<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 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. 48 |X|
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
AMENDMENT NO. 49 |X|
ONE GROUP(R) MUTUAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1111 POLARIS PARKWAY
P.O. BOX 710211
COLUMBUS, OHIO 43271-0211
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(800) 480-4311
(REGISTRANT'S TELEPHONE NUMBER)
MARK S. REDMAN
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
ALAN G. PRIEST, ESQUIRE MICHAEL V. WIBLE, ESQUIRE
ROPES & GRAY BANK ONE CORPORATION
ONE FRANKLIN SQUARE 100 EAST BROAD STREET, 18TH FL.
1301 K STREET, N.W., SUITE 800E COLUMBUS, OHIO 43271-0158
WASHINGTON, D.C. 20005
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: IMMEDIATELY UPON EFFECTIVENESS
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_X_ on March 18, 1999 pursuant to paragraph(b)
___ on (DATE) pursuant to paragraph(a)(1)
___ 75 days after filing pursuant to paragraph(a)(2)
___ on March 18, 1999 pursuant to paragraph(a)(2) of Rule 485.
If appropriate, check the following box:
___ post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE> 2
ONE GROUP(R) MUTUAL FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
- --------------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis About the Funds
3. Financial Highlights
4. General Description About the Funds, More About the
of Registrant Funds, How To Do Business with The
One Group(R) Mutual Funds; Details About the
Fund's Investment Practices and Policies;
5. Management of the Fund About the Funds; More About the
Funds; Organization & Management
of the Funds;
6. Capital Stock and Other Securities About the Fund; Shareholder Information
7. Purchase of Securities How To Do Business with
Being Offered The One Group(R) Mutual Funds, Organization
& Management of the Funds
8. Redemption or Repurchase How To Do Business with
The One Group(R) Mutual Funds
9. Pending Legal Proceedings Inapplicable
COMBINED STATEMENT OF
ADDITIONAL INFORMATION
FORM N-1A PART B ITEM CAPTION
- --------------------- -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust; Additional Information
Description of Shares
13. Investment Objective and Policies Investment Objectives and
Policies
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Additional Information -
Holders of Securities Miscellaneous
16. Investment Advisory and Other
Services Management of the Trust
17. Brokerage Allocation Management of the Trust -
Portfolio Transactions
18. Capital Stock and Other Securities Valuation; Additional
Information Regarding the
Calculation of Per Share Net
Asset Value;
Additional Purchase
and Redemption Information;
Additional Information
19. Purchase, Redemption and Pricing of Valuation; Additional
Securities Being Offered Information Regarding the
Calculation Per Share Net Asset
Value; Additional Purchase and
Redemption Information;
Management of the Trust
20. Tax Status Investment Objectives and
Policies - Additional Tax
Information Concerning the Funds
21. Underwriters Management of the Trust -
Distributor
22. Calculation of Performance Data Additional Information -
Calculation of Performance Data
23. Financial Statements Incorporated by Reference
</TABLE>
<PAGE> 3
PART A
Part A of Post-effective Amendment No. 46 (filed October 19, 1998) to The One
Group Registration Statement on Form N-1A for One Group Institutional Prime
Money Market Fund, One Group Tax Exempt Money Market Fund, One Group Treasury
Money Market Fund, One Group Texas Municipal Bond Fund, One Group Investor Fixed
Income Fund and One Group Investor Aggressive Growth Fund is incorporated herein
by reference.
<PAGE> 4
ONE GROUP MUTUAL FUNDS
EQUITY FUNDS
COMBINED PROSPECTUS
MARCH 18, 1999
ONE GROUP(R) BALANCED FUND
ONE GROUP(R) LARGE CAP GROWTH FUND
ONE GROUP(R) LARGE CAP VALUE FUND
ONE GROUP(R) MID CAP GROWTH FUND
ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
ONE GROUP(R) MID CAP VALUE FUND
ONE GROUP(R) EQUITY INDEX FUND
ONE GROUP(R) EQUITY INCOME FUND
ONE GROUP(R) DIVERSIFIED EQUITY FUND
ONE GROUP(R) SMALL CAP GROWTH FUND
ONE GROUP(R) SMALL CAP VALUE FUND
ONE GROUP(R) DIVERSIFIED MID CAP FUND
ONE GROUP(R) DIVERSIFIED INTERNATIONAL FUND
ONE GROUP(R) MARKET EXPANSION INDEX FUND
- --------------------------------------------------------------------------------
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 information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK ONE CORPORATION OR ITS AFFILIATES: - ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY FEDERAL OR
STATE GOVERNMENTAL AGENCY: - INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Balanced Fund............................... 2
One Group(R) Large Cap Growth Fund....................... 5
One Group(R) Large Cap Value Fund........................ 8
One Group(R) Mid Cap Growth Fund......................... 11
One Group(R) International Equity Index Fund............. 14
One Group(R) Mid Cap Value Fund.......................... 17
One Group(R) Equity Index Fund........................... 20
One Group(R) Equity Income Fund.......................... 23
One Group(R) Diversified Equity Fund..................... 26
One Group(R) Small Cap Growth Fund....................... 29
One Group(R) Small Cap Value Fund........................ 32
One Group(R) Diversified Mid Cap Fund.................... 35
One Group(R) Diversified International Fund.............. 38
One Group(R) Market Expansion Index Fund................. 41
MORE ABOUT THE FUNDS........................................ 44
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 46
Purchasing Fund Shares................................... 46
Sales Charges............................................ 48
Sales Charge Reductions and Waivers...................... 49
Exchanging Fund Shares................................... 51
Redeeming Fund Shares.................................... 52
SHAREHOLDER INFORMATION..................................... 54
Voting Rights............................................ 54
Dividend Policies........................................ 54
Tax Treatment of the Funds............................... 54
Tax Treatment of Shareholders............................ 55
Shareholder Inquiries.................................... 55
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 56
The Funds................................................ 56
The Board of Trustees.................................... 56
The Advisor.............................................. 56
The Sub-Advisor.......................................... 56
The Distributor.......................................... 57
The Administrator and Sub-Administrator.................. 57
The Transfer Agent, Custodian and Sub-Custodian.......... 57
Year 2000................................................ 57
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 58
Investment Practices..................................... 58
Investment Risks......................................... 61
Investment Policies...................................... 62
APPENDIX: DESCRIPTION OF RATINGS............................ 63
</TABLE>
table of contents
<PAGE> 6
1
a brief preview of the funds
WHAT ARE THE GOALS OF ONE GROUP EQUITY FUNDS?
The Funds are designed for a variety of investment objectives,
including total return, capital appreciation, current income,
and long-term capital growth. Each Fund pursues a different
objective and involves different risks. Please read about each
Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds normally will invest in a variety of equity
securities, including common stock. The Funds also may invest
in debt securities and preferred stocks which are convertible
into common stock, and lend their portfolio securities. Most
of the Funds may invest in securities of foreign issuers.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
Equity securities such as those in which the Funds may invest
are more volatile and carry more risk than some other forms of
investment. Accordingly, as with all equity investments, you
may lose money by investing in the Funds. The Funds may invest
in derivative securities. These securities may expose the
Funds to special risks. In addition, investments in foreign
securities may expose the Funds to risks that are different
from investments in U.S. securities. An investment in the
Funds is not a deposit of BANK ONE CORPORATION or its
affiliates and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
For more information about risks, please read "More About the
Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A,
Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I shares are
offered to institutional investors, including affiliates of
BANK ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization
authorized to act in fiduciary, advisory, agency, custodial or
similar capacities. The section called "How To Do Business
With One Group Mutual Funds" will provide more information.
