTATE FUND
TECHNOLOGY FUND
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
FIXED INCOME FUNDS
- ------------------
Income Bond Fund
Short-Term Bond Fund (formerly the Limited Volatility Bond Fund
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
Government Bond Fund
Ultra Short-Term Bond Fund
High Yield Bond Fund
Bond Fund
Investor Fixed Income Fund
Treasury & Agency Fund
Municipal Income Fund
Texas Municipal Bond Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Intermediate Bond Fund
<PAGE> 5
Arizona Municipal Bond Fund
Louisiana Municipal Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
-------------------------- --------------------------
<PAGE> 6
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
DISTRIBUTION PLAN SHARES
------------------------
NAME OF THE FUND
- ----------------
MONEY MARKET FUNDS
- ------------------
U.S. Treasury Securities Money Market Fund -- Service Class Shares
U.S. Treasury Securities Money Market Fund -- Class A Shares
Prime Money Market Fund -- Class A Shares
Prime Money Market Fund -- Service Class Shares
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -- SERVICE CLASS SHARES
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND -- CLASS A SHARES
TREASURY PRIME MONEY MARKET FUND -- SERVICE CLASS SHARES
TREASURY PRIME MONEY MARKET FUND -- CLASS A SHARES
Municipal Money Market Fund -- Class A Shares
Municipal Money Market Fund -- Service Class Shares
Ohio Municipal Money Market Fund -- Class A Shares
Ohio Municipal Money Market Fund -- Service Class Shares
Michigan Municipal Money Market Fund -- Class A Shares
Michigan Municipal Money Market Fund -- Service Class Shares
Cash Management Money Market Fund -- Class A Shares
Treasury Cash Management Money Market Fund -- Class A Shares
Treasury Prime Cash Management Money Market Fund -- Class A Shares
U.S. Government Cash Management Money Market Fund -- Class A Shares
Municipal Cash Management Money Market Fund -- Class A Shares
EQUITY FUNDS
- ------------
Equity Income Fund (formerly the Income Equity Fund) -- Class A Shares
Mid Cap Value Fund (formerly the Disciplined Value Fund) -- Class A Shares
Mid Cap Growth Fund (formerly the Growth Opportunities Fund) -- Class A Shares
International Equity Index Fund -- Class A Shares
Large Cap Value Fund (formerly the Large Company Value Fund) -- Class A Shares
Equity Index Fund -- Class A Shares
Balanced Fund (formerly the Asset Allocation Fund) -- Class A Shares
Large Cap Growth Fund (formerly the Large Company Growth Fund) -- Class A Shares
Diversified Equity Fund (formerly the Value Growth Fund) -- Class A Shares
Small Cap Growth Fund (formerly the Small Capitalization Fund) -- Class A Shares
Diversified Mid Cap Fund -- Class A Shares
Small Cap Value Fund -- Class A Shares
Diversified International Fund -- Class A Shares
Market Expansion Index Fund -- Class A Shares
REAL ESTATE FUND - CLASS A SHARES
<PAGE> 7
TECHNOLOGY FUND - CLASS A SHARES
Investor Aggressive Growth Fund -- Class A Shares
Investor Growth Fund -- Class A Shares
Investor Growth and Income Fund -- Class A Shares
Investor Balanced Fund -- Class A Shares
Investor Conservative Growth Fund -- Class A Shares
FIXED INCOME FUNDS
- ------------------
Income Bond Fund -- Class A Shares
Short-Term Bond Fund (formerly the Limited Volatility Bond Fund)--Class A Shares
Government Bond Fund -- Class A Shares
Ultra Short-Term Bond Fund -- Class A Shares
Treasury & Agency Fund -- Class A Shares
High Yield Bond Fund -- Class A Shares
Bond Fund -- Class A Shares
Intermediate Tax-Free Bond Fund -- Class A Shares
Ohio Municipal Bond Fund -- Class A Shares
Intermediate Bond Fund -- Class A Shares
Arizona Municipal Bond Fund -- Class A Shares
Louisiana Municipal Bond Fund -- Class A Shares
Michigan Municipal Bond Fund -- Class A Shares
Short-Term Municipal Bond Fund -- Class A Shares
Tax-Free Bond Fund -- Class A Shares
Municipal Income Fund -- Class A Shares
Texas Municipal Bond Fund -- Class A Shares
West Virginia Municipal Bond Fund -- Class A Shares
Kentucky Municipal Bond Fund
Investor Fixed Income Fund -- Class A Shares
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
-------------------------- --------------------------
<PAGE> 8
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
CDSC CLASSES
------------
NAME OF THE FUND
- ----------------
MONEY MARKET FUNDS
- ------------------
U.S. Treasury Securities Money Market Fund -- Class B Shares
Prime Money Market Fund -- Class B Shares
EQUITY FUNDS
- ------------
Equity Income Fund (formerly the Income Equity Fund) -- Class B Shares
Mid Cap Value Fund (formerly the Disciplined Value Fund) -- Class B Shares
Mid Cap Growth Fund (formerly the Growth Opportunities Fund) -- Class B Shares
International Equity Index Fund -- Class B Shares
Large Cap Value Fund (formerly the Large Company Value Fund) -- Class B Shares
Equity Index Fund -- Class B Shares
Balanced Fund (formerly the Asset Allocation Fund) -- Class B Shares
Large Cap Growth Fund (formerly the Large Company Growth Fund) -- Class B Shares
Diversified Equity Fund (formerly the Value Growth Fund) -- Class B Shares
Small Cap Growth Fund (formerly the Small Capitalization Fund) -- Class B Shares
Diversified Mid Cap Fund -- Class B Shares
Small Cap Value Fund -- Class B Shares
Diversified International Fund -- Class B Shares
Market Expansion Index Fund -- Class B Shares
REAL ESTATE FUND -- CLASS B SHARES
TECHNOLOGY FUND -- CLASS B SHARES
Investor Aggressive Growth Fund -- Class B Shares
Investor Growth Fund -- Class B Shares
Investor Growth and Income Fund -- Class B Shares
Investor Balanced Fund -- Class B Shares
Investor Conservative Growth Fund -- Class B Shares
FIXED INCOME FUNDS
- ------------------
Income Bond Fund -- Class B Shares
Short-Term Bond Fund (formerly the Limited Volatility Bond Fund)--Class B Shares
Treasury & Agency Fund-- Class B Shares
Government Bond Fund-- Class B Shares
Ultra Short-Term Bond Fund-- Class B Shares
Intermediate Bond Fund-- Class B Shares
High Yield Bond Fund -- Class B Shares
Bond Fund -- Class B Shares
Intermediate Tax-Free Bond Fund-- Class B Shares
Ohio Municipal Bond Fund-- Class B Shares
Michigan Municipal Bond Fund -- Class B Shares
Short-Term Municipal Bond Fund -- Class B Shares
Tax-Free Bond Fund -- Class B Shares
Municipal Income Fund-- Class B Shares
<PAGE> 9
Texas Municipal Bond Fund-- Class B Shares
West Virginia Municipal Bond Fund-- Class B Shares
Kentucky Municipal Bond Fund-- Class B Shares
Arizona Municipal Bond Fund-- Class B Shares
Louisiana Municipal Bond Fund-- Class B Shares
Investor Fixed Income Fund-- Class B Shares
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
-------------------------- --------------------------
<PAGE> 10
SCHEDULE E
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
CDSC CLASSES
------------
NAME OF THE FUND
- ----------------
EQUITY FUNDS
- ------------
Equity Income (formerly the Income Equity Fund) - Class C Shares
Mid Cap Value Fund (formerly the Disciplined Value Fund ) - Class C Shares
Mid Cap Growth Fund (formerly the Growth Opportunities Fund) - Class C Shares
Equity Index Fund - Class C Shares
Large Cap Value Fund (formerly the Large Company Value Fund) - Class C Shares
Balanced Fund (formerly the Asset Allocation Fund) - Class C Shares
International Equity Index Fund - Class C Shares
Large Cap Growth Fund formerly the Large Company Growth Fund) - Class C Shares
Diversified Equity Fund (formerly the Value Growth Fund) - Class C Shares
Small Cap Growth Fund (formerly the Small Capitalization Fund) - Class C Shares
Diversified Mid Cap Fund -- Class C Shares
Small Cap Value Fund -- Class C Shares
Diversified International Fund -- Class C Shares
Market Expansion Index Fund -- Class C Shares
REAL ESTATE FUND - CLASS C SHARES
TECHNOLOGY FUND - CLASS C SHARES
Investor Aggressive Growth Fund -- Class C Shares
Investor Growth Fund -- Class C Shares
Investor Growth & Income Fund -- Class C Shares
Investor Balanced Fund -- Class C Shares
Investor Conservative Growth Fund -- Class C Shares
FIXED INCOME FUNDS
- ------------------
Income Bond Fund -- Class C Shares
Short-Term Bond Fund (formerly the Limited Volatility Bond Fund)--Class C Shares
Government Bond Fund -- Class C Shares
Ultra Short-Term Income Fund -- Class C Shares
Treasury & Agency Fund -- Class C Shares
High Yield Bond Fund -- Class C Shares
Bond Fund -- Class C Shares
Intermediate Tax-Free Bond Fund -- Class C Shares
Ohio Municipal Bond Fund -- Class C Shares
Intermediate Bond Fund -- Class C Shares
Arizona Municipal Bond Fund -- Class C Shares
Louisiana Municipal Bond Fund -- Class C Shares
Michigan Municipal Bond Fund -- Class C Shares
Short-Term Municipal Bond Fund -- Class C Shares
Municipal Bond Fund -- Class C Shares
Municipal Income Fund-- Class C Shares
Texas Municipal Bond Fund -- Class C Shares
<PAGE> 11
West Virginia Municipal Bond Fund -- Class C Shares
Kentucky Municipal Bond Fund
Investor Fixed Income Fund -- Class C Shares
MONEY MARKET FUNDS
- ------------------
Prime Money Market Fund - Class C Shares
U.S. Treasury Securities Money Market Fund - Class C Shares
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND - CLASS C SHARES
TREASURY PRIME MONEY MARKET FUND - CLASS C SHARES
Municipal Money Market Fund - Class C Shares
Ohio Municipal Money Market Fund - Class C Shares
Michigan Municipal Money Market Fund - Class C Shares
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
-------------------------- --------------------------
<PAGE> 1
Exhibit (e)(6)
Amendment to the Agency Services and Delegation Agreement
between
One Group Mutual Funds and INVESCO Retirement Plan Services.
<PAGE> 2
AMENDMENT TO THE AGENCY SERVICES AND DELEGATION AGREEMENT
This Amendment to the Agency Services and Delegation Agreement is made
effective June , 1999, by and between INVESCO Retirement & Benefit Services
("Service Provider") and One Group Mutual Funds (the "Fund Company").
WHEREAS, the Service Provider and the Fund Company entered into an Agency
Services and Delegation Agreement ("Agreement") dated January 1, 1998, with
regard to certain employee benefit, profit-sharing, and retirement plans for
with the Service Provider performs certain administrative and recordkeeping
services;
WHEREAS, the parties desire to amend said Agreement in the manner hereinafter
set forth;
NOW THEREFORE, pursuant to Section 20 of the Agreement, the parties hereby amend
the Agreement in the following form:
1. The rights and benefits due to INVESCO Retirement & Benefit Services, a
division of INVESCO Fund group, Inc. ("IFG") under this Agreement hereby
are assigned to INVESCO Retirement Plan Services, a division of Retirement
& Benefit Services, Inc. ("IRPS") and IRPS hereby assumes all of IFG's
duties, obligations and liabilities hereunder.
2. Section 11A is deleted in its entirety and replaced with the following:
COMPENSATION.
A. In consideration of performance of the services by the Recordkeeper
hereunder, the Fund Company will compensate the Recordkeeper per
fiscal year at a rate of eighteen dollars ($18.00) per participant
account, or as the Fund Company and the Recordkeeper shall agree from
time-to-time in writing. The Recordkeeper shall invoice the Fund
Company quarterly. Said compensation will commence with the calendar
quarter ending June 30, 1999.
3. The following is added as Section 21:
FUND COMPANY LIABILITY. The names "One Group Mutual Funds" and "Trustees of
One Group Mutual Funds" 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 as of 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 "One Group Mutual Funds" entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agent are made not individually, but in such
<PAGE> 3
capacities, and are not binding upon any of the Trustees, Shareholders, or
representatives of the Fund Company personally, but bind only the assets of
the Fund Company, and all persons dealing with any series of Shares of the
Fund Company must look solely to the assets of the Fund Company belonging
to such series for the enforcement of any claim against the Fund Company.
The Agreement, as amended, shall remain in full force and effect.
IN WITNESS THEREOF, the Fund Company and the Recordkeeper have caused this
Amendment to be executed by their duly authorized officers effective as of the
date first written above.