Class I shares are not available to Individual Retirement
Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Class C shares are not available
for purchase in all of the Funds. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group." For additional information, call The
One Group Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on the last business day of
each month and are distributed periodically on the first
business day of each month. One Group International Equity
Index Fund, however, distributes dividends annually. Any
capital gains are distributed at least annually. Distributions
are paid in additional shares of the same class unless you
elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. Independence
International Associates, Inc. (the "Sub-Advisor") serves as
Sub-Advisor to the International Equity Index Fund. The
Sub-Advisor's fees are paid by Banc One Investment Advisors. A
more detailed discussion regarding Banc One Investment
Advisors, its services and compensation can be found in the
Prospectus under the headings "The Advisor" and "Shareholder
Expenses." Additional information regarding the Sub-Advisor is
located in the Prospectus under the heading "The Sub-Advisor."
<PAGE> 7
One Group(R)
Balanced Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks to provide total
return while preserving capital.
LOGO PRINCIPAL INVESTMENT STRATEGY
The Fund invests in a combination of
stocks, fixed income securities and
money market instruments. Banc One
Investment Advisors will regularly
review the Fund's asset allocations
and vary them over time to favor
investments which they believe will
provide the most favorable total
return. In making asset allocation
decisions, Banc One Investment
Advisors will evaluate projections
of risk, market and economic
conditions, volatility, yields and
expected return. Because the Fund
seeks total return over the long
term, Banc One Investment Advisors
will not attempt to time the market.
Rather, asset allocation shifts will
be made gradually over time. This
Fund was formerly called The One
Group Asset Allocation Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally will invest
between 40% and 75% of its total
assets in all types of equity
securities, including the stock of
both large and small capitalization
companies, as well as growth and
value securities. Up to 20% of the
equities held by the Fund may be
foreign securities, including
American Depository Receipts.
Between 25% and 60% of the Fund's
total assets will be invested in
fixed income securities, including
bonds, notes, and other debt
securities. The balance of the
Fund's total assets will be invested
in money market instruments. For a
list of all the securities in which
the Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. As a result, the
value of your investment in the Fund
may increase or decrease in value.
The Fund also will invest in fixed
income securities. The value of
these securities will change in
response to interest rate changes
and other factors. This is
especially true to the extent that
the Fund invests in debt securities
in the lowest investment grade
category. Such securities have
speculative characteristics. Before
you invest, please read "More About
the Funds" and "Investment
Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average daily
net assets)
Investment Advisory Fees (after fee
waiver) (4) .55% .55% .55%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00%
Other Expenses .40% .40% .40%
Total Fund Operating Expenses (after
fee waivers) (6) 1.20% 1.95% 1.95%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.55%
none
.40%
.95%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from the redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .65% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Total Operating Expenses have been revised to reflect fee waivers.
Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.40% for Class A shares, 2.05% for
Class B shares, 2.05% for Class C shares and 1.05% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $115 $190
Class A
(without fee
waivers) $ 66 $ 94 $125 $212
Class B $ 70 $ 91 $125 $208
Class B
(without fee
waiver) $ 71 $ 94 $130 $221
Class C $ 30 $ 61 $105 $227
Class C
(without fee
waiver) $ 31 $ 64 $110 $238
Class I $ 10 $ 30 $ 53 $117
Class I
(without fee
waiver) $ 11 $ 33 $ 58 $128
</TABLE>
Assuming no redemption the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $115 $190
Class A
(without fee
waivers) $ 66 $ 94 $125 $212
Class B $ 20 $ 61 $105 $208
Class B
(without fee
waiver) $ 21 $ 64 $110 $221
Class C $ 20 $ 61 $105 $227
Class C
(without fee
waiver) $ 21 $ 64 $110 $238
Class I $ 10 $ 30 $ 53 $117
Class I
(without fee
waiver) $ 11 $ 33 $ 58 $128
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 8
One Group(R) Balanced Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.98 $ 11.71 $ 10.73 $ 9.64 $ 10.06 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.43 0.41 0.38 0.29 0.07
Net realized and unrealized gains
(losses) from investments 2.24 1.81 1.16 1.12 (0.38) 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.64 2.24 1.57 1.50 (0.09) 0.13
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.39) (0.43) (0.41) (0.37) (0.29) (0.07)
From net realized gains (1.43) (0.54) (0.18) (0.04) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.82) (0.97) (0.59) (0.41) (0.33) (0.07)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.98 $ 11.71 $ 10.73 $ 9.64 $ 10.06
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 22.12% 20.16% 14.87% 16.06% (1.01)% 5.45%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $105,243 $ 94,971 $50,323 $37,658 $42,751 $30,441
Ratio of expenses to average net assets 0.85% 0.80% 0.94% 1.06% 1.06% 0.90%(b)
Ratio of net investment income to average
net assets 3.03% 3.55% 3.58% 3.72% 2.91% 3.03%(b)
Ratio of expenses to average net assets* 1.03% 1.00% 1.19% 1.31% 1.33% 1.34%(b)
Ratio of net investment income to average
net assets* 2.85% 3.35% 3.33% 3.47% 2.64% 2.59%(b)
Portfolio turnover (c) 46.04% 80.96% 73.38% 115.36% 56.55% 4.05%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class I Shares commenced offering on April 5,
1993. (b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.00 $ 11.72 $ 10.74 $ 9.65 $ 10.06 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.36 0.39 0.37 0.35 0.27 0.05
Net realized and unrealized gains
(losses) from investments 2.24 1.83 1.16 1.13 (0.38) 0.07
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.60 2.22 1.53 1.48 (0.11) 0.12
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.40) (0.37) (0.34) (0.26) (0.06)
In excess of net investment income -- -- -- (0.01) -- --
From net realized gains (1.43) (0.54) (0.18) (0.04) (0.04) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.79) (0.94) (0.55) (0.39) (0.30) (0.06)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.81 $ 13.00 $ 11.72 $ 10.74 $ 9.65 $ 10.06
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.71% 19.85% 14.48% 15.76% (1.19)% 5.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 50,456 $ 31,379 $17,849 $ 4,745 $ 1,691 $ 571
Ratio of expenses to average net assets 1.10% 1.05% 1.19% 1.31% 1.33% 1.15%(b)
Ratio of net investment income to average
net assets 2.77% 3.30% 3.33% 3.57% 2.68% 2.84%(b)
Ratio of expenses to average net assets* 1.38% 1.34% 1.54% 1.66% 1.67% 1.62%(b)
Ratio of net investment income to average
net assets* 2.49% 3.01% 2.98% 3.22% 2.34% 2.37%(b)
Portfolio turnover (c) 46.04% 80.96% 73.38% 115.36% 56.55% 4.05%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) The Fund commenced operations on April 2,
1993. (b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
3
<PAGE> 9
One Group(R) Balanced Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.04 $ 11.76 $ 10.76 $ 9.67 $ 10.37
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.30 0.28 0.27 0.08
Net realized and unrealized gains (losses) from
investments 2.26 1.83 1.18 1.14 (0.70)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.52 2.13 1.46 1.41 (0.62)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.31) (0.28) (0.27) (0.08)
In excess of net investment income -- -- -- (0.01) --
From net realized gains (1.43) (0.54) (0.18) (0.04) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.69) (0.85) (0.46) (0.32) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.87 $ 13.04 $ 11.76 $ 10.76 $ 9.67
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.95% 18.90% 13.79% 14.90% (5.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $114,957 $43,900 $18,575 $ 3,019 $ 1,862
Ratio of expenses to average net assets 1.85% 1.81% 1.94% 2.07% 2.40%(c)
Ratio of net investment income to average net assets 2.01% 2.54% 2.58% 2.77% 1.99%(c)
Ratio of expenses to average net assets* 2.03% 2.01% 2.19% 2.31% 2.40%(c)
Ratio of net investment income to average net assets* 1.83% 2.34% 2.33% 2.52% 1.99%(c)
Portfolio turnover (d) 46.04% 80.96% 73.38% 115.36% 56.55%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B commenced offering shares on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
4
<PAGE> 10
One Group(R)
Large Cap Growth Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
appreciation and growth of income by
investing primarily in equity
securities.