INVESCO RETIREMENT SERVICES,
a division of INVESCO Retirement and Benefit ONE GROUP MUTUAL FUNDS Services,
Inc.
By: /s/ R. Eric Starr By: /s/ Mark S. Redman
------------------------------- -------------------------------
Name: R. Eric Starr Name: Mark S. Redman
----------------------------- -----------------------------
Title: Secretary & General Counsel Title: President
---------------------------- ----------------------------
Date: August 13, 1999 Date: August 17, 1999
---------------------------- ----------------------------
<PAGE> 1
Exhibit (h)(2)
Revised Schedule A to the Management and Administration Agreement
between
One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
<PAGE> 2
SCHEDULE A
TO THE MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
NAME OF THE MULTIPLE CLASS FUNDS
- --------------------------------
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
TREASURY PRIME MONEY MARKET FUND
Municipal Money Market Fund (formerly Tax-Free Money Market Portfolio)
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Balanced Fund (formerly Asset Allocation Fund)
Equity Income Fund (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
International Equity Index Fund
Large Cap Value Fund (formerly Large Company Value Fund)
Equity Index Fund
Large Cap Growth Fund (formerly Large Company Growth Fund)
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth Fund (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
REAL ESTATE FUND
TECHNOLOGY FUND
High Yield Bond Fund
Bond Fund
Treasury & Agency Fund
Intermediate Bond Fund
Income Bond Fund (formerly Income Portfolio)
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Government Bond Fund
Ultra Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Ohio Municipal Bond Fund
Municipal Income Fund (formerly Tax Free Bond Fund)
Intermediate Tax-Free Bond Fund
Louisiana Municipal Bond Fund
Texas Municipal Bond Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Arizona Municipal Bond Fund
<PAGE> 3
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
COMPENSATION REGARDING MULTIPLE CLASS FUNDS
- -------------------------------------------
Compensation for each of the above Funds (the "Multiple Class Funds")
shall be at annual rates of the Fund's average daily net assets as follows:
twenty one-hundredths of one percent (.20%) of amounts included in that portion
of the aggregate daily net assets of all Multiple Class Funds subject to this
Agreement equal to or less than $1,500,000,000; eighteen one-hundredths of one
percent (.18%) of amounts included in the portion of the aggregate daily net
assets of all Multiple Class Funds subject to this Agreement between
$1,500,000,000 and $2,000,000,000; and sixteen one-hundredths of one percent
(.16%) of amounts included in that portion of the aggregate daily net assets of
all Multiple Class Funds subject to this Agreement in excess of $2,000,000,000.
The fees pertaining to each Multiple Class Fund shall be computed daily in
amounts strictly proportionate to the amount of the Fund's average daily net
assets as a percentage of the aggregate daily net assets of all Multiple Class
Funds subject to this Agreement, and shall be paid periodically.
NAME OF SINGLE CLASS FUNDS
- --------------------------
Treasury Money Market Fund
Treasury Only Money Market Fund
Government Money Market Fund
Tax Exempt Money Market Fund
Institutional Prime Money Market Fund
COMPENSATION REGARDING SINGLE CLASS FUNDS
- -----------------------------------------
Compensation for each of the Funds listed immediately above (the
"Single Class Funds") shall be at the following annual rates: With respect to
The One Group Treasury Money Market, The One Group Treasury Only Money Market,
The One Group Government Money Market, and the One Group Tax Exempt Money Market
Funds" five one-hundredths of one percent (.05%) of the Fund's average daily net
assets; and with respect to The One Group Institutional Prime Money Market Fund:
four one-hundredths of one percent (.04%) of the Fund's average daily net
assets. The fees pertaining to each Single Class Fund shall be computed daily
and paid periodically.
NAME OF FUND OF FUNDS
- ---------------------
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
Investor Fixed Income Fund
COMPENSATION REGARDING FUND OF FUNDS
- ------------------------------------
Compensation for each of the above Funds (the "Fund of Funds") shall be
at annual rates as follows: ten one-hundredths of one percent (.10%) of the
Fund's average daily net assets on the first $500,000,000 in Fund assets; seven
and one-half one-hundredths of one percent (.075%) of the Fund's average daily
net assets between
<PAGE> 4
$500,000,000 and $1,000,000,000 and five one-hundredths of one percent (.05%) of
the Fund's average daily net assets when Fund assets exceed $1,000,000,000.
<PAGE> 5
COMPENSATION TO BE REDUCED BY FUND ACCOUNTING FEES
- --------------------------------------------------
The compensation under this Agreement due to The One Group Services
Company with respect to each Multiple Class Fund, each Single Class Fund and
each Fund of Fund shall be reduced in each month by the amount of compensation
paid to The One Group Service Company under its Fund Accounting Agreement with
The One Group with respect to such Fund.
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------------- ----------------------------
Date: May 20, 1999 Date: May 20, 1999
<PAGE> 1
Exhibit (h)(6)
Revised Schedule A to the Fund Accounting Agreement
between
One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
<PAGE> 2
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE ONE GROUP(R)
AND
THE ONE GROUP SERVICES COMPANY
NAME OF THE FUND
- ----------------
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S. Treasury Securities Money Market Fund
Treasury Prime Money Market Fund
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Treasury Money Market Fund
Treasury Only Money Market Fund
Government Money Market Fund
Tax Exempt Money Market Fund
Institutional Prime Money Market Fund
Balanced Fund (formerly Asset Allocation Fund)
Equity Income Fund (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
International Equity Index Fund
Large Cap Growth Fund (formerly Large Company Value Fund)
Equity Index Fund
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
Real Estate Fund
Technology Fund
High Yield Bond Fund
Bond Fund
Government Bond Fund
Income Bond Fund
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Ultra Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Treasury & Agency Fund
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
Municipal Income Fund (formerly Tax Free Bond Fund)
Texas Municipal Bond Fund
<PAGE> 3
Intermediate Bond Fund
Arizona Municipal Bond Fund
Large Company Growth Fund
Kentucky Municipal Bond Fund
West Virginia Municipal Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Louisiana Municipal Bond Fund
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
Investor Fixed Income Fund
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
---------------------- ---------------------
Date: May 20, 1999 Date: May 20, 1999
---------------------- ---------------------
<PAGE> 1
Exhibit (h)(8)
Revised Schedule A to the Sub-Administration Agreement
between
One Group Services Company and Banc One Investment Advisors Corporation
dated May 20, 1999
<PAGE> 2
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
BETWEEN
THE ONE GROUP SERVICES COMPANY
AND
BANC ONE INVESTMENT ADVISORS
NAME OF THE MULTIPLE CLASS FUND
- -------------------------------
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
TREASURY PRIME MONEY MARKET FUND
Municipal Money Market Fund (formerly Tax-Free Money Market Portfolio)
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Balanced Fund (formerly Asset Allocation Fund)
Equity Income (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
International Equity Index Fund
Large Cap Growth Fund (formerly Large Company Growth Fund)
Large Cap Value Fund (formerly Large Company Value Fund)
Equity Index Fund
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
REAL ESTATE FUND
TECHNOLOGY FUND
High Yield Bond Fund
Bond Fund
Treasury & Agency Fund
Income Bond Fund (formerly Income Portfolio)
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Government Bond Fund
Ultra Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Intermediate Bond Fund
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
Municipal Income Fund (formerly Tax Free Bond Fund)
Texas Municipal Bond Fund
West Virginia Municipal Bond Fund
Louisiana Municipal Bond Fund
Kentucky Municipal Bond Fund
Arizona Municipal Bond Fund
<PAGE> 3
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
Investor Fixed Income Fund
NAME OF SINGLE CLASS FUNDS
- --------------------------
The One Group Treasury Money Market Fund
The One Group Treasury Only Money Market Fund
The One Group Government Money Market Fund
The One Group Tax Exempt Money Market Fund
The One Group Institutional Prime Money Market Fund
BANC ONE INVESTMENT ADVISORS CORPORATION THE ONE GROUP SERVICES COMPANY
By: /s/ Mark A. Beeson By: /s/ Mark S. Redman
------------------------- -------------------------
Date: May 20, 1999 Date: May 20, 1999
------------------------- -------------------------
<PAGE> 1
Exhibit (h)(10)
Amendment to the Agency Services and Delegation Agreement
between
One Group Mutual Funds and BISYS Qualified Plan Services
<PAGE> 2
AMENDMENT TO THE AGENCY SERVICES AND DELEGATION AGREEMENT
This Amendment to the Agency Services and Delegation Agreement is made
effective June , 1999, by and between One Group Mutual Funds (the "Fund
Company") and BISYS Qualified Plan Services, Inc. ("Recordkeeper").
WHEREAS, pursuant to an Agency Services and Delegation Agreement ("Agreement")
dated January 1, 1996, the Recordkeeper has agreed to perform certain
recordkeeping and accounting services and functions with respect to transactions
in shares the Fund Company made by or on behalf of participants, beneficiaries
or plan sponsors in certain employee pension benefit plans as defined in Section
3(2)(A) of the Employee Retirement Income Security Act of 1974;
NOW THEREFORE, pursuant to Section 20 of the Agreement, the Fund Company and the
Recordkeeper amend the Agreement in the following form:
1. Section 6(a) is deleted in its entirety and replaced with the
following:
Compensation.
-------------
A. In consideration of performance of the services by the
Recordkeeper hereunder, the Fund Company will compensate the
Recordkeeper per fiscal year at a rate of eighteen dollars
($18.00) per participant account per fund position, or as the
Fund Company and the Recordkeeper shall agree from
time-to-time in writing. The Recordkeeper shall invoice the
Fund Company quarterly. Said compensation will commence with
the calendar quarter ending June 30, 1999.
2. The following is added as Section 10:
FUND COMPANY LIABILITY. The names "One Group Mutual Funds" and
"Trustees of One Group Mutual Funds" 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
as of 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 "One
Group Mutual Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agent are made not
individually, but in such capacities, and are not binding upon any of
the Trustees, Shareholders, or representatives of the Fund Company
personally, but bind only the assets of the Fund Company, and all
persons dealing with any series of Shares of the Fund Company must look
solely to the assets of the Fund Company belonging to such series for
the enforcement of any claim against the Fund Company.
<PAGE> 3
The Agreement, as amended, shall remain in full force and effect.
IN WITNESS THEREOF, the Fund Company and the Recordkeeper have caused this
Amendment to be executed by their duly authorized officers effective as of the
date first written above.
BISYS Qualified Plan Services, Inc. ONE GROUP MUTUAL FUNDS
By: /s/ Eric F. Hill By: /s/ Mark S. Redman
-------------------------------- --------------------------------
Name: Eric F. Hill Name: Mark S. Redman
------------------------------ ------------------------------
Title: Vice-President Title: President
----------------------------- -----------------------------
Date: 8/20/99 Date: 8/20/99
------------------------------ ------------------------------
<PAGE> 1
Exhibit (h)(11)
Order Processing Agreement
between
One Group Mutual Funds and Bank One Trust Company, NA
<PAGE> 2
ORDER PROCESSING AGREEMENT
AGREEMENT made as of May 20, 1999, by and between Bank One Trust Company, NA
("Recordkeeper") and The One Group(R) (the "Fund Company").
WHEREAS, the Recordkeeper and the Fund Company have entered into an Agency and
Delegation Agreement (the "Agency Agreement"), which is incorporated herein by
reference, under which the Fund Company will retain the Recordkeeper to perform
certain recordkeeping and accounting services and functions with respect to
transactions in shares of series ("Funds") of the Fund Company made by or on
behalf of participants in certain employee pension benefit plans as that term is
defined in Section 3(2)A) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("Plans");
WHEREAS, pursuant to the Agency Agreement, the Recordkeeper has been deemed the
agent of the Fund Company for the limited purpose of receiving instructions
("Instructions") in proper form from participants, beneficiaries or plan
sponsors (collectively, "Participants") from which are derived orders ("Orders")
for the purchase, redemption and exchange of Fund shares; and
WHEREAS, the Recordkeeper is responsible for transmitting such Orders to the
Fund Company's transfer agent.
NOW THEREFORE, in consideration of the foregoing and the mutual promises set
forth below, the parties hereto agree as follows:
1. PROVISION OF NET ASSET VALUE. The Fund Company or its designee shall
furnish the Recordkeeper with the confirmed net asset value ("NAV")
information as of the close of trading on the New York Stock Exchange
(generally, 4:00 p.m., Eastern Time ("ET")) ("Market Close") on any day
that the Fund Company is open for business ("Business Day"), and
dividend and capital gains information as it arises. The Fund Company
or its designee shall use its best efforts to provide such information
by 6:30 p.m., ET on each Business Day.
2. THE RECORDKEEPERS RECEIPT AND TRANSMISSION OF ORDERS.
a) As provided in the Agency Agreement, the Recordkeeper will
aggregate all purchase, redemption and exchange Instructions
made by or on behalf of Plan Participants and communicate to
the Fund Company an aggregate purchase, redemption or exchange
Order.
b) The Recordkeeper agrees that (i) Orders derived from
Participant Instructions received by the Recordkeeper prior to
the Market Close on any Business Day of the Fund Company, as
defined in the Fund Company's registration statement, ("Day
1") will be electronically transmitted to the Fund Company by
9:00 p.m., ET that Business Day (such Orders are referred to
as "Day 1 Trades"); and (ii) orders derived from Instructions
received by the Recordkeeper after the Market Close ("Day 2
Trades") on Day 1 will be electronically transmitted to the
Fund Company on the next Business Day following Day 1 ("Day
2").
<PAGE> 3
c) If the Recordkeeper cannot electronically transmit Day 1
Trades by 9:00 p.m. on Day 1, the Recordkeeper will transmit
such Orders by facsimile prior to the Market Open (generally
7:00 a.m.) on Day 2. If Day 2 Trades cannot be electronically
transmitted by 9:00 p.m. on Day 2, the Recordkeeper will
transmit such Orders by facsimile prior to the Market Open on
the second business day following Day 1 ("Day 3").
3. PRICING OF ORDERS. The Fund Company agrees that Day 1 Trades will be
effected at the NAV calculated as of the Market Close on Day 1,
provided that such trades are received by the Fund Company by 9:00
p.m., ET on Day 1 or prior to 7:00 a.m. on Day 2; and Day 2 Trades will
be effected at the NAV calculated as of the Market Close on Day 2,
provided they are received by the Fund Company by 9:00 p.m., ET on Day
2 or prior to 7:00 a.m. on Day 3. The Fund Company agrees that,
consistent with the foregoing, Day 1 Trades will have been received by
the Fund Company prior to the Market Close on Day 1, and Day 2 trades
will have been received by the Fund Company prior to the Market Close
on Day 2 for all purposes, including, without limitation, effecting
distributions.
4. CONFIRMATIONS. The Fund Company will send a confirmation of each
Business Day's Order via electronic transmission or facsimile by the
Market Close on Day 2 for Day 1 Trades received by 9:00 p.m on Day 1,
and on Day 3 for Day 1 Trades received prior to 7:00 a.m. on Day 2.
5. ROLE OF THE RECORDKEEPER. The parties acknowledge and agree that,
except as specifically provided in this Agreement and for the sole and
limited purposes set forth herein, the Recordkeeper acts as agent for
the Plans in connection with the effectuation of Orders subject to this
Agreement. The parties agree that the Recordkeeper is not an agent of
the Fund Company other than as provided herein and in the Agency
Agreement.
6. BOOKS AND RECORDS. To the extent required by the Investment Company Act
of 1940 (the "1940 Act"), as amended, and the rules thereunder, all
records maintained by the Recordkeeper hereunder are the property of
the Fund Company and will be preserved, maintained and made available
in accordance with the 1940 Act and the rules thereunder. Copies, or if
required, originals, of such records shall be surrendered promptly to
the Fund Company and its agents (or independent accountants) upon
request. This Section 6 shall survive termination of this Agreement.
7. REPRESENTATIONS OF THE RECORDKEEPER.
(a) Bank One Trust Company, NA is a national banking association
with its principal offices in Columbus, Ohio.
(b) Bank One Trust Company, NA possesses full power and authority
to enter into and perform services under this Agreement
8. VERIFICATION. Each party shall, as soon as practicable after
notification that a report, notification or other information has been
transmitted by the other party via facsimile or
<PAGE> 4
other electronic transmission, confirm the receipt of such report,
notification or other information. Such confirmation shall be in oral,
written or electronic format. In the absence of such confirmation, a
party to whom the transmission was sent shall not be held liable for
any failure to act in accordance with the transmission, and absent
evidence to the contrary, the sending party may not claim that the
transmission was received by the other party. Each party shall promptly
notify the other of any errors, omission or interruptions in, or delay
or unavailability of, any such transmission as promptly as possible.
9. LIMITATION OF LIABILITY. The Recordkeeper shall not be liable to the
Fund Company for any loss or damage, including counsel fees and court
costs, whether or not resulting from its acts or omissions to act
hereunder or otherwise hereunder, unless the loss or damage arises out
of the Recordkeeper's own bad faith, wilful misfeasance, negligence or
from its reckless disregard of its obligations and duties.
The Fund Company shall not be liable to the Recordkeeper for any loss
or damage, including counsel fees and court costs, whether or not
resulting from its acts or omissions to act hereunder or otherwise
hereunder, unless the loss or damage arises out of the Fund Company's
own bad faith, wilful misfeasance, negligence or from its reckless
disregard of its obligations and duties.
10. TERMINATION. The Fund Company will provide the Recordkeeper with ninety
(90) days prior written notice if purchase Orders may no longer be
effected in accordance with this Agreement. Such termination shall not
affect the remaining provisions of this Agreement and redemption Orders
shall continue to be effected. Either party may terminate this
Agreement upon ninety (90) day's prior written agreement to the Fund
Company.
11. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties, supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, and shall not be
modified or amended except by a writing signed by both parties.
12. NOTICES. Unless otherwise specified, all notices and other
communications shall be in writing and shall be duly given if hand
delivered, delivered by facsimile with written confirmation, or mailed
by first class mail to the following addresses:
If to the Fund Company:
-----------------------
The One Group
Attn: Mark Redman
3435 Stelzer Road
Columbus, Ohio 43219
If to the Recordkeeper:
-----------------------
Bank One Trust Company, NA
Attn: John Murphy
<PAGE> 5
P.O. Box 710091
190 Heatherdown Road
Westerville, Ohio 43271-0091
13. SEVERABILITY. If any provision of this Agreement are held or made
invalid by a statute, rule, regulation , decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected and,
to this extent, the provisions of this Agreement shall be deemed to be
severable.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
state of Ohio, except as such laws are superseded by or preempted by
any Federal law.
15. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party.
16. DISPUTE RESOLUTION AND ARBITRATION. Any controversy or claim arising
out of or relating to this Agreement, or the breach of the same which
gives rise to a remedy at law, shall be settled through consultation
and negotiation in good faith and a spirit of mutual cooperation.
However, if those attempts fail, the parties agree that any
misunderstandings or disputes arising from this Agreement shall be
decided by arbitration which shall be conducted, upon request by either
party, before three (3) arbitrators (unless both parties agree on one
(1) arbitrator) designated by the American Arbitration Association (the
"AAA"), in accordance with the terms of the Commercial Arbitration
Rules of the AAA, and, to the maximum extent applicable, the United
States Arbitration Act (Title 9 of the United States Code), or if such
Act is not applicable, any substantially equivalent Ohio state law. The
parties further agree that the arbitrator(s) will decide which party
must bear the expenses of the arbitration proceedings. The arbitration
will take place in Columbus, Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date set forth above.
THE ONE GROUP BANK ONE TRUST COMPANY, NA
By: /s/ Mark S. Redman By: /s/ John G. Alexander
-------------------------- ----------------------------
Name: Mark S. Redman Name: John G. Alexander
------------------------ --------------------------
Title: President Title: Senior Managing Director
------------------------ --------------------------
<PAGE> 1
Exhibit (h)(29)
Sub-Transfer Agency Agreement
between
Pershing Division of Donaldson, Lufkin & Jenrette Securities Corporation
and
One Group Mutual Funds.
<PAGE> 2
SUB TRANSFER AGENCY AGREEMENT
AGREEMENT made as of ___________________________________________ by and between
the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corporation
("Recordkeeper") and One Group Mutual Funds (the "Trust").
WHEREAS, the Trust desires to enter into a Sub Transfer Agency Agreement
pursuant to which the Trust will retain the Recordkeeper to perform certain
recordkeeping and accounting services and functions with respect to transactions
in Trust shares ("Shares") made by or on behalf of Client/Shareholders of
Recordkeeper and broker dealer correspondents of Recordkeeper ("Clients") with
respect to holdings of Shares maintained by or on behalf of such Clients, when
with respect to the Trust such plans maintain with the Trust's transfer agent
("Transfer Agent") one or more master shareholder accounts; and
NOW, THEREFORE, in consideration of the following premises and mutual covenants,
the parties agree as follows:
1. Services Provided by The Recordkeeper
-------------------------------------
When and to the extent reasonably requested by the Trust, the Recordkeeper
agrees to perform recordkeeping and account services and functions with respect
to transactions in Shares made by or on behalf of Clients, and with respect to
holding of Shares maintained by or on behalf of Clients. To the extent
requested, the Recordkeeper will provide the following services:
A. Maintain separate records for each Client reflecting Shares
purchased, redeemed and exchanged on behalf of such Client and
outstanding balances of Shares owned by or for the benefit of such
Client.
B. Prepare and transmit to Clients periodic account statements
indicating the number of shares of the Trust owned by or for the
benefit of Clients and purchases, redemptions and exchanges made on
behalf of Clients.
C. Aggregate all purchase, redemption and exchange orders made by or on
behalf of the Clients and transmit instructions based on such
aggregate orders ("Instructions") to the Transfer Agent for
acceptance.
D. Provide to the Trust, the Transfer Agent and/or other parties
designated by them such other information relating to transactions
in and holdings of Shares by or on behalf of Clients as is
reasonably requested.
E. As agreed upon with the Trust, deliver or arrange for the delivery
of appropriate documentation in connection with orders.
2. Appointment as Agent For Limited Purpose
----------------------------------------
<PAGE> 3
The Recordkeeper shall be deemed the agent of the Trust for the sole and limited
purpose of receiving purchase redemption and exchange orders from Clients and
Transmitting corresponding instructions to the Transfer Agent. Except as
provided specifically herein, neither the Trust nor any person to which the
Trust may delegate any of its duties hereunder shall be or hold itself out as an
agent of the Transfer Agent or the Trust.
3. Representations of Recordkeeper
-------------------------------
The Recordkeeper agrees, represents and warrants that:
A. It will forward Instructions within such time periods and to such
parties as are specified by the Trust, the Transfer Agent, the
Trust's prospectuses and applicable law and regulation.
B. At all times during the term of this contract, the Recordkeeper will
maintain errors and omissions coverage in an amount not less than
$1,000,000 per occurrence, and in the aggregate. A certificate of
insurance evidencing such coverage will be provided by the
Recordkeeper to __________________________ as soon as is practicable
after commencement of this Agreement.
4. Records and Reporting
---------------------
The Recordkeeper will maintain and preserve all records as required by law in
connection with its provision of services under this Agreement. Upon the
reasonable request of the Funds or the Transfer Agent, the Recordkeeper will
provide copies of. historical records relating to transactions involving the
Trust and Clients; written communications regarding the Trust to or from
Clients; and other materials relating to the provision of services by the
Recordkeeper under this Agreement. The Recordkeeper will comply with any
reasonable request for such information and documents made by the Trust, or its
board of Trustees or any governmental body or self-regulatory organization.
Notwithstanding anything herein to the contrary, the Recordkeeper shall not be
required to provide the names and addresses of Clients to the Transfer Agent or
the Trust, unless applicable law or regulation otherwise requires.
5. Ability to Provide Services
---------------------------
The Recordkeeper agrees to notify the Trust promptly if for any reason it is
unable to perform its obligations under this Agreement.
6. Compensation
------------
A. In consideration of performance of the services by the Recordkeeper
hereunder, the Trust will compensate the Recordkeeper at the rate of
$15 per client account, payable in quarterly increments in arrears
as of the last business day of each
<PAGE> 4
quarter or at a rate as to which the Trust and the Recordkeeper
agree from time-to-time in writing.
B. The Recordkeeper will permit the Trust and its representatives
(including counsel and independent accounts) to have reasonable
access to its records to enable the Trust to verify that the
Recordkeeper's charges hereunder comply with the provisions of this
Agreement. Such access shall include, but not be limited to, up to
four on-site inspections of the Recordkeeper's records each calendar
year.
7. Indemnification
---------------
The Recordkeeper shall indemnify and hold harmless the Trust from and against
any and all losses and liabilities that it may incur, including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of the Recordkeeper of its
responsibilities under this Agreement, excluding, however, any such claims,
suits, loss, damage or costs caused by, contributed to or arising from any
non-compliance by the Trust with its obligations under this Agreement or the
Trust's negligence or misconduct, as to which the Trust as pertinent, shall
indemnify, hold harmless and defend the Recordkeeper on the same basis as set
forth above.
8. Termination
-----------
This Agreement may be terminated at any time by either parry hereto upon ninety
(90) days written notice to the other. The provisions of paragraphs 4 and 7
shall continue in full force and effect after termination of this Agreement.