LOGO INVESTMENT STRATEGY
The Fund invests primarily in equity
securities of large,
well-established companies. The
weighted average capitalization of
companies in which the Fund invests
normally will exceed the market
median capitalization of the
Standard & Poor's 500 Composite
Stock Price Index ("S&P 500").* This
Fund was formerly called The One
Group Large Company Growth Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in the
equity securities of companies
described above, including common
stock, warrants and rights to buy
common stocks. The remainder of the
Fund's total assets may be invested
in nonconvertible fixed income
securities, options and futures,
repurchase agreements, and
securities issued by the U.S.
government and its agencies and
instrumentalities. For daily cash
management purposes, the Fund may
invest in repurchase agreements and
cash equivalents. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. As a result, the
value of your investment in the Fund
may increase or decrease in value.
The Fund also may invest in fixed
income securities. The value of
these securities will change in
response to interest rate changes
and other factors. This is
especially true to the extent the
Fund invests in debt securities with
speculative characteristics. Before
you invest, please read "More About
the Funds" and "Investment
Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
* "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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .71% .71% .71% .71%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .21% .21% .21% .21%
Total Fund Operating Expenses (after
fee waiver) (5) 1.17% 1.92% 1.92% .92%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders may
pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers.
Without the voluntary waiver, 12b-1 fees would be .35% for Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.27% for Class A shares.
EXAMPLE An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 88 $113 $187
Class A (without
fee waiver) $ 65 $ 91 $119 $198
Class B $ 69 $ 90 $124 $205
Class C $ 29 $ 60 $104 $224
Class I $ 9 $ 29 $ 51 $113
</TABLE>
Assuming no redemption at the end of the periods, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 88 $113 $187
Class A (without
fee waiver) $ 65 $ 91 $119 $198
Class B $ 19 $ 60 $104 $205
Class C $ 19 $ 60 $104 $224
Class I $ 9 $ 29 $ 51 $113
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 11
One Group(R) Large Cap Growth Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.44 $ 15.44 $ 13.47 $ 11.32 $ 10.92
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.04 0.12 0.18 0.20 0.20
Net realized and unrealized gains
(losses) from investments 6.13 4.79 2.14 3.04 0.67
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.17 4.91 2.32 3.24 0.87
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.11) (0.18) (0.20) (0.20)
From net realized gains (2.88) (0.80) (0.17) (0.89) (0.27)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.90) (0.91) (0.35) (1.09) (0.47)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.71 $ 19.44 $ 15.44 $ 13.47 $ 11.32
- ------------------------------------------------------------------------------------------------------------------------
Total Return 35.75% 33.11% 17.36% 21.85% 8.04%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,510,521 $1,142,864 $745,986 $531,595 $150,035
Ratio of expenses to average net assets 0.99% 0.99% 0.96% 1.00% 0.78%
Ratio of net investment income to
average net assets 0.21% 0.69% 1.20% 1.72% 1.87%
Ratio of expenses to average net assets* 0.99% 0.99% 0.99% 1.00% 1.13%
Ratio of net investment income to
average net assets* 0.21% 0.69% 1.17% 1.72% 1.52%
Portfolio turnover (a) 117.34% 57.17% 35.51% 14.22% 9.04%
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
CLASS I 1993 1992(b)
- ---------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85 $ 10.00
- ---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.23 0.08
Net realized and unrealized gains
(losses) from investments 1.12 (0.16)
- ---------------------------------------------------------------------------
Total from Investment Activities 1.35 (0.08)
- ---------------------------------------------------------------------------
Distributions:
From net investment income (0.23) (0.07)
From net realized gains (0.05) --
- ---------------------------------------------------------------------------
Total Distributions (0.28) (0.07)
- ---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.92 $ 9.85
- ---------------------------------------------------------------------------
Total Return 13.92% .(080)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $41,317 $25,019
Ratio of expenses to average net assets 0.39% 0.30%(c)
Ratio of net investment income to
average net assets 2.24% 2.37%(c)
Ratio of expenses to average net assets* 1.43% 1.49%(c)
Ratio of net investment income to
average net assets* 1.21% 1.12%(c)
Portfolio turnover (a) 10.61% 3.09%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) The Fund
commenced operations on February 28, 1992. (c) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.92 $ 15.83 $ 13.83 $ 11.62 $ 11.78
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.01) 0.08 0.14 0.17 0.04
Net realized and unrealized gains (losses) from
investments 6.30 4.88 2.17 3.10 (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.29 4.96 2.31 3.27 (0.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.07) (0.14) (0.16) (0.04)
In excess of net investment income (0.01) -- -- (0.01) --
From net realized gains (2.88) (0.80) (0.17) (0.89) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.89) (0.87) (0.31) (1.06) (0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.32 $ 19.92 $ 15.83 $ 13.83 $ 11.62
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 35.43% 32.57% 16.85% 21.52% .(102)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $199,052 $125,910 $75,114 $27,428 $368
Ratio of expenses to average net assets 1.24% 1.24% 1.21% 1.26% 1.25%(c)
Ratio of net investment income to average net assets (0.04)% 0.44% 0.95% 1.49% 1.78%(c)
Ratio of expenses to average net assets* 1.34% 1.32% 1.34% 1.36% 1.35%(c)
Ratio of net investment income to average net assets* (0.14)% 0.36% 0.82% 1.39% 1.68%(c)
Portfolio turnover (d) 117.34% 57.17% 35.51% 14.22% 9.04%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class A Shares commenced offering on January 1, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
6
<PAGE> 12
One Group(R) Large Cap Growth Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.61 $ 15.63 $ 13.63 $ 11.47 $ 11.57
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.10) (0.04) 0.05 0.09 0.03
Net realized and unrealized gains (losses) from
investments 6.10 4.82 2.17 3.06 (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.00 4.78 2.22 3.15 (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- -- (0.05) (0.09) (0.03)
In excess of net investment income -- -- -- (0.01) --
From net realized gains (2.88) (0.80) (0.17) (0.89) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.88) (0.80) (0.22) (0.99) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.73 $ 19.61 $ 15.63 $ 13.63 $ 11.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 34.39% 31.74% 16.41% 20.65% .(066)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $280,563 $132,268 $56,261 $6,918 $334
Ratio of expenses to average net assets 1.99% 2.00% 1.96% 2.01% 1.99%(c)
Ratio of net investment income (loss) to average net
assets (0.80)% (0.33)% 0.20% 0.74% 0.96%(c)
Ratio of expenses to average net assets* 1.99% 2.00% 1.99% 2.01% 1.99%(c)
Ratio of net investment income (loss) to average net
assets* (0.80)% (0.33)% 0.17% 0.74% 0.96%(c)
Portfolio turnover (d) 117.34% 57.17% 35.51% 14.22% 9.04%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.98
- ------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.06)
Net realized and unrealized gains from investments 4.99
- ------------------------------------------------------------------------------
Total from Investment Activities 4.93
- ------------------------------------------------------------------------------
Distributions:
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.