9. Limitation of Liability of the Trustees and Shareholders
--------------------------------------------------------
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust property of the
Trust. The execution and delivery of this Agreement has been authorized by the
Trustees, and this Agreement has been signed and delivered by an authorized
officer of the Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
the Trust's Agreement and Declaration of Trust.
10. Miscellaneous
-------------
This Agreement represents the entire Agreement between the parties with regard
to the matters described herein and may not be modified or amended except by
written instrument executed by all parties. This Agreement may not be assigned
by either party hereto without the prior written consent of the other parties.
This Agreement is made and shall be construed under the laws of the State of New
York. This Agreement supersedes all previous agreements and understandings
<PAGE> 5
between the parties with respect to its subject matter. If any provision of the
Agreement shall be held or made invalid by a statute, rule, regulation, decision
of a tribunal or otherwise, the remainder of the Agreement shall not be affected
thereby.
<PAGE> 6
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
THE ONE GROUP
By: /s/ Mark S. Redman
-------------------------------
Title: President
----------------------------
PERSHING DIVISION OF DONALDSON, LUFKIN
& JENRETTE SECURITIES CORPORATION
By:_______________________________
Title: Senior Vice President
----------------------------
<PAGE> 1
Exhibit (h)(32)
Services Agreement
between
One Group Mutual Funds, Bank One Trust Company, NA,
Kemper Services Company,
Kemper Distributors, Inc. and
The One Group Services Company.
<PAGE> 2
SERVICES AGREEMENT
THIS AGREEMENT, made and entered into as of this 28th day of May, 1999,
is by and between, One Group Mutual Funds ("Fund"), The One Group Service Co.
("Principal Underwriter"), Bank One Trust Company, N.A. ("Bank One"), Kemper
Service Company ("KSvC"), and Kemper Distributors, Inc. ("KDI").
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); the Principal
Underwriter is the agent of the Fund for the distribution of shares of the Fund;
and Bank One is a national bank providing education and enrollment services in
connection with retirement plans;
WHEREAS, KSvC, a registered transfer agent, provides various
administrative services, including recordkeeping, reporting and processing
services, to retirement plans covered by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); and KDI, a registered broker-dealer,
distributes shares of investment companies to Plans;
WHEREAS, it is contemplated that the appropriate fiduciary of a Plan
(e.g., the trustee, a committee or other "named fiduciary") ("Plan Fiduciary")
will either direct the investment
<PAGE> 3
of Plan assets in the Fund, or offer participants of the Plan ("Participants")
the opportunity to select the Fund as an investment for their individual
accounts, and the Plan Fiduciary has designated KSvC as its agent for purposes
of transmitting orders for purchases and requests for redemptions to the Fund on
behalf of the Plan;
WHEREAS, the Fund, Bank One, the Principal Underwriter, KDI, and KSvC
desire to facilitate the investment by Plans in shares of the Fund, the
provision of services for the benefit of Plans and Participants related to
accounts in the Fund, including processing of Plan orders for purchases and
redemptions of Fund shares; and the dissemination of information regarding the
Fund to Plans and Participants; and
WHEREAS, the Fund desires that KSvC provide certain administrative
services (as described herein at ARTICLES 1, 2 and 3) on its behalf with respect
to Plans, and KSvC is willing to perform such services;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1. APPOINTMENT OF KSVC AS AGENT. The Fund hereby appoints KSvC as its
agent for the limited purpose of receiving orders for purchases and requests for
redemptions for Fund shares from Plans, and receipt thereof by KSvC shall
constitute receipt by the Fund. The Fund further appoints KSvC as a co-
<PAGE> 4
transfer agent, responsible for transferring record ownership in connection with
Plans, orders for purchases and requests for redemptions of Fund shares. KSvC
accepts this appointment subject to the terms and conditions herein.
ARTICLE 2. TRANSACTIONS IN FUND SHARES.
SECTION 2.1 The Fund or its designee shall make Fund shares available
for purchase by Plans, at a public offering price determined in a manner
described in the applicable prospectus, which shall be the net asset value as
determined by the prospectus.
SECTION 2.2 PROCESSING OF ORDERS. (a) KSvC shall, as agent for the
Fund, receive for acceptance from Plans orders for purchases and requests for
redemptions, and stamp each order with the date and time received. KSvC shall
determine each Plan's daily orders to correspond with instructions received from
Plan Fiduciaries or Participants.
(b) Orders for purchases and requests for redemptions
received in good form by KSvC prior to the determination of net asset value by
the Fund ("Time of Pricing") on each day that the New York Stock Exchange is
open ("Business Day") shall be priced at the net asset value effective on that
day. Orders received after the Time of Pricing shall be priced at the net asset
value effective on the next Business Day. A Plan's order for purchase
<PAGE> 5
shall not be deemed received "in good form" by KSvC until the Master Custodian
(described in Section 2.3) has received from the Plan funds necessary to settle
the order, and KSvC has received purchase instructions in good order that
balance to the order received.
(c) The Fund or its designee shall provide to KSvC closing net
asset value, dividend and capital gain information determined at the close of
trading on each Business Day no later than 6 p.m. Central Time.
(d) On each Business Day, KSvC shall transfer record ownership
of the Fund's shares in accordance with the orders for purchases and requests
for redemptions received from Plans prior to the Time of Pricing on that
Business Day (T). KSvC shall transfer record ownership of the Fund's shares in
accordance with orders for purchases and requests for redemptions received from
Plans after the Time of Pricing on the next Business Day.
(e) KSvC shall use its best efforts to notify the Fund or its
designee of (1) the total number of Fund shares purchased by Plans and, (2) the
total number of shares redeemed by Plans (without identifying transactions on a
Plan-by-Plan basis) on each Business Day (T) no later than 8 a.m. Central Time
on the next Business Day (T+1), or such other specified
<PAGE> 6
time mutually acceptable to the parties ("Time of Transmission").
(f) The Fund or its designee shall confirm the net number of
Fund shares purchased or redeemed by Plans on the prior Business Day (T) no
later than 2 p.m. Central Time on the next Business Day (T+1), or such other
time as mutually agreed by the parties. KSvC shall promptly review confirmation
information and coordinate with the Fund or its designee to resolve any
discrepancies. KSvC shall be responsible for providing confirmations of
transactions to Plans and to Participants, as required under applicable laws.
SECTION 2.3 SETTLEMENT. (a) Generally. A master custodial account will
be maintained on behalf of Plans by Investors Fiduciary Trust Company ("Master
Custodian") under the terms of a certain Master Custodial Agreement between the
Plan Fiduciaries and the Master Custodian. Plan Fiduciaries will appoint KSvC to
act as their agent to transmit instructions to the Master Custodian regarding
the receipt and transfer of Plan assets in connection with the investment of
Plan assets, including investment in the Fund.
(b) Settlement of Purchases. Acting as agent for Plan
Fiduciaries, KSvC shall instruct the Master Custodian to wire the full purchase
price for Fund shares purchased by Plans
<PAGE> 7
to the appropriate custodial account for the Fund (the "Fund Custodial Account")
no later than 11 a.m. Central Time on the next Business Day after the order is
accepted by KSvC (T+1), or such other specified time mutually acceptable to the
parties.
(c) Settlement of Redemptions. Full payment for total
redemptions by Plans on each Business Day shall be wired by the Fund to the
Master Custodial Account no later than 11 a.m. Central Time on the next Business
Day after the order is accepted (T+1), or such other specified time mutually
acceptable to the parties.
SECTION 2.4 DIVIDENDS. All dividends declared or distributions made by
the Fund shall be reinvested in shares of the Fund on behalf of Plans entitled
to the dividend or distribution. Upon declaration of any dividend or other
distribution with respect to Fund shares, the Fund or its designee shall provide
KSvC information setting forth the date of declaration of the dividend or
distribution, the exdividend date, the date of payment thereof, the record date
on which Plans entitled to payment will be determined, and the amount payable
per share to the Plans on that date.
ARTICLE 3. ADMINISTRATIVE SERVICES. KSvC shall provide the following
administrative and recordkeeping services to the Fund.
<PAGE> 8
SECTION 3.1 PLAN ACCOUNTING. KSvC shall maintain an individual
securityholder account for each Plan on behalf of the Fund or its designee. KSvC
shall promptly post to each Plan's securityholder account credits and debits
containing the minimum and appropriate certificate detail representing all Fund
shares purchased or redeemed by Plans, and shall dispatch (by electronic means,
or as otherwise mutually agreed) to the Fund or its designee a record of all
debits and credits for every security purchased or redeemed by each Plan within
two Business Days after the day of the purchase or redemption transaction, or by
such time as may be otherwise required under Section 17 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the regulations
thereunder. KSvC shall provide periodic account statements to each Plan that
reflect the Plan's interest in the Fund.
SECTION 3.2 PARTICIPANT ACCOUNTING. In accordance with directions by
Plan Fiduciaries, KSvC shall maintain individual accounts for Participants,
including a record of the number of shares of the Fund allocated to each
Participant's individual account. If requested by the Plan Fiduciary, KSvC shall
provide periodic account statements for each Participant that reflect
Participants' interests in the Fund.
<PAGE> 9
SECTION 3.3 PLAN FIDUCIARY AND PARTICIPANT INQUIRIES. KSvC shall
investigate and respond to inquiries from Plan Fiduciaries and Participants,
including responding to Participant inquiries regarding their individual
accounts or regarding the Fund. if authorized by the Plan Fiduciaries, KSvC
(acting together with KDI) shall make available to Plan Fiduciaries and
Participants an "800" number service through which live operators will provide
information about the Fund, answer Participant inquiries about their investment
in the Fund, and receive Participant investment instructions. The Fund or its
designee shall provide KSvC a telephone number and the name of an employee
("Point of Contact") for answering questions or inquiries that KSvC may have
about the Fund and for forwarding Participant questions and inquiries that KSvC
is unable to answer. At the request of KSvC, the Fund or its designee shall
provide KSvC training to enable KSvC to respond to and answer Participant
questions and inquiries.
SECTION 3.4 COMMUNICATIONS. KSvC shall distribute prospectuses to Plans
and Participants already invested in the Fund upon Participant request, or as
otherwise directed by Plan Fiduciaries. KSvC shall notify the Fund or its
designee of the number of prospectuses required, and the Fund or its designee
shall, at their expense, provide KSvC with a sufficient quantity
<PAGE> 10
of Fund prospectuses. KSvC also may periodically distribute current Fund Sheets
(described in Section 5.2 below) to Plans and Participants already invested in
the Fund. KSvC shall pay the cost of distributing these materials to Plan
Fiduciaries and Participants.
SECTION 3.5 PROXY MATERIALS. The Fund or its designee is responsible
for making proxy solicitations to Plans. KSvC agrees, however, that it will
prepare adequate computer tapes compatible with the Fund's or its designee's
computer equipment and software so that the Fund or its designee may make proper
proxy solicitations of Plans. The Fund or its designee shall provide KSvC
fifteen (15) Business Day's prior written notice of the date that the Fund or
its designee requires the computer tapes. KSvC shall have no responsibility with
respect to unexecuted proxies.
SECTION 3.6 BLUE SKY REPORTS. If, in the reasonable judgment of the
Fund or its designee, blue sky information is required by applicable state
securities laws or the interpretation thereof by applicable regulatory
authorities, KSvC shall periodically prepare a report to the Fund or its
designee, in accordance with a system approved by the Fund or its designee,
showing by state all sales and redemptions of Fund shares by Plans.
<PAGE> 11
SECTION 3.7 RECORDS.
(a) GENERAL. KSvC shall maintain and preserve all records
required by law to be maintained and preserved in connection with providing the
above described administrative services. To the extent required by Section 31 of
the 1940 Act, and regulations thereunder, all such records are the property of
the Fund, and shall be preserved, or surrendered promptly to the Fund or its
agents on request. In addition, KSvC agrees that with respect any of its records
that are required to be maintained in connection with its provision of services
under this Agreement under section 17 of the 1934 Act, and regulations
thereunder, (a) such records are subject at any time, or from time to time, to
reasonable periodic, special, or other examinations by representatives of the
Securities and Exchange Commission (the "Commission") and any other regulatory
agency having authority with respect to the Fund or its designee; and (b) KSvC
will furnish to the Commission (and any other appropriate regulatory agency)
upon demand, complete, correct and current hard copies of any and all such
records.
SECTION 3.8 TERMINATION OF SERVICES WITH RESPECT TO A PLAN.
KSvC shall notify the Fund if it terminates its agreement for providing
administrative services to a Plan. In that event,
<PAGE> 12
KSvC shall deliver to the Fund or its designee all securityholder records that
the Fund is required to maintain under Section 17 of the 1934 Act and Section 31
of the 1940 Act, and applicable regulations, and the Fund or its designee shall
thereafter be responsible for preserving, maintaining and posting such records
on behalf of the Fund.
ARTICLE 4. FEE FOR ADMINISTRATIVE SERVICES. In consideration of the services
provided under this Agreement, KSvC shall receive an administrative fee equal to
35 basis points per annum of the daily net asset value of assets invested by
Plans in the Fund, computed monthly and paid quarterly in arrears. The Fund
shall pay up to $18.00 per account and Bank One shall pay the balance.
ARTICLE 5. DISSEMINATION OF INFORMATION TO PROSPECTIVE PLAN INVESTORS.
SECTION 5.1 MARKETING MATERIALS. KDI is authorized to develop and
prepare materials describing the Fund for use in providing information about the
Fund to Plans and Participants that may invest in Fund shares, including (but
not limited to) a "Fund Sheet," as described by Section 5.2. KDI shall pay the
cost of preparing and printing these materials. The Fund or its designee shall
provide NASD approved historical Fund
<PAGE> 13
information to KDI in an automated electronic format agreed to by the parties to
assist KDI in preparing the Fund Sheet. KDI shall submit any such materials to
the Principal Underwriter for review and approval before use and the Principal
Underwriter shall advise KDI in writing of its approval or disapproval within
fifteen (15) Business Days of receiving any marketing materials.
SECTION 5.2 FUND SHEET. KDI may develop a standardized format for a
"Fund Sheet" that provides updated performance information about the Fund. KDI
shall submit the Fund Sheet format to the Principal Underwriter for review and
approval in accordance with Section 5.1. After receiving written approval of the
format, KDI may prepare, update and distribute the Fund Sheet without any
requirement for subsequent written approval; provided that (a) each version of
the Fund Sheet is prepared or updated in accordance with the approved format,
and (b) KDI provides a copy of each version of the Fund Sheet to the Principal
Underwriter at least fifteen (15) days prior to first use.
SECTION 5.3 ABSENCE OF REPRESENTATIONS WITH RESPECT TO FUND SHARES.
Neither KDI nor KSvC is authorized to make any representations concerning shares
of the Fund except those contained in either (a) the current Fund prospectus,
(b) other
<PAGE> 14
printed information supplemental to the current Fund prospectus and issued by
either the Fund or Principal Underwriter, or (c) in materials prepared by KDI
and approved by the Principal Underwriter pursuant to Section 5.1.
SECTION 5.4 USE OF PROSPECTUS FOR MARKETING PURPOSES. KDI shall notify
the Fund or its designee of the number of Fund prospectuses required for
marketing purposes, and the Fund or its designee will provide KDI with a
sufficient quantity at the Fund's own expense.
ARTICLE 6. EXPENSES. In addition to any costs or expenses specifically assumed
by KSvC or KDI under this Agreement, KSvC shall be responsible for costs and
expenses incident to its performance of its responsibilities under this
Agreement. The Fund, Bank One and Principal Underwriter shall assume and pay all
costs and expenses of their operations not specifically assumed by either KSvC
or KDI under this Agreement.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES.
SECTION 7.1 REPRESENTATIONS OF KDI AND KSVC. KDI and KSvC each
represents and warrants:
(a) that it (1) is in material compliance with all applicable
federal, state and securities laws, (2) is duly licensed and authorized to
conduct business in every
<PAGE> 15
jurisdiction where such license or authorization is required, and (3) has full
authority to enter into this Agreement and carry out its obligations pursuant to
the terms of this Agreement;
(b) that it will promptly notify the Fund or the Principal
Underwriter in the event that it is for any reason unable to perform any of its
obligations under this Agreement;
(c) that it will comply with all federal and state statutes
and regulations applicable to its activities under this Agreement;
(d) for KSvC only, that it is a transfer agent registered
under the 1934 Act and regulations thereunder; and
(e) for KDI only, that it is a broker-dealer registered under
the 1934 Act and regulations thereunder, and the laws of all states and other
jurisdictions necessary for the sale of Fund shares under this Agreement.
SECTION 7.2 REPRESENTATIONS OF THE FUND. The Fund, Bank One, and
Principal Underwriter each represents and warrants:
(a) that it (1) is in material compliance with all applicable
federal, state and securities laws, (2) is duly licensed and authorized to
conduct business in every jurisdiction where such license or authorization is
required, and (3) has full authority to enter into this Agreement and
<PAGE> 16
carry out its obligations pursuant to the terms of this Agreement;
(b) that it shall promptly notify KDI and KSvC in the event
that it is for any reason unable to perform any of its obligations under this
Agreement;
(c) that it shall comply with all federal and state statutes
and regulations applicable to its activities under this Agreement; and
(d) that (1) the Fund is an investment company registered
under the 1940 Act, (2) a registration statement under the Securities Act of
1933 has been filed and will be effective with respect to all shares of the Fund
being offered for sale, and (3) the Fund has registered and qualified its shares
for sale in accordance with the laws of each jurisdiction where it is required
to do so.
SECTION 7.3 Y2K COMPLIANCE. Each party represents and warrants that the
software used in connection with this Agreement is year 2000 compliant.
ARTICLE 8. TERM AND TERMINATION.
8.1 TERM. This Agreement shall become effective on the date first set
forth above and shall continue in effect until terminated as set forth below.
The provisions of Sections 8.3,
<PAGE> 17
9.1, 9.2 and Article 10 shall survive any termination of this Agreement.
8.2 TERMINATION. This Agreement may be terminated at the option of
either party upon at least sixty (60) days, written notice. In the event of
termination, KSvC will cease to provide services to Plans or to the Fund with
respect to any new orders for additional shares of the Fund.
8.3 CONTINUATION OF PLAN SERVICES. No fee shall be due to KSvC with
respect to any Fund shares purchased or held by Plans after the termination of
this Agreement. Notwithstanding any termination, to the extent Plans already are
invested in shares of the Fund, Plans shall be permitted to maintain such
investments, and KSvC may continue to provide administrative and recordkeeping
services to Plans and Participants in connection with such investments. In this
regard, the Fund or its designee shall have a continuing obligation to cooperate
with KSvC in its provision of services to Plans, including, but not limited to:
(a) accepting redemption requests and other information from KSvC on behalf of
Plans; (b) forwarding redemption proceeds and other distributions to the Master
Custodial Account or to such other account as designated by KSvC; (c) providing
closing net asset value, dividend and capital gain information as necessary to
permit KSvC's performance of recordkeeping services for
<PAGE> 18
Plans, and (d) supplying to KSvC prospectuses and other shareholder
communication materials necessary for KSvC's performance of services for Plans.
KSvC shall notify the Fund in the event that KSvC no longer provides services to
a particular Plan.
ARTICLE 9. INDEMNIFICATION.
Section 9.1 INDEMNIFICATION OF FUND, BANK ONE, AND PRINCIPAL
UNDERWRITER. (a) KSvC shall indemnify and hold harmless the Fund, Bank One, and
Principal Underwriter and their respective directors, officers, employees, and
agents against any claims or liabilities suffered to the extent arising from any
act of commission or omission by KSvC relating to this Agreement or the services
rendered hereunder, including reasonable legal fees and other reasonable
out-of-pocket costs of defending against any claims or liability; provided,
however, that KSvC shall not be responsible for any claims or liabilities that
arise from the negligence or willful misconduct of the Fund, Bank One, or
Principal Underwriter, or their respective directors, officers, employees and
agents.
(b) KDI shall indemnify and hold harmless the Fund, Bank One,
and Principal Underwriter and their respective directors, officers, employees,
and agents against any claims or
<PAGE> 19
liabilities suffered to the extent arising from any act of commission or
omission by KDI relating to this Agreement, including reasonable legal fees and
other reasonable out-of-pocket costs of defending against any claims or
liability; provided, however, that KDI shall not be responsible for any claims
or liabilities that arise from the negligence or willful misconduct of the Fund,
Bank One, or Principal Underwriter, or their respective directors, officers,
employees and agents.
SECTION 9.2 INDEMNIFICATION OF KDI AND KSVC. The Fund, Bank One and
Principal Underwriter shall each indemnify and hold harmless KDI and KSvC and
their respective directors, officers, employees and agents against any claims or
liabilities suffered to the extent arising from any act of commission or
omission by the Fund, Bank One, or Principal Underwriter relating to this
Agreement or the services rendered hereunder, including reasonable legal fees
and other reasonable out-of-pocket costs of defending against any claims or
liability; provided, however, that neither the Fund, Bank One, nor Principal
Underwriter shall be responsible for any claims or liabilities that arise from
the negligence or willful misconduct of KDI or KSvC, or their respective
directors, officers, employees and agents.
ARTICLE 10. CONFIDENTIALITY. All non-public books, records, information and data
pertaining to the business of another party
<PAGE> 20
that are exchanged or received pursuant to the negotiation or the
performance of this Agreement shall remain confidential, and shall not be
voluntarily disclosed by any party without the prior written consent of the
other party, except as may be required by law or by such party to carry out this
Agreement, or an order of any court, governmental agency or regulatory body.
Further, during the term of this Agreement and for two years thereafter, the
Fund, Bank One and Principal Underwriter agree that they may not use the
identity of Plans that have named KSvC as agent in connection with this
Agreement, or any other information about such Plans obtained in connection with
this Agreement, except for purposes of this Agreement; and that any information
about Plans obtained in connection with this Agreement may not be used to
compete with the relationship of KSvC or any of its affiliates with the Plans.
ARTICLE 11. RELATIONSHIP OF PARTIES. Except to the extent of KSvC's appointment
as agent under Article I of this Agreement, KSvC shall act only as agent for
Plans or on its own behalf. it is understood the parties are independent
contractors and not partners, co-venturers, or employees of each other.
ARTICLE 12. NON-EXCLUSIVITY. Nothing in this Agreement shall prohibit either (a)
KSvC or any of its affiliates from entering agreements similar to this Agreement
with organizations other
<PAGE> 21
than the Fund, Bank One or Principal Underwriter that also make available shares
of mutual funds or other investment options to Plans; or (b) the Fund, Bank One,
or Principal Underwriter from providing administrative or recordkeeping services
to retirement plans, or from soliciting any such plan (or its sponsor or
fiduciary) to enter into an arrangement with the Fund, Bank One, or Principal
Underwriter, or any of their affiliates for such services, or from otherwise
providing any type of service or product to any person, whether alone or in
participation with others.
ARTICLE 13. MISCELLANEOUS.
SECTION 13.1 AMENDMENT AND WAIVER. Neither this Agreement nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing signed by all parties hereto.
SECTION 13.2 NOTICES. All notices and other communications hereunder
shall be given or made in writing and shall be hand delivered or mailed by
certified mail, to the party or parties to whom they are directed at the
following address, or at such other addresses as may be designated by notice
from such party to all other parties,
If to KDI or KSvC:
<PAGE> 22
222 South Riverside Plaza
Chicago, Illinois 60603
ATTN: Herbert A. Christiansen
Senior Vice President
If to the Fund, Bank One or Principal Underwriter:
The One Group
3435 Stelzer Road
Columbus, Ohio 43219
ATTN: Mark S. Redman
President
Any notice, demand or other communication given in a manner prescribed in this
Section 13.2 shall be deemed to have been delivered on receipt.
SECTION 13.3 SUCCESSORS AND ASSIGNS. This Agreement shall not be
assigned by any party without the written consent of the other parties, except
that a party may assign this Agreement to an affiliate having the same ultimate
ownership as the assigning party without such consent, but such party shall not
be relieved of its responsibilities hereunder by reason of such assignment.
SECTION 13.4 GOVERNING LAW, This Agreement shall be governed by, and
construed and enforced in accordance with applicable federal law and the laws of
the State of Illinois.
SECTION 13.5 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be
<PAGE> 23
an original but all of which together shall constitute one agreement.
SECTION 13.6 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 13.7 CAPTIONS. The paragraph headings contained herein are for
reference purposes only and shall not in any way affect the interpretation or
construction of this Agreement.
SECTION 13.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have caused this Agreement to be executed as of the day and year above written.
KEMPER DISTRIBUTORS, INC. THE ONE GROUP
By: /s/ H.A. Christiansen By: /s/ James T. Gillespie
--------------------------- ----------------------------
Name: H.A. Christiansen Name: /s/ James T. Gillespie
------------------------- --------------------------
Title: Vice President Title: Vice President
------------------------ -------------------------
KEMPER SERVICE COMPANY BANK ONE TRUST COMPANY, N.A.
By: /s/ H.A. Christiansen By: /s/ Jeffrey J. Korgl
--------------------------- ----------------------------
Name: H.A. Christiansen Name: /s/ Jeffrey J. Korgl
------------------------- --------------------------
Title: Senior Vice President Title: Director of Product Mgmt.