7
<PAGE> 13
One Group(R)
Large Cap Value Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks capital appreciation
with the incidental goal of
achieving current income by
investing primarily in equity
securities.
LOGO INVESTMENT STRATEGY
The Fund invests in equity
securities of large capitalization
companies that are believed to be
selling below their long-term
investment values. The weighted
average capitalization of companies
in which the Fund invests normally
will exceed the market median
capitalization of the Standard &
Poor's 500 Composite Stock Price
Index ("S&P 500").* The Fund also
may invest in the stock of companies
which have "breakup values" well in
excess of current market values or
which have uniquely undervalued
corporate assets. This Fund was
formerly called The One Group Large
Company Value Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in the
equity securities of companies
described above, including common
stocks and debt securities and
preferred stock that is convertible
to common stock. A portion of the
Fund's assets will be held in cash
equivalents. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. As a result, the
value of your investment in the Fund
may increase or decrease in value.
Before you invest, please read "More
About the Funds" and "Investment
Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
* "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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .74% .74% .74%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses .26% .26% .26%
Total Fund Operating Expense (after
fee waiver) (5) 1.25% 2.00% 2.00%
CLASS I
none
none
none
none
.74%
none
.26%
1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $196
Class A
(without fee
waiver) $ 66 $ 93 $123 $206
Class B $ 70 $ 93 $128 $213
Class C $ 30 $ 63 $108 $233
Class I $ 10 $ 32 $ 55 $122
</TABLE>
Assuming no redemption at the end of the period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $196
Class A
(without fee
waiver) $ 66 $ 93 $123 $206
Class B $ 20 $ 63 $108 $213
Class C $ 20 $ 63 $108 $233
Class I $ 10 $ 32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
8
<PAGE> 14
One Group(R) Large Cap Value Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(c)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.79 $ 12.83 $ 12.87 $ 11.34 $ 11.64 $ 11.34 $ 10.07 $ 10.00
Investment Activities:
Net investment income 0.21 0.27 0.31 0.31 0.20 0.18 0.21 0.08
Net realized and unrealized gains
(losses) from investments 2.84 3.01 1.20 2.18 (0.01) 0.58 1.34 0.07
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.05 3.28 1.51 2.49 0.19 0.76 1.55 0.15
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.21) (0.26) (0.31) (0.32) (0.19) (0.18) (0.21) (0.08)
From net realized gains (0.93) (1.06) (1.24) (0.64) (0.30) (0.28) (0.07) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.14) (1.32) (1.55) (0.96) (0.49) (0.46) (0.28) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.70 $ 14.79 $ 12.83 $ 12.87 $ 11.34 $ 11.64 $ 11.34 $ 10.07
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 21.46% 27.10% 12.71% 23.42% (1.59)% 6.73% 15.53% 4.47%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $792,649 $686,156 $584,527 $365,376 $169,127 $132,833 $62,075 $36,237
Ratio of expenses to average net
assets 0.95% 0.97% 0.97% 1.00% 0.95% 0.86% 0.82% 0.52%(b)
Ratio of net investment income to
average net assets 1.34% 1.99% 2.43% 2.74% 1.72% 1.62% 1.91% 2.48%(b)
Ratio of expenses to average net
assets* 0.95% 0.97% 0.98% 1.01% 1.02% 1.12% 1.34% 1.26%(b)
Ratio of net investment income to
average net assets* 1.34% 1.99% 2.42% 2.73% 1.65% 1.36% 1.39% 1.74%(b)
Portfolio turnover (a) 47.35% 77.05% 186.84% 203.13% 111.72% 51.75% 55.90% 19.87%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) The Fund commenced operations on March 1, 1991.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.85 $ 12.87 $ 12.89 $ 11.34 $ 11.64 $ 11.33 $ 11.42
Investment Activities:
Net investment income 0.18 0.23 0.27 0.28 0.17 0.16 0.07
Net realized and unrealized gains (losses) from
investments 2.84 3.04 1.22 2.20 (0.01) 0.59 (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.02 3.27 1.49 2.48 0.16 0.75 (0.01)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.17) (0.23) (0.27) (0.27) (0.16) (0.16) (0.08)
In excess of net investment income -- -- -- (0.02) -- -- --
From net realized gains (0.93) (1.06) (1.24) (0.64) (0.30) (0.28) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.10) (1.29) (1.51) (0.93) (0.46) (0.44) (0.08)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.77 $ 14.85 $ 12.87 $ 12.89 $ 11.34 $ 11.64 $ 11.33
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.14% 26.90% 12.40% 22.64% 1.35% 6.64% (0.33)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 15,699 $ 14,832 $ 9,380 $ 3,481 $ 698 $ 451 $ 12
Ratio of expenses to average net assets 1.20% 1.22% 1.22% 1.25% 1.20% 1.10% 1.02%(c)
Ratio of net investment income to average net
assets 1.10% 1.72% 2.18% 2.52% 1.57% 1.41% 2.12%(c)
Ratio of expenses to average net assets* 1.30% 1.31% 1.33% 1.37% 1.37% 1.50% 1.22%(c)
Ratio of net investment income to average net
assets* 1.00% 1.63% 2.07% 2.41% 1.40% 1.01% 1.92%(c)
Portfolio turnover (a) 47.35% 77.05% 186.84% 203.13% 111.72% 51.75% 55.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) Class A
Shares commenced offering on February 18, 1992. (c) Annualized.
9
<PAGE> 15
One Group(R) Large Cap Value Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.95 $ 12.98 $ 12.96 $ 11.41 $ 11.87
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07 0.14 0.18 0.17 0.05
Net realized and unrealized gains (losses) from
investments 2.84 3.04 1.26 2.19 (0.46)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.91 3.18 1.44 2.36 (0.41)
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.09) (0.15) (0.18) (0.17) (0.05)
From net realized gains (0.93) (1.06) (1.24) (0.64) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (1.02) (1.21) (1.42) (0.81) (0.05)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.84 $ 14.95 $ 12.98 $ 12.96 $ 11.41
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.18% 25.86% 11.95% 22.28% 3.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 17,154 $ 9,288 $ 4,135 $ 861 $ 182
Ratio of expenses to average net assets 1.95% 1.97% 1.97% 2.00% 2.00%(c)
Ratio of net investment income to average net assets 0.33% 0.96% 1.43% 1.74% 1.06%(c)
Ratio of expenses to average net assets* 1.95% 1.97% 1.98% 2.01% 2.00%(c)
Ratio of net investment income to average net assets* 0.33% 0.96% 1.42% 1.72% 1.06%(c)
Portfolio turnover (d) 47.35% 77.05% 186.84% 203.13% 111.72%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
10
<PAGE> 16
One Group(R)
Mid Cap Growth Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks growth of capital and
secondarily, current income by
investing primarily in equity
securities.
LOGO INVESTMENT STRATEGY
The Fund invests in securities of
companies with market
capitalizations between $500 million
and $5 billion 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. This
Fund was formerly called The One
Group Growth Opportunities Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
80% of its total assets in equity
securities of mid cap companies.
These securities include common
stocks and debt securities and
preferred stocks that are
convertible to common stock. A
portion of the Fund's assets will be
held in cash equivalents. For a list
of all the securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Also, the stocks of smaller
companies may be subject to greater
risks than those of larger
companies. Before you invest, please
read "More About the Funds" and
"Investment Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average
daily net assets)
Investment Advisory Fees .74% .74% .74%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses .26% .26% .26%
Total Fund Operating Expenses (after
fee waiver) (5) 1.25% 2.00% 2.00%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.74%
none
.26%
1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from the redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $196
Class A
(without fee
waiver) $ 66 $ 93 $123 $206
Class B $ 70 $ 93 $128 $213
Class C $ 30 $ 63 $108 $233
Class I $ 10 $ 32 $ 55 $122
</TABLE>
Assuming no redemption at the end of the period, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $196
Class A
(without fee
waiver) $ 66 $ 93 $123 $206
Class B $ 20 $ 63 $108 $213
Class C $ 20 $ 63 $108 $233
Class I $ 10 $ 32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 17
One Group(R) Mid Cap Growth Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.46 $ 18.81 $ 18.40 $ 15.96 $ 16.96 $ 14.54 $ 12.92
- ----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.07) 0.25 0.20 0.06 0.07 0.06 0.09
Net realized and unrealized gains
(losses) from investments 5.70 3.59 3.83 2.98 (0.05) 2.99 1.87
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.63 3.84 4.03 3.04 0.02 3.05 1.96
- ----------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.25) (0.20) (0.06) (0.07) (0.06) (0.08)
In excess of net investment -- (0.02) -- -- -- -- --
From net realized gains (2.58) (2.92) (3.42) (0.54) (0.95) (0.57) (0.26)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.19) (3.62) (0.60) (1.02) (0.63) (0.34)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.51 $ 19.46 $ 18.81 $ 18.40 $ 15.96 $ 16.96 $ 14.54
- ----------------------------------------------------------------------------------------------------------------------
Total Return 31.11% 22.75% 24.63% 19.75% (0.16)% 21.36% 15.15%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $868,901 $623,911 $532,525 $413,518 $389,567 $232,898 $131,533
Ratio of expenses to average net
assets 1.00% 0.99% 1.00% 0.98% 0.98% 0.89% 0.75%
Ratio of net investment income to
average net assets (0.36)% 1.32% 1.15% 0.38% 0.42% 0.41% 0.51%
Ratio of expenses to average net
assets* 1.00% 0.99% 1.01% 0.98% 1.03% 1.11% 1.23%
Ratio of net investment income to
average net assets* (0.36)% 1.32% 1.14% 0.38% 0.37% 0.19% 0.03%
Portfolio turnover (a) 158.43% 301.35% 435.30% 132.63% 70.67% 64.64% 42.77%
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
CLASS I 1991 1990 1989(b)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.14 $ 10.71 $ 10.00
- ---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.19 0.11
Net realized and unrealized gains
(losses) from investments 0.92 1.97 0.71
- ------------------------------------------------------------------------------------
Total from Investment Activities 1.13 2.16 0.82
- ---------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.21) (0.19) (0.11)
In excess of net investment -- -- --
From net realized gains (0.14) (0.54) --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.73) (0.11)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.92 $ 12.14 $ 10.71
- ----------------------------------------------------------------------------------------------------------------------
Total Return 9.85% 20.83% 24.86%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $53,831 $31,804 $22,753
Ratio of expenses to average net
assets 0.45% 0.41% 0.38%(c)
Ratio of net investment income to
average net assets 1.75% 1.65% 3.20%(c)
Ratio of expenses to average net
assets* 1.19% 1.15% 1.12%(c)
Ratio of net investment income to
average net assets* 1.01% 0.91% 2.46%(c)
Portfolio turnover (a) 68.83% 92.55% 68.51%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued. (B) The Fund
commenced operations on March 2, 1989; at that time, the Fund did not offer
multiple classes of shares. Subsequently all shares of the Fund were
redesignated as Class I shares. (C) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.37 $ 18.76 $ 18.36 $ 15.93 $ 16.96 $ 14.54 $ 16.53
- ----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.08) 0.21 0.17 0.02 0.04 0.03 0.01
Net realized and unrealized gains (losses)
from investments 5.65 3.58 3.80 2.98 (0.08) 3.00 (1.99)
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.57 3.79 3.97 3.00 (0.04) 3.03 (1.98)
- ----------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.24) (0.15) (0.01) (0.03) (0.04) (0.01)
In excess of net investment income -- (0.02) -- (0.02) (0.01) -- --
From net realized gains (2.58) (2.92) (3.42) (0.54) (0.95) (0.57) --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.18) (3.57) (0.57) (0.99) (0.61) (0.01)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.36 $ 19.37 $ 18.76 $ 18.36 $ 15.93 $ 16.96 $ 14.54
- ----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 30.95% 22.52% 24.32% 19.50% (0.52)% 21.70% (34.00)%(a)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 95,647 $ 43,370 $ 28,052 $ 11,178 $ 8,097 $ 5,757 $ 84
Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.23% 1.22% 1.11% 1.31%(a)
Ratio of net investment income to average net
assets (0.60)% 0.92% 0.90% 0.12% 0.27% 0.25% 0.12%(a)
Ratio of expenses to average net assets* 1.35% 1.34% 1.36% 1.33% 1.38% 1.48% 1.50%(a)
Ratio of net investment income (loss) to
average net assets* (0.70)% 0.83% 0.79% 0.02% 0.11% (0.12)% (0.07)%(a)
Portfolio turnover (b) 158.43% 301.35% 435.30% 132.63% 70.67% 64.64% 42.77%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Annualized. (B) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued. (C) Class A
Shares commenced offering on February 18, 1992.
12
<PAGE> 18
One Group(R) Mid Cap Growth Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.82 $ 18.43 $ 18.14 $ 15.85 $17.44
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.15) 0.11 0.09 (0.07) (0.02)
Net realized and unrealized gains (losses) from
investments 5.35 3.44 3.69 2.90 (1.56)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.20 3.55 3.78 2.83 (1.58)
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.22) (0.07) -- (0.01)
In excess of net investment income -- (0.02) -- -- --
From net realized gains (2.58) (2.92) (3.42) (0.54) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.16) (3.49) (0.54) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.44 $ 18.82 $ 18.43 $ 18.14 $15.85
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 29.79% 21.73% 23.53% 18.47% (9.07)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 90,930 $ 37,409 $ 12,910 $ 2,787 $1,131
Ratio of expenses to average net assets 2.00% 2.00% 2.00% 1.98% 2.12%(c)
Ratio of net investment income (loss) to average net
assets (1.35)% 0.01% 0.15% (0.63)% (0.55)%(c)
Ratio of expenses to average net assets* 2.00% 2.00% 2.01% 1.98% 2.12%(c)
Ratio of net investment income (loss) to average net
assets* (1.35)% 0.01% 0.14% (0.63)% (0.55)%(c)
Portfolio turnover (d) 158.43% 301.35% 435.30% 132.63% 70.67%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Class B Shares commenced offering on January 14, 1994. (B) Not
annualized. (C) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.47
- -----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.04)
Net realized and unrealized gains from investments 2.77
- -----------------------------------------------------------------------------
Total from Investment Activities 2.73
- -----------------------------------------------------------------------------
Distributions:
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.