------------------------ -------------------------
<PAGE> 24
THE ONE GROUP SERVICES COMPANY
By: /s/ Mark S. Redman
-------------------------
Name: /s/ Mark S. Redman
-----------------------
Title: President
----------------------
<PAGE> 1
Exhibit (h)(33)
Sub-Transfer Agency Agreement
between Nationwide Investment Services Corporation
and
One Group Mutual Funds.
<PAGE> 2
SUB TRANSFER AGENCY AGREEMENT
AGREEMENT made as of June 30, 1996 by and between Nationwide Investment Services
Corporation ("Recordkeeper") and the One Group (the "Trust").
WITNESSETH
WHEREAS, the Trust desires to enter into a Sub Transfer Agency
Agreement pursuant to which the Trust will retain the Recordkeeper to perform
certain recordkeeping and accounting services and functions with respect to
transactions in Trust shares ("Shares") made by or on behalf of Participants in
certain defined contribution employee benefit or retirement plans, and with
respect to holdings of Shares maintained by or on behalf of such participants,
when with respect to each Trust such plans maintain with the Fund's transfer
agent ("Transfer Agent") a single master shareholder account; and
NOW, THEREFORE, in consideration of the following premises and mutual
covenants, the parties agree as follows:
1. Services Provided by the Recordkeeper
When and to the extent requested by the Trust, the Recordkeeper on
behalf of its affiliates/designees agrees to perform recordkeeping and
account services and functions with respect to transactions in Shares
made by or on behalf of Participants in the Plan ("Participants"), and
with respect to holding of Shares maintained by or on behalf of
participants, when with respect to the Trust the Plan maintains with
the Transfer Agent plan level shareholder accounts.. To the extent
requested, the Recordkeeper or its affiliates/designees will provide
the following services:
A. Maintain separate records for each participant reflecting
Shares or Share equivalents purchased, redeemed and exchanged
on behalf of such Plan or Participants and outstanding
balances of Shares or Share equivalents owned by or for the
benefit of such Plan or Participant.
B. Prepare and transmit to Plan and/or its Participants periodic
account statements indicating the number of Shares or Share
equivalents of the Trust owned by or for the benefit of
participants and purchases, redemptions and exchanges made on
behalf of participants.
C. With respect to the Plan, aggregate all purchase, redemption
and exchange orders made by or on behalf of the Plan's
Participants and transmit instructions based on such aggregate
orders ("Instructions") to the Transfer Agent for acceptance
as defined in the processing procedures in Exhibit A.
<PAGE> 3
D. Provide to the Trust, the Transfer Agent and/or other parties
designated by them such other information relating to
transactions in and holdings of Shares by or on behalf of
participants as is reasonably requested.
E. As agreed upon with the Trust, deliver or arrange for the
delivery of appropriate documentation in connection with
orders.
2. APPOINTMENT AS AGENT FOR LIMITED PURPOSE
The Recordkeeper shall be deemed the agent of the Trust for the sole
and limited purpose of receiving purchase redemption and exchange
orders from participants and transmitting corresponding Instructions to
the Transfer Agent. Except as provided specifically herein, neither the
Trust nor any person to which the Trust may delegate any of its duties
hereunder shall be or hold itself out as an agent of the Transfer Agent
or the Trust.
3 REPRESENTATIONS OF RECORDKEEPER
The Recordkeeper agrees, represents and warrants that: A. It will
forward Instructions within such time periods and to such parties as
are specified by the Trust, the Transfer Agent, the Trust's
prospectuses and applicable law and regulation.
B. If and to the extent required under applicable federal and
state securities laws and regulations, it is duly registered
pursuant to such laws and regulations; it is not a "fiduciary"
of any Plan as such term is defined in section 3(21) of the
Employment Retirement Income Security Act of 1974, as amended
("ERISA"), and section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"): and the receipt of any fees by
it from the Trust, and the corresponding reduction of fees
payable to the Recordkeeper by the Plan (or by the Plan
sponsor, according to Recordkeeper's agreement with the Plan
(or by the Plan sponsor, according to Recordkeeper's agreement
with the Plan) will not constitute a "prohibited transaction"
for purposes of Title I of ERISA and section 4975 of the Code.
C. At all times during the term of this contract, the
Recordkeeper will maintain errors and omissions coverage in an
amount not less than $1,000,000 per occurrence, and in the
aggregate. A certificate of insurance evidencing such coverage
will be provided by the Recordkeeper to the One Group on
request.
4. RECORDS AND REPORTING
The Recordkeeper will maintain and preserve all records as required by
law in connection with its provision of services under this Agreement.
Upon the reasonable request of the
<PAGE> 4
Funds, or the Transfer Agent, the Recordkeeper will provide or cause to
be provided copies of-. historical records relating to transactions
involving the Trust and participants; written communications regarding
the Trust to or from participants; and other materials relating to the
provision of services by the Recordkeeper under this Agreement. The
Recordkeeper will comply with any reasonable request for such
information and documents made by the Trust, or its board of Trustees
or any governmental body or self-regulatory organization. The
Recordkeeper agrees that, with respect to the Plans regarding which it
is providing services under this Agreement, the Recordkeeper will
permit the Trust, the Transfer Agent, or their representatives to have
reasonable access to its personnel and records in order to facilitate
the monitoring of the quality of the services provided by the
Recordkeeper. Notwithstanding anything herein to the contrary, the
Recordkeeper shall not be required to provide the names and addresses
of participants to the Transfer Agent or the Trust, unless applicable
law or regulation otherwise requires.
5. ABILITY TO PROVIDE SERVICES
The Recordkeeper agrees to notify the Trust promptly if for any reason
it is unable to perform its obligations under this Agreement.
6. COMPENSATION
A. In consideration of performance of the services by the
Recordkeeper hereunder, the Trust will compensate the
Recordkeeper exhibit per account as provided in Exhibit B or
as the Trust and the Recordkeeper agree from time to time in
writing.
B. The Recordkeeper will permit the Trust and its representatives
(including counsel and independent accounts) to have
reasonable access to its records to enable the Trust to verify
that the Recordkeeper's charges hereunder comply with the
provisions of this Agreement. Such access shall include, but
not be limited to, up to four on-site inspections of the
Recordkeeper's records each calendar year.
7. INDEMNIFICATION
The Recordkeeper shall indemnify and hold harmless the Trust from and
against any and all losses and liabilities that it may incur, including
without limitation reasonable attorneys' fees, expenses and costs
arising out of or related to the performance or non-performance of the
Recordkeeper of its responsibilities under this Agreement, excluding,
however, any such claims, suits, loss, damage or costs caused by,
contributed to or arising from any noncompliance by the Trust with its
obligations under this Agreement, as to which the Trust as pertinent,
shall indemnify, hold harmless and defend the Recordkeeper on the same
basis as set forth above.
8. TERMINATION
<PAGE> 5
This Agreement may be terminated at any time by either parry hereto
upon ninety (90) days written notice to the other. The provisions of
paragraphs 4 and 7 shall continue in full force and effect after
termination of this Agreement.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust. The execution and delivery of
this Agreement has been authorized by the Trustees, and this Agreement
has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as
provided in the Trust's Agreement and Declaration of Trust.
10. MISCELLANEOUS
This Agreement represents the entire Agreement between the parties with
regard to the matters described herein and may not be modified or
amended except by written instrument executed by all parties. This
Agreement may not be assigned by either party hereto without the prior
written consent of the other parties. This Agreement is made and shall
be construed under the laws of the State of Ohio. This Agreement
supersedes all previous agreements and understandings between the
parties with respect to its subject matter. If any provision of the
Agreement shall be held or made invalid by a statute, rule, regulation,
decision of a tribunal or otherwise, the remainder of the Agreement
shall not be affected thereby.
The names 'One Group Mutual Funds' and 'Trustees of the One Group
Mutual Funds' refer respectively to the Trust created and the
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 'One Group Mutual Funds' entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities, and are not binding upon
any of the Trustees, Shareholders or representatives of the Trust
personally, but bind only the assets of the Trust, and all persons
dealing with any series of Shares of the Trust must look solely to the
assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
THE ONE GROUP
<PAGE> 6
By: /s/ Mark S. Redman
----------------------------------
Mark S. Redman
----------------------------------
Title: President
----------------------------------
Nationwide Investment Services Corporation (Recordkeeper)
- ---------------------------------------------------------
By: /s/ Barbara J. Shane
----------------------------------
Barbara J. Shane
----------------------------------
Title: Vice President
----------------------------------
<PAGE> 1
Exhibit (i)
Opinion and Consent of Ropes & Gray
<PAGE> 2
WRITER'S DIRECT DIAL NUMBER: (202) 626-3925
April 26, 1999
One Group(R) Mutual Funds
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(R) ("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.
<PAGE> 3
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 (j)(2)
Consent of Ropes & Gray.
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" and "Experts" included in or made a part of
Post-Effective Amendment No. 50 to the Registration Statement of the One
Group(R) Mutual Funds (Nos. 2-95973 and 811-4236) on Form N-1A under the
Securities Act of 1933, as amended.
/s/ ROPES & GRAY
ROPES & GRAY
Washington, D.C.
August 23, 1999
<PAGE> 1
Exhibit (m)(2)
Revised Schedule A to the Distribution and Shareholder Services Plan
between
One Group Mutual Funds
and
The One Group Services Company
dated May 20, 1999
<PAGE> 2
SCHEDULE A TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
BETWEEN THE ONE GROUP(R) AND
ONE GROUP SERVICES COMPANY
Name of Fund
- ------------
Class A Shares:
Equity Income Fund (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
International Equity Index Fund
Equity Index Fund
Large Cap Value Fund (formerly Large Company Value Fund)
Large Cap Growth Fund (formerly Large Company Growth Fund)
Balance Fund (formerly Asset Allocation Fund)
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth Fund (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
Real Estate Fund
Technology Fund
High Yield Bond Fund
Bond Fund
Income Bond Fund
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Intermediate Bond Fund
Government Bond Fund
Ultra Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Treasury & Agency Fund
Municipal Income Fund
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Arizona Municipal Bond Fund
Louisiana Municipal Bond Fund
Texas Tax-Free Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Treasury Money Market Fund
Treasury Only Money Market Fund
Government Money Market Fund
<PAGE> 3
Tax Exempt Money Market Fund
Institutional Prime Money Market Fund
Investor Aggressive Growth Fund
Investor Growth Fund
Investor Growth and Income Fund
Investor Balanced Fund
Investor Conservative Growth Fund
Investor Fixed Income Fund
Class A Money Market Shares:
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S Government Securities Money Market Fund
Treasury Prime Money Market Fund
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Service Class Shares:
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
U.S Government Securities Money Market Fund
Treasury Prime Money Market Fund
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
THE ONE GROUP(R) THE ONE GROUP SERVICES COMPANY
By: /s/ Bryan C. Haft By: /s/ Mark S. Redman
Title: Vice President Title: President
Date: May 20, 1999 Date: May 20, 1999
<PAGE> 1
Exhibit (m)(4)
Revised Schedules A and B to the Distribution and Shareholder Services Plan
Class B and Class C shares
between
One Group Mutual Funds and The One Group Services Company
dated May 20, 1999.