13
<PAGE> 19
One Group(R)
International Equity Index Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks to provide investment
results that correspond to the
aggregate price and dividend
performance of the securities in the
MSCI EAFE GDP Index.*
LOGO INVESTMENT STRATEGY
The Fund attempts to track the
capital performance and dividend
income of the Index by investing in
a representative portion of the
stocks which match as closely as
possible the characteristics of the
stocks which comprise the Index. The
Fund also will invest in stock index
futures. The Fund will attempt to
achieve a correlation between the
performance of its portfolio and
that of the MSCI EAFE GDP Index of
at least 0.90, without taking into
account expenses. Perfect
correlation would be 1.00.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in foreign
equity securities, consisting of
common stocks (including American
Depository Receipts) and preferred
stocks, securities convertible to
common stock (provided they are
traded on an exchange or over-the-
counter), warrants and receipts. No
more than 10% of the Fund's assets
will be held in cash or cash
equivalents. The Fund may invest up
to 10% of its net assets in
securities of emerging international
markets such as Mexico, Chile and
Brazil, either directly through
local exchanges, through publicly
traded closed-end country funds, or
through "passive foreign investment
companies." A substantial portion of
the Fund's assets will be
denominated in foreign currencies.
For a list of all the securities in
which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Because the Fund's investments are
tied to an index, fluctuations in
the index will affect the value of
your investment in the Fund. Also,
investments in foreign securities
involve risks different from
investments in U.S. securities.
Before you invest, please read "More
About the Funds" and "Investment
Risks."
LOGO FUND MANAGEMENT
Independence International
Associates, Inc. ("Independence
International") serves as
sub-advisor to the Fund.
Independence International is an
indirect subsidiary of John Hancock
Mutual Life Insurance Company.
* Gross Domestic 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .55% .55% .55%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses .40% .40% .40%
Total Fund Operating Expenses (after
fee waiver) (5) 1.20% 1.95% 1.95%
CLASS I
none
none
none
none
.55%
none
.40%
.95%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from the redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.30% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $115 $190
Class A
(without fee
waiver) $ 65 $ 92 $120 $201
Class B $ 70 $ 91 $125 $208
Class C $ 30 $ 61 $105 $227
Class I $ 10 $ 30 $ 53 $117
</TABLE>
Assuming no redemption at the end of the period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $115 $190
Class A
(without fee
waiver) $ 65 $ 92 $120 $201
Class B $ 20 $ 61 $105 $208
Class C $ 20 $ 61 $105 $227
Class I $ 10 $ 30 $ 53 $117
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
14
<PAGE> 20
One Group(R) International Equity Index Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 16.89 $ 15.17 $ 13.93 $ 13.46 $ 11.80 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.15 0.11 0.13 0.11 0.06
Net realized and unrealized
gains from investments 1.32 2.02 1.43 0.46 1.68 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.53 2.17 1.54 0.59 1.79 1.81
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.17) (0.16) (0.08) (0.11) (0.01)
In excess of net investment
income -- (0.13) (0.02) -- -- --
From net realized gains (0.43) (0.15) (0.12) (0.04) (0.01) --
In excess of net realized gains -- -- -- -- (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.45) (0.30) (0.12) (0.13) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93 $ 13.46 $ 11.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 9.54% 14.64% 11.22% 4.20% 15.44% 26.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $586,741 $449,949 $347,790 $218,299 $145,640 $35,384
Ratio of expenses to average
net assets 0.88% 0.86% 0.97% 1.04% 1.02% 1.22%(b)
Ratio of net investment income
to average net assets 1.29% 1.00% 1.04% 1.25% 1.27% 1.37%(b)
Ratio of expenses to average
net assets* 0.88% 0.86% 1.00% 1.04% 1.02% 2.34%(b)
Ratio of net investment income
to average net assets* 1.29% 1.00% 1.01% 1.25% 1.27% 0.25%(b)
Portfolio turnover (c) 9.90% 9.61% 6.28% 4.67% 7.74% 3.10%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) The Fund commenced offering on October 28,
1992. (b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 16.92 $ 15.16 $ 13.92 $ 13.49 $ 11.80 $ 11.74
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.19 0.11 0.14 0.12 0.09 0.02
Net realized and unrealized
gains from investments 1.31 2.03 1.40 0.43 1.67 0.04
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.50 2.14 1.54 0.55 1.76 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.13) (0.16) (0.08) (0.05) --
In excess of net investment
income -- (0.10) (0.02) -- -- --
From net realized gains (0.43) (0.15) (0.12) (0.04) (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.38) (0.30) (0.12) (0.07) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.99 $ 16.92 $ 15.16 $ 13.92 $ 13.49 $ 11.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 9.34% 14.31% 11.20% 3.87% 15.18% 2.87%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $24,060 $12,562 $10,789 $5,028 $2,395 $153
Ratio of expenses to average
net assets 1.13% 1.11% 1.22% 1.28% 1.26% 1.47%(b)
Ratio of net investment income
to average net assets 1.11% 0.73% 0.79% 1.09% 1.15% 2.10%(b)
Ratio of expenses to average
net assets* 1.23% 1.19% 1.35% 1.38% 1.36% 2.35%(b)
Ratio of net investment income
to average net assets* 1.01% 0.65% 0.66% 0.99% 1.05% 1.22%(b)
Portfolio turnover (c) 9.90% 9.61% 6.28% 4.67% 7.74% 3.10%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class A commenced operations on April 23,
1993. (b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
15
<PAGE> 21
One Group(R) International Equity Index Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.44 $ 14.79 $ 13.73 $ 13.40 $ 13.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.08 0.09 0.03 0.03 0.06
Net realized and unrealized gains from investments 1.24 1.86 1.32 0.41 0.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.32 1.95 1.35 0.44 0.40
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.08) (0.15) (0.07) --
In excess of net investment income -- (0.07) (0.02) -- --
From net realized gains (0.43) (0.15) (0.12) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.30) (0.29) (0.11) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.33 $ 16.44 $ 14.79 $ 13.73 $ 13.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.48% 13.37% 9.97% 3.17% 3.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $13,307 $10,033 $5,856 $3,687 $1,872
Ratio of expenses to average net assets 1.88% 1.86% 1.97% 2.04% 2.00%(c)
Ratio of net investment income to average net assets 0.26% 0.08% 0.04% 0.25% 1.37%(c)
Ratio of expenses to average net assets* 1.88% 1.86% 2.00% 2.04% 2.00%(c)
Ratio of net investment income to average net assets* 0.26% 0.08% 0.01% 0.25% 1.37%(c)
Portfolio turnover (d) 9.90% 9.61% 6.28% 4.67% 7.74%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.70
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.06
Net realized and unrealized gains from investments
(losses) 2.45
- ----------------------------------------------------------------------------
Total from Investment Activities 2.51
- ----------------------------------------------------------------------------
Distributions:
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.
16
<PAGE> 22
One Group(R)
Mid Cap Value Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks capital appreciation
with the secondary goal of achieving
current income by investing
primarily in equity securities.
LOGO INVESTMENT STRATEGY
The Fund primarily invests in the
equity securities of companies with
below-market average
price-to-earnings and price-to-book
value ratios and with market
capitalizations of $500 million to
$5 billion. In selecting
investments, the Fund considers the
issuer's soundness and earnings
prospects. If Banc One Investment
Advisors determines that a company's
fundamentals are declining or that
the company's ability to pay
dividends has been impaired, it
likely may consider eliminating the
Fund's holding of the company's
stock. This Fund was formerly called
The One Group Disciplined Value
Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
80% of its total assets in equity
securities of mid cap companies.