<PAGE> 2
SCHEDULE A TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
CLASS B AND CLASS C SHARES
BETWEEN THE ONE GROUP(R) AND
ONE GROUP SERVICES COMPANY
Name of Fund
- ------------
Equity Income Fund (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
Equity Index Fund
Large Cap Value Fund (formerly Large Company Value Fund)
Balanced Fund (formerly Asset Allocation Fund)
International Equity Index Fund
Large Cap Growth Fund (formerly Large Company Growth Fund)
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth Fund (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
Real Estate Fund
Technology Fund
High Yield Bond Fund
Bond Fund
Income Bond Fund
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Intermediate Bond Fund
Government Bond Fund
Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Treasury & Agency Fund
Intermediate Tax-Free Bond Fund
Municipal Income Fund
Ohio Municipal Bond Fund
Texas Tax-Free Bond Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Arizona Municipal Bond Fund
Louisiana Municipal Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Prime Money Market Fund
U.S. Treasury Securities Money Market Fund
<PAGE> 3
Investor Conservative Growth Fund
Investor Growth Fund
Investor Balanced Fund
Investor Fixed-Income Fund
Investor Aggressive Growth Fund
Investor Growth and Income Fund
THE ONE GROUP(R) ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
--------------------------------- -----------------------------
Date: May 20, 1999 Date: May 20, 1999
----------------------------- --------------------------
<PAGE> 4
SCHEDULE B TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
CLASS B AND CLASS C SHARES
BETWEEN THE ONE GROUP(R) AND
ONE GROUP SERVICES COMPANY
Name of Fund
- ------------
Equity Income Fund (formerly Income Equity Fund)
Mid Cap Value Fund (formerly Disciplined Value Fund)
Mid Cap Growth Fund (formerly Growth Opportunities Fund)
Equity Index Fund
Large Cap Value Fund (formerly Large Company Value Fund)
Balanced Fund (formerly Asset Allocation Fund)
International Equity Index Fund
Large Cap Growth Fund (formerly Large Company Growth Fund)
Diversified Equity Fund (formerly Value Growth Fund)
Small Cap Growth Fund (formerly Small Capitalization Fund)
Diversified Mid Cap Fund
Small Cap Value Fund
Diversified International Fund
Market Expansion Index Fund
Real Estate Fund
Technology Fund
High Yield Bond Fund
Bond Fund
Income Bond Fund
Short-Term Bond Fund (formerly Limited Volatility Bond Fund)
Intermediate Bond Fund
Government Bond Fund
Short-Term Bond Fund (formerly Ultra Short-Term Income Fund)
Treasury & Agency Fund
Intermediate Tax-Free Bond Fund
Municipal Income Fund
Ohio Municipal Bond Fund
Texas Tax-Free Bond Fund
West Virginia Municipal Bond Fund
Kentucky Municipal Bond Fund
Arizona Municipal Bond Fund
Louisiana Municipal Bond Fund
Michigan Municipal Bond Fund
Short-Term Municipal Bond Fund
Tax-Free Bond Fund
Prime Money Market Fund
U.S. Treasury Securities Money Market Fund
U.S. Government Securities Money Market Fund
Treasury Prime Money Market Fund
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Michigan Municipal Money Market Fund
<PAGE> 5
Investor Conservative Growth Fund
Investor Growth Fund
Investor Balanced Fund
Investor Fixed-Income Fund
Investor Aggressive Growth Fund
Investor Growth and Income Fund
THE ONE GROUP(R) ONE GROUP SERVICES COMPANY
By: Bryan C. Haft By: Mark Redman
-------------------------------- ---------------------------------
Date: May 20, 1999 Date: May 20, 1999
---------------------------- -------------------------------
<PAGE> 1
Exhibit (n)
Multiple Class Plan for One Group Mutual Funds, as amended May 20, 1999
<PAGE> 2
MULTIPLE CLASS PLAN FOR THE ONE GROUP
(AS AMENDED MAY 20, 1999)
The One Group (the "Trust") is an open-end investment company that
offers units of beneficial interest ("shares") in fifty-nine separate portfolios
("funds") and five different classes of certain of the funds. The five classes
are Class A, Class B, Class C, Class I, and Service Class. The classes provide
for variations in distribution costs, voting rights, dividends, and per share
net asset value. The differences among the classes are discussed below. Attached
as Exhibit A, which may be amended from time to time, is a list of the funds and
the class of shares available in each fund.
A. DISTRIBUTION AND SHAREHOLDER SERVICES
Class A, Class B and Class C shares are distributed to the general
public. Investors may purchase Class A, Class B and Class C shares of a fund by
completing and signing an account application form and mailing it, along with a
check (or other negotiable bank instrument or money order) to the Trust's
transfer agent and custodian. Subsequent purchases of shares may be made at any
time by mailing a check to the transfer agent.
Class A, Class B and Class C investors may make automatic monthly
investments in a fund from their bank, savings and loan or other depository
institution accounts. The Trust pays the costs associated with these transfers,
but reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service.
Class I shares are offered to institutional investors, including
affiliates of BANC ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization authorized to act in a
fiduciary, advisory, agency, custodial or similar capacity (each an "Authorized
Financial Organization"). Purchases of Class I shares that are offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are purchased by a Shareholder Servicing
Agent on behalf of an investor.
Service Class shares are available only in the Prime Money Market, the
U.S. Treasury Securities Money Market Funds, the Municipal Money Market Fund,
the Ohio Municipal Money Market Fund and the Michigan Municipal Money Market
Fund. This class of shares is available to broker-dealers, other financial
intermediaries, banks and other depository institutions. Service Class shares
offer administrative and accounting (sweep processing) services.
A purchase order will be effective as of the day received by the
distributor if the distributor receives the order before 4:00 p.m., eastern
time. However, an order may be canceled if the transfer agent does not receive
Federal funds before close of business on the next Business Day for Class I
shares, and before the close of business on the fifth Business Day for Class A,
Class B and Class C shares.
<PAGE> 3
B. SALES LOAD
CLASS A SHARES
Class A shares are subject to a front-end sales charge. The front-end
sales charge is based on a percentage of the offering price and may vary based
on the amount of purchase.
Class A shares also are subject to a distribution and shareholder
services fee assessed pursuant to the distribution and shareholder services plan
(the "Plan"). As provided in the Plan, the Trust will pay the distributor a fee
based on the average daily net assets of Class A shares of the fund. A certain
percentage of the fee payable under the Plan may be used as compensation for
shareholder services by the distributor and/or financial institutions and
intermediaries. All such fees that may be paid under the Plan will be paid
pursuant to Rule 12b-1 of the 1940 Act. The distributor may apply these fees
toward: (i) compensation for its services in connection with distribution
assistance or provision of shareholder services; or (ii) payments to financial
institutions and intermediaries such as banks (including affiliates of the
Adviser), savings and loan associations, insurance companies, investment
counselors, broker-dealers, and the distributor's affiliates and subsidiaries,
as compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of shareholder services.
A shareholder of Class A shares may reduce the sales charge by
completing the Letter of Intent section of the account application form. The
Letter of Intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period. In addition, pursuant
to a Letter of Intent, the Custodian will hold in escrow the difference between
the sales charge applicable to the amount initially purchased and the sales
charge paid at the time of investment, which is based on the amount covered by
the Letter of Intent.
No sales charge is imposed on Class A shares of the Fund: (i) issued
through reinvestment of dividends and capital gains distributions; (ii) acquired
through the exercise of exchange privileges where a comparable sales charge has
been paid for exchanged shares; (iii) purchased by officers, directors or
trustees, retirees and employees (and their spouses and immediate family
members) of the Trust, of BANC ONE CORPORATION and its subsidiaries and
affiliates, of the Distributor and its subsidiaries and affiliates, of the
Transfer Agent and Custodian and their subsidiaries and affiliates, of
broker/dealers who have entered into dealer agreements with The One Group and
their subsidiaries and affiliates, or of an investment sub-adviser of a Fund of
the Trust and such sub-adviser's subsidiaries and affiliates; (iv) sold to
affiliates of BANC ONE CORPORATION and certain accounts (other than Individual
Retirement Accounts) for which Authorized Financial Organizations act in
fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Class I shares of a Fund of the Trust or acquired
in an exchange of Class I shares of a Fund for Class A shares of the same Fund;
(vi) purchased with
<PAGE> 4
proceeds from the recent redemption of shares of a mutual fund for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
Fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; (x)
directly purchased with the proceeds of a distribution on a bond for which a
BANC ONE CORPORATION affiliate bank or trust company is the Trustee or Paying
Agent; (xi) purchased in connection with plans of reorganization of a Fund, such
as mergers, asset acquisitions and exchange offers to which the Fund is a party;
(xii) purchased by retirement and deferred compensation plans and trusts used to
fund these plans including, but not limited to, those defined in Sections
401(a), 403(b) or 457 of The Internal Revenue Code and rabbi trusts; or (xiii)
purchased by accounts participating in certain affinity programs sponsored by
BANK ONE CORPORATION and its affiliates and subsidiaries.
Further, an initial purchase of shares in the amount of $1 million or
more is not subject to a front-end sales charge. However, if such shares are
redeemed prior to the first anniversary of purchase, the shareholder will be
subject to a contingent deferred sales charge ("Class A CDSC") on the initial
purchase in an amount not to exceed any promotional incentives or additional
compensation paid by the Distributor to registered representatives who have sold
or are expected to sell significant amounts of shares of the Funds.
An investor relying upon any of the categories of waivers of the sales
charge must qualify for such waiver in advance of the purchase with the
Distributor or the financial institution or intermediary through which shares
are purchased by the investor.
The waiver of the sales charge under circumstances (v), (vi), and (vii)
above applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. This waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi), and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice.
CLASS B SHARES
Class B shares are subject to a Contingent Deferred Sales Charge and a
distribution and shareholder services fee. If the Shareholder redeems Class B
shares prior to the sixth anniversary of purchase, the Shareholder will pay a
Contingent Deferred Sales Charge. The Contingent Deferred Sales Charge is
assessed on an amount equal to the lesser of the then current market value or
the cost of the shares being redeemed. Accordingly, no sales charge is imposed
on increases in net asset value above the initial purchase price. In addition,
no charge is assessed on shares derived from reinvestment of dividends or
capital gain distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies
depending on the number of years from the time of payment for the purchase of
Class B shares until the time of redemption of such shares. Solely for purposes
of determining the number of years from the time of any payment for the purchase
of shares, all payments during a month are aggregated and deemed to have been
made on the first day of the month.
<PAGE> 5
In determining whether a particular redemption is subject to a
Contingent Deferred Sales Charge, it is assumed that the redemption is first of
any Class A shares in the Shareholder's Fund account (unless the Shareholder
elects to have Class B shares redeemed first) or shares representing capital
appreciation, next of shares acquired pursuant to reinvestment of dividends and
capital gain distributions, and finally of other shares held by the Shareholder
for the longest period of time. This method should result in the lowest possible
sales charge.
Class B shares of the fund also are subject to an ongoing distribution
and shareholder service fee as provided in the Class B and Class C distribution
and shareholder services plan (the "Class B and Class C Plan") at an annual rate
based on a percentage of the fund's average daily net assets. This fee
arrangement will cause Class B shares to have a higher expense ratio and to pay
lower dividends than Class A shares. Class B shares convert automatically to
Class A shares after six years, commencing from the end of the calendar month in
which the purchase order was accepted.
Proceeds from the Contingent Deferred Sales Charge and the distribution
and shareholder service fee under the Class B Plan are payable to the
distributor and financial intermediaries to defray the expenses of advance
brokerage commissions and expenses related to providing distribution-related and
shareholder services to the fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. The combination of the Contingent Deferred Sales Charge and the
distribution and shareholder services fees facilitate the ability of the fund to
sell the Class B shares without a front-end sales charge.
The Contingent Deferred Sales Charge is waived on redemption of shares:
(i) for distributions that are limited to no more than 10% of the account value
annually, determined in the first year as of the date the redemption request is
received by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date; (ii) following the death or disability of a
shareholder or a participant or beneficiary of certain qualifying retirement
plans if redemption is made within one year of such death or disability; or
(iii) to the extent that the redemption represents a minimum required
distribution from an Individual Retirement Account or other qualifying
retirement plan to a shareholder who has attained the age of 70 1/2; or (iv)
bought in connection with certain retirement plans, such as 401(k) and similar
qualified plan. In addition, the following circumstances are not deemed to
result in a "redemption" of Class B shares for purposes of the assessment of a
Contingent Deferred Sales Charge, which is therefore waived: (i) plans of
reorganization of the fund, such as mergers, asset acquisitions and exchange
offers to which the Fund is a party; or (ii) exchanges for Class B shares of
other funds of the Trust.
CLASS C SHARES
Class C shares are subject to a Contingent Deferred Sales Charge and a
distribution and shareholder services fee. If the Shareholder redeems Class C
shares prior to the first anniversary of purchase, the Shareholder will pay a
Contingent Deferred Sales Charge. The Contingent Deferred Sales Charge is
assessed on an amount equal to the lesser of the then current market value or
the cost of the shares being redeemed. Accordingly, no sales charge is imposed
on
<PAGE> 6
increases in net asset value above the initial purchase price. In addition, no
charge is assessed on shares derived from reinvestment of dividends or capital
gain distributions.
Solely for purposes of determining the number of years from the time of
any payment for the purchase of shares, all payments during a month are
aggregated and deemed to have been made on the first day of the month.
In determining whether a particular redemption is subject to a
Contingent Deferred Sales Charge, it is assumed that the redemption is first of
any Class A shares in the Shareholder's Fund account (unless the Shareholder
elects to have Class C shares redeemed first) or shares representing capital
appreciation, next of shares acquired pursuant to reinvestment of dividends and
capital gain distributions, and finally of other shares held by the Shareholder
for the longest period of time. This method should result in the lowest possible
sales charge.
Class C shares of the fund also are subject to an ongoing distribution
and shareholder service fee as provided in the Class B and Class C distribution
and shareholder services plan (the "Class B and Class C Plan") at an annual rate
based on a percentage of the fund's average daily net assets. This fee
arrangement will cause Class C shares to have a higher expense ratio and to pay
lower dividends than Class A shares.
Proceeds from the Contingent Deferred Sales Charge and the distribution
and shareholder service fee under the Class C Plan are payable to the
distributor and financial intermediaries to defray the expenses of advance
brokerage commissions and expenses related to providing distribution-related and
shareholder services to the fund in connection with the sale of the Class C
shares, such as the payment of compensation to dealers and agents for selling
Class C shares. The combination of the Contingent Deferred Sales Charge and the
distribution and shareholder services fees facilitate the ability of the fund to
sell the Class C shares without a front-end sales charge.