These securities include common
stocks, debt securities, and
preferred stocks that are
convertible into common stocks. A
portion of the Fund's assets will be
held in cash equivalents. For a list
of all the securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Before you invest, please read "More
About the Funds" and "Investment
Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average
daily net assets)
Investment Advisory Fees .74% .74% .74%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses .20% .20% .20%
Total Fund Operating Expenses (after
fee waiver) (5) 1.19% 1.94% 1.94%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.74%
none
.20%
.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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from the redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.29% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 88 $114 $189
Class A
(without fee
waiver) $ 65 $ 91 $120 $200
Class B $ 70 $ 91 $125 $207
Class C $ 30 $ 61 $105 $226
Class I $ 10 $ 30 $ 52 $115
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 88 $114 $189
Class A
(without fee
waiver) $ 65 $ 91 $120 $200
Class B $ 20 $ 61 $105 $207
Class C $ 20 $ 61 $105 $226
Class I $ 10 $ 30 $ 52 $115
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
17
<PAGE> 23
One Group(R) Mid Cap Value Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 15.65 $ 14.69 $ 13.20 $ 11.90 $ 12.76 $ 11.49 $ 10.20
- ---------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14 0.22 0.29 0.28 0.26 0.28 0.34
Net realized and unrealized gains
from investments 3.99 2.57 2.27 1.57 0.29 1.27 1.29
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.13 2.79 2.56 1.85 0.55 1.55 1.63
- ---------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.14) (0.22) (0.29) (0.27) (0.26) (0.28) (0.34)
From net realized gains (2.74) (1.61) (0.78) (0.28) (1.15) -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (2.88) (1.83) (1.07) (0.55) (1.41) (0.28) (0.34)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.90 $ 15.65 $ 14.69 $ 13.20 $ 11.90 $ 12.76 $ 11.49
- ---------------------------------------------------------------------------------------------------------------
Total Return 28.27% 20.56% 20.10% 16.03% 4.04% 13.58% 16.24%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $634,672 $562,302 $522,474 $448,530 $418,238 $211,785 $155,234
Ratio of expenses to average net
assets 0.96% 0.98% 0.99% 1.00% 0.93% 0.89% 0.69%
Ratio of net investment income to
average net assets 0.85% 1.52% 2.04% 2.21% 2.14% 2.30% 3.17%
Ratio of expenses to average net
assets* 0.96% 0.98% 1.00% 1.10% 0.98% 1.08% 1.23%
Ratio of net investment income to
average net assets* 0.85% 1.52% 2.03% 2.11% 2.09% 2.11% 2.63%
Portfolio turnover (a) 106.41% 92.66% 90.55% 176.66% 56.33% 108.79% 25.32%
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
CLASS I 1991 1990 1989(B)
<S> <C> <C> <C>
- -----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.42 $ 10.85 $ 10.00
- -----------------------------------------------------------------------
Investment Activities:
Net investment income 0.39 0.48 0.14
Net realized and unrealized gains
from investments (0.23) (0.09) 0.85
- -----------------------------------------------------------------------
Total from Investment Activities 0.16 0.39 0.99
- -----------------------------------------------------------------------
Distributions:
From net investment income (0.38) (0.48) (0.14)
From net realized gains -- (0.34) --
- -----------------------------------------------------------------------
Total Distributions (0.38) (0.82) (0.14)
- -----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.20 $ 10.42 $ 10.85
- -----------------------------------------------------------------------
Total Return 1.75% 3.49% 29.90%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 74,481 $ 59,992 $ 45,872
Ratio of expenses to average net
assets 0.41% 0.35% 0.33%(c)
Ratio of net investment income to
average net assets 3.92% 4.36% 3.95%(c)
Ratio of expenses to average net
assets* 1.15% 1.09% 1.07%(c)
Ratio of net investment income to
average net assets* 3.18% 3.62% 3.21%(c)
Portfolio turnover (a) 49.62% 51.14% 14.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) Class I
Shares commenced offering on March 2, 1989. (c) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.68 $ 14.72 $ 13.22 $ 11.91 $ 12.75 $ 11.49 $ 11.45
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.19 0.25 0.24 0.24 0.25 0.12
Net realized and unrealized gains from
investments 3.99 2.57 2.28 1.59 0.30 1.26 0.06
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.09 2.76 2.53 1.83 0.54 1.51 0.18
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.10) (0.19) (0.25) (0.24) (0.23) (0.25) (0.14)
From net realized gains (2.74) (1.61) (0.78) (0.26) (1.10) -- --
In excess of net realized gains -- -- -- (0.02) (0.05) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.84) (1.80) (1.03) (0.52) (1.38) (0.25) (0.14)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.93 $ 15.68 $ 14.72 $ 13.22 $ 11.91 $ 12.75 $ 11.49
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.90% 20.21% 19.80% 15.43% 3.95% 13.27% 1.56%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 29,443 $ 23,909 $ 20,838 $ 13,560 $ 10,448 $ 3,435 $ 35
Ratio of expenses to average net assets 1.21% 1.23% 1.24% 1.26% 1.18% 1.12% 1.29%(c)
Ratio of net investment income to
average net assets 0.60% 1.26% 1.79% 1.99% 2.00% 2.06% 2.43%(c)
Ratio of expenses to average net
assets* 1.31% 1.31% 1.35% 1.36% 1.33% 1.46% 1.49%(c)
Ratio of net investment income to
average net assets* 0.50% 1.18% 1.68% 1.89% 1.85% 1.72% 2.23%(c)
Portfolio turnover (a) 106.41% 92.66% 90.55% 176.66% 56.33% 108.79% 25.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued. (b) Class A Shares
commenced offering on February 18, 1992. (c) Annualized.
18
<PAGE> 24
The One Group(R) Mid Cap Value Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.64 $ 14.69 $ 13.19 $ 11.90 $ 12.60
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.02) 0.08 0.15 0.15 0.07
Net realized and unrealized gains (losses) from
investments 3.98 2.55 2.27 1.58 (0.70)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.96 2.63 2.42 1.73 (0.63)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.01) (0.07) (0.14) (0.15) (0.06)
In excess of net investment income -- -- -- (0.01) (0.01)
From net realized gains (2.74) (1.61) (0.78) (0.28) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.75) (1.68) (0.92) (0.44) (0.07)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.85 $ 15.64 $ 14.69 $ 13.19 $ 11.90
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 26.97% 19.19% 18.93% 14.92% (5.00)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 30,094 $ 20,499 $ 16,305 $ 11,222 $ 5,356
Ratio of expenses to average net assets 1.96% 1.98% 1.99% 2.00% 1.96%(c)
Ratio of net investment income to average net assets (0.15)% 0.51% 1.04% 1.26% 1.80%(c)
Ratio of expenses to average net assets* 1.96% 1.98% 2.00% 2.01% 1.96%(c)
Ratio of net investment income to average net assets* (0.15)% 0.51% 1.03% 1.25% 1.80%(c)
Portfolio turnover (d) 106.41% 92.66% 90.55% 176.66% 56.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
19
<PAGE> 25
One Group(R)
Equity Index Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks investment results
that correspond to the aggregate
price and dividend performance of
securities in the Standard & Poor's
500 Composite Stock Price Index
("S&P 500").*
LOGO INVESTMENT STRATEGY
The Fund invests primarily in stocks
included in the S&P 500 and,
secondarily in stock index futures.