The Contingent Deferred Sales Charge is waived on redemption of shares:
(i) for distributions that are limited to no more than 10% of the account value
annually, determined in the first year as of the date the redemption request is
received by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date; (ii) following the death or disability of a
shareholder or a participant or beneficiary of certain qualifying retirement
plans if redemption is made within one year of such death or disability; (iii)
if the Trust's Distributor receives notice prior to the time of a shareholder's
investment indicating that the Shareholder Servicing Agent, due to the nature of
the shareholder's account, waives the commission it would otherwise be paid; or
(iv) to the extent that the redemption represents a minimum required
distribution from an Individual Retirement Account or other qualifying
retirement plan to a shareholder who has attained the age of 70 1/2; or (iv)
bought in connection with certain retirement plans, such as 401(k) and similar
qualified plan. In addition, the following circumstances are not deemed to
result in a "redemption" of Class C shares for purposes of the assessment of a
Contingent Deferred Sales Charge, which is therefore waived: (i) plans of
reorganization of the fund, such as mergers, asset acquisitions and exchange
offers to which the Fund is a party; or (ii) exchanges for Class C shares of
other funds of the Trust.
CLASS I SHARES
<PAGE> 7
Class I shares are not subject to a sales charge at the time of
purchase or redemption, nor are they subject to a distribution or shareholder
services fee.
SERVICE CLASS SHARES
Service class shares are not subject to a sales charge at the time of
purchase or redemption. However, service class shares are subject to a
distribution and shareholder services fee based on a percentage of the fund's
average daily net assets.
C. EXCHANGE RIGHTS
CLASS A AND CLASS I SHARES
Class I Shareholders of the Fund may exchange their shares for Class A
shares of the 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
the fund or for Class I or Class A shares of another fund of the Trust if the
shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the
shares of the fund or such other fund of the Trust may be legally sold. All
exchanges discussed herein are made at the net asset value of the exchanged
shares, except as provided below. The Trust does not impose a charge for
processing exchanges of shares. If a shareholder seeks to exchange Class A
shares of a fund that does not impose a sales charge for Class A shares of a
fund that does or the fund being exchanged into has a higher sales charge, the
Shareholder will be required to pay a sales charge in the amount equal to the
difference between the sales charge applicable to the fund into which the shares
are being exchanged and any sales charges previously paid for the exchanged
shares, including any sales charges incurred on any earlier exchanges of the
shares (unless such sales charge is otherwise waived). The exchange of Class I
shares for Class A shares also will require payment of the sales charge unless
the sales charge is waived.
CLASS B SHARES
Class B shareholders of the fund may exchange their shares for Class B
shares of any other fund of the Trust on the basis of the net asset value of the
exchanged Class B shares, without the payment of any Contingent Deferred Sales
Charge that might otherwise be due upon redemption of the outstanding Class B
shares. The newly acquired Class B shares will be subject to the higher
Contingent Deferred Sales Charge of either the fund from which the shares were
exchanged or the fund into which the shares were exchanged. With respect to
outstanding Class B shares as to which previous exchanges have taken place,
"higher Contingent Deferred Sales Charge" shall mean the higher of the
Contingent Deferred Sales Charge applicable to either the fund the shares are
exchanging into or any other fund from which the shares previously have been
exchanged. For purposes of computing the Contingent Deferred Sales Charge that
may be payable upon a disposition of the newly acquired Class B shares, the
holding period for outstanding Class B shares of the fund from which the
exchange was made is "tacked" to the holding period of the
<PAGE> 8
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 of the fund may exchange their shares for Class C
shares of any other fund of the Trust on the basis of the net asset value of the
exchanged Class C shares, without the payment of any Contingent Deferred Sales
Charge that might otherwise be due upon redemption of the outstanding Class C
shares. The newly acquired Class C 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 C 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 C shares, the
holding period for outstanding Class C shares of the fund from which the
exchange was made is "tacked" to the holding period of the newly acquired Class
C shares. For purposes of calculating the holding period applicable to the newly
acquired Class C shares, the newly acquired Class C shares shall be deemed to
have been issued on the date of receipt of the shareholder's order to purchase
the outstanding Class C shares of the fund from which the initial exchange was
made.
SERVICE CLASS SHARES
Service Class shareholders may not exchange their Service Class shares
for Class A, Class B, Class C, or Class I shares, nor may Class A, Class B,
Class C, or Class I shares be exchanged for Service Class shares.
ADDITIONAL INFORMATION REGARDING EXCHANGES
The Trust reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' written notice. An exchange
between classes of shares of the same fund is not considered a taxable event;
however, an exchange between funds of the Trust is considered a sale of shares
and usually results in a capital gain or loss for Federal income tax purposes.
D. CONVERSION RIGHTS
Class B shares will automatically convert to Class A shares six or
eight years (depending on the fund) after the end of the month in which the
shares were purchased and will be subject to the lower distribution and fees
charged to Class A shares. Such conversion will be on the basis of the relative
net asset values of the two classes, without the imposition of any sales charge,
fee or other charge. The conversion is not a taxable event to a shareholder.
For purposes of conversion to Class A shares, shares received as
dividends and other distributions paid on Class B shares in a shareholder's fund
account will be considered to be held
<PAGE> 9
in a separate sub-account. Each time any Class B shares in a shareholder's fund
account (other than those in the sub-account) convert to Class A shares, a
pro-rata portion of the Class B shares in the sub-account will also convert to
Class A shares.
If a shareholder effects one or more exchanges among Class B shares of
the funds of the Trust during the six-year period, the Trust will aggregate the
holding periods for the shares of each fund of the Trust for purposes of
calculating that six-year period. Because the per share net asset value of the
Class A shares may be higher than that of the Class B shares at the time of
conversion, a shareholder may receive fewer Class A shares than the number of
Class B shares converted, although the dollar value will be the same.
Class C shares issued through November 1, 1997 ("Grandfathered Shares")
will automatically convert to Class A shares six years after the end of the
month in which the shares were purchased under the terms above described with
respect to Class B shares (including the treatment of shares received as
dividends or as other distributions. All other Class C shares shall not convert
to Class A shares.
E. VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each
fund of the Trust will vote separately on matters relating solely to that fund.
In addition, each class of a fund shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to that class, and shall
have separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class. However,
all fund shareholders will have equal voting rights on matters that affect all
fund shareholders equally.
F. EXPENSE ALLOCATION
Each class shall pay the expenses associated with its different
distribution and shareholder services arrangement. Each class may, at the
Board's discretion, also pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the management of the
Trust's assets, if these expenses are actually incurred in a different amount by
that class, or if the class receives services of a different kind or to a
different degree than other classes. All other expenses will be allocated to
each class on the basis of the net asset value of that class in relation to the
net asset value of the Fund. However, money market funds operating in reliance
on Rule 2a-7, and other funds making daily distributions of their net investment
income, may allocate such other expenses to each share regardless of class, or
based on the relative net assets (settled shares).
Expenses may be waived or reimbursed by a fund's advisor, underwriter
or any other service provider to the fund.
G. REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B and
Class C shares, and Class A shares initially purchased in an amount of $1
million or more, as provided above) on any Business Day; shares may ordinarily
be redeemed by mail, by telephone or by wire. All redemption orders are effected
at the net asset value per share next determined for Class A
<PAGE> 10
shares, except for Class A shares initially purchased in an amount of $1 million
or more, which will be reduced by any applicable Class A CDSC, and at net asset
value per share next determined reduced by any applicable Contingent Deferred
Sales Charge for Class B and Class C shares, after receipt of a valid request
for redemption.
Pursuant to the Systematic Withdrawal Plan, Class B and Class C
Shareholders may elect to receive, or may designate another person to receive,
distributions provided that the distributions are limited to no more than 10% of
their account value annually, determined in the first year as of the date the
redemption request is received by the Transfer Agent, and in subsequent years,
as of the most recent anniversary of that date. In addition, Shareholders who
have attained the age of 70 1/2 may elect to receive distributions, to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan.
H. DIVIDENDS
Shareholders automatically receive all income dividends and capital
gain distributions in additional Class A, Class B, Class C, Service Class and
Class I shares, as applicable, at the net asset value next determined following
the record date, unless the shareholder has elected to take such payment in
cash. Reinvested dividends and distributions receive the same tax treatment as
dividends and distributions paid in cash.
Class B shares received as dividends and capital gains distributions at
the net asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the sub-account) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares.
The amount of dividends payable on Class I shares will be more than the
dividends payable on Class A, Class B, Class C, and Service Class shares because
of the distribution expenses charged to Class A, Class B, Class C, and Service
Class shares.
<PAGE> 11
EXHIBIT A
<TABLE>
<CAPTION>
NAME OF FUND CLASS OF SHARES
- ------------ ---------------
<S> <C>
U.S. Treasury Securities Class A, Class B, Class C, Class I,
Money Market Fund Service Class
Prime Money Market Fund Class A, Class B, Class C, Class I, Service Class
Municipal Money Market Fund Class A, Class C, Class I, Service Class
Ohio Municipal Money Market Fund Class A, Class C, Class I, Service Class
Michigan Municipal Money Market Fund Class A, Class C, Class I, Service Class
U.S. Government Securities Money Class A, Class C, Class I, Service Class
Market Fund
Treasury Prime Money Market Fund Class A, Class C, Class I, Service Class
Cash Management Money Market Fund Class A, Class I
Treasury Cash Management Money Market Class A, Class I
Fund
Treasury Prime Cash Management Money Class A, Class I
Market Fund
U.S. Government Cash Management Class A, Class I
Money Market Fund
Municipal Cash Management Money Class A, Class I
Market Fund
Equity Income Fund Class A, Class B, Class C, Class I
Mid Cap Value Fund Class A, Class B, Class C, Class I
Mid Cap Growth Fund Class A, Class B, Class C, Class I
International Equity Index Fund Class A, Class B, Class C, Class I
Equity Index Fund Class A, Class B, Class C, Class I
Large Cap Value Fund Class A, Class B, Class C, Class I
Large Cap Growth Fund Class A, Class B, Class C, Class I
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
Balanced Fund Class A, Class B, Class C, Class I
Diversified Equity Fund Class A, Class B, Class C, Class I
Small Cap Growth Fund Class A, Class B, Class C, Class I
Diversified Mid Cap Fund Class A, Class B, Class C, Class I
Small Cap Value Fund Class A, Class B, Class C, Class I
Diversified International Fund Class A, Class B, Class C, Class I
Small Cap Index Fund Class A, Class B, Class C, Class I
Technology Fund Class A, Class B, Class C, Class I
Real Estate Fund Class A, Class B, Class C, Class I
High Yield Bond Fund Class A, Class B, Class C, Class I
Bond Fund Class A, Class B, Class C, Class I
Income Bond Fund Class A, Class B, Class C, Class I
Short-Term Bond Fund Class A, Class B, Class C, Class I
Intermediate Bond Fund Class A, Class B, Class C, Class I
Government Bond Fund Class A, Class B, Class C, Class I
Ultra-Short Term Bond Fund Class A, Class B, Class C, Class I
Louisiana Municipal Bond Fund Class A, Class B, Class C, Class I
High Yield Bond Fund Class A, Class B, Class C, Class I
Municipal Income Fund Class A, Class B, Class C, Class I
Intermediate Tax-Free Bond Fund Class A, Class B, Class C, Class I
Ohio Municipal Bond Fund Class A, Class B, Class C, Class I
Texas Municipal Bond Fund Class A, Class B, Class C, Class I
West Virginia Municipal Bond Fund Class A, Class B, Class C, Class I
Kentucky Municipal Bond Fund Class A, Class B, Class C, Class I
Arizona Municipal Bond Fund Class A, Class B, Class C, Class I
Michigan Municipal Bond Fund Class A, Class B, Class C, Class I
Tax-Free Bond Fund Class A, Class B, Class C, Class I
Short-Term Municipal Bond Fund Class A, Class B, Class C, Class I
Treasury Money Market Fund Class I
Treasury Only Money Market Fund Class I
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
Government Money Market Fund Class I
Tax Exempt Money Market Fund Class I
Institutional Prime Money Market Fund Class I
Investor Aggressive Growth Fund Class A, Class B, Class C, Class I
Investor Growth Fund Class A, Class B, Class C, Class I
Investor Growth and Income Fund Class A, Class B, Class C, Class I
Investor Conservative Growth Fund Class A, Class B, Class C, Class I
Investor Balanced Fund Class A, Class B, Class C, Class I
Investor Fixed Income Fund Class A, Class B, Class C, Class I
Treasury & Agency Fund Class A, Class B, Class C, Class I
</TABLE>