Banc One Investment Advisors will
seek to achieve a correlation
between the performance of the Fund
and that of the S&P 500 Index. To
implement this strategy, Banc One
Investment Advisors generally
selects stocks in the order of their
weightings in the S&P 500 beginning
with the heaviest weighted stocks.
The Fund will attempt to achieve a
correlation between the performance
of its portfolio and that of the S&P
500 of at least 0.95, without taking
into account expenses. Perfect
correlation would be 1.00.
LOGO PORTFOLIO SECURITIES
The percentage of a stock that the
Fund holds will be approximately the
same percentage that the stock
represents in the S&P 500. In
addition, the Fund may hold up to
10% of its net assets in cash or
cash equivalents. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Because the Fund's investments are
tied to an index, fluctuations in
the index will affect the value of
your investment in the Fund. Before
you invest, please read "More About
the Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
* "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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
Investment Advisory Fees (after fee
waiver) (4) .15% .15% .15%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00%
Other Expenses (after
reimbursements) (6) .21% .21% .21%
Total Fund Operating Expenses (after
fee waivers) (7) .61% 1.36% 1.36%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.15%
none
.21%
.36%
</TABLE>
(1) If you buy or sell shares through an account with a Shareholder
Servicing Agent, you may be charged separate transaction fees by the
Shareholder Servicing Agent. In addition, a $10.00 sub-minimum account
fee may be applicable and a $7.00 charge will be deducted from the
redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .30% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Without expense reimbursements, Other Expenses would be .28% for all
classes of shares.
(7) Without the voluntary reduction of Investment Advisory and 12b-1 fees
and reimbursement of Other Expenses, Total Operating Expenses would be
.93% for Class A shares, 1.58% for Class B shares, 1.58% for Class C
shares and .58% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 58 $ 71 $ 85 $125
Class A
(without fee
waivers) $ 61 $ 81 $101 $161
Class B $ 64 $ 73 $ 94 $143
Class B
(without fee
waivers) $ 66 $ 80 $106 $170
Class C $ 24 $ 43 $ 74 $164
Class C
(without fee
waivers) $ 26 $ 50 $ 86 $188
Class I $ 4 $ 12 $ 20 $ 46
Class I
(without fee
waiver) $ 6 $ 19 $ 32 $ 73
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 58 $ 71 $ 85 $125
Class A
(without fee
waivers) $ 61 $ 81 $101 $161
Class B $ 14 $ 43 $ 74 $143
Class B
(without fee
waivers) $ 16 $ 50 $ 86 $170
Class C $ 14 $ 43 $ 74 $164
Class C
(without fee
waivers) $ 16 $ 50 $ 86 $188
Class I $ 4 $ 12 $ 20 $ 46
Class I
(without fee
waivers) $ 6 $ 19 $ 32 $ 73
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
20
<PAGE> 26
One Group(R) Equity Index Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32 0.29
Net realized and unrealized gains
(losses) from investments 5.98 5.27 3.16 2.59 (0.20)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.31 5.62 3.49 2.91 0.09
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29) (0.29)
In excess of net investment income -- -- (0.01) (0.02) (0.04)
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.48) (0.86) (0.47) (0.42)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- ---------------------------------------------------------------------------------------------------------------------
Total Return 29.73% 34.30% 25.47% 25.79% 0.63%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $671,422 $480,819 $321,058 $234,895 $165,370
Ratio of expenses to average net assets 0.35% 0.30% 0.30% 0.33% 0.46%
Ratio of net investment income to
average net assets 1.37% 1.87% 2.18% 2.57% 2.44%
Ratio of expenses to average net assets* 0.62% 0.61% 0.59% 0.66% 0.59%
Ratio of net investment income to
average net assets* 1.10% 1.56% 1.89% 2.24% 2.31%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81%
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
CLASS I 1993 1992(b)
- ---------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.00
- ---------------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.26
Net realized and unrealized gains
(losses) from investments 1.13 0.95
- ---------------------------------------------------------------------
Total from Investment Activities 1.43 1.21
- ---------------------------------------------------------------------
Distributions:
From net investment income (0.30) (0.26)
In excess of net investment income -- --
From net realized gains (0.13) (0.03)
- ---------------------------------------------------------------------
Total Distributions (0.43) (0.29)
- ---------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.92 $ 10.92
- ---------------------------------------------------------------------
Total Return 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $96,446 $62,150
Ratio of expenses to average net assets 0.50% 0.73%(c)
Ratio of net investment income to
average net assets 2.46% 2.43%(c)
Ratio of expenses to average net assets* 0.87% 1.16%(c)
Ratio of net investment income to
average net assets* 2.09% 2.00%(c)
Portfolio turnover (a) 2.71% 21.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) The Fund
commenced operations on July 2, 1991. (c) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.81 $ 16.67 $ 14.02 $ 11.59 $ 11.91
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29 0.28
Net realized and unrealized gains
(losses) from investments 5.97 5.28 3.18 2.58 (0.20)
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.23 5.57 3.45 2.87 0.08
- -------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.28) (0.27) (0.28) (0.27)
In excess of net investment income -- -- (0.01) -- (0.04)
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.43) (0.80) (0.44) (0.40)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02 $ 11.59
- -------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 29.33% 33.94% 25.16% 25.43% 0.56%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $218,518 $98,338 $32,186 $3,003 $1,416
Ratio of expenses to average net
assets 0.60% 0.55% 0.55% 0.56% 0.62%
Ratio of net investment income to
average net assets 1.11% 1.59% 1.93% 2.38% 2.37%
Ratio of expenses to average net
assets* 0.96% 0.95% 0.94% 1.01% 0.94%
Ratio of net investment income to
average net assets* 0.75% 1.19% 1.54% 1.94% 2.05%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81%
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
CLASS A 1993 1992(b)
- ----------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.94
- ----------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.08
Net realized and unrealized gains
(losses) from investments 1.10 --
- ----------------------------------------------------------------
Total from Investment Activities 1.40 0.08
- ----------------------------------------------------------------
Distributions:
From net investment income (0.28) (0.10)
In excess of net investment income -- --
From net realized gains (0.13) --
- ----------------------------------------------------------------
Total Distributions (0.41) (0.10)
- ----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.91 $ 10.92
- ----------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $512 $5
Ratio of expenses to average net
assets 0.52% 1.09%(c)
Ratio of net investment income to
average net assets 2.51% 1.97%(c)
Ratio of expenses to average net
assets* 0.99% 1.27%(c)
Ratio of net investment income to
average net assets* 2.04% 1.79%(c)
Portfolio turnover (a) 2.71% 21.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) Class A
Shares commenced offering on February 18, 1992. (c) Annualized.
21
<PAGE> 27
One Group(R) Equity Index Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.80 $ 16.68 $ 14.05 $ 11.61 $ 12.39
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18 0.09
Net realized and unrealized gains (losses) from
investments 5.97 5.27 3.16 2.61 (0.78)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.07 5.43 3.32 2.79 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.11) (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (0.63) (0.15) (0.52) (0.16) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.31) (0.69) (0.35) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05 $ 11.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 28.47% 32.93% 24.05% 24.58% (5.57)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $351,624 $168,699 $38,538 $1,408 $248
Ratio of expenses to average net assets 1.35% 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income to average net assets 0.36% 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average net assets* 1.61% 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income to average net assets* 0.10% 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover (d) 4.32% 5.81% 9.08% 2.71% 11.81%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.60
- ------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07
Net realized and unrealized gains (losses) from
investments 4.67
- ------------------------------------------------------------------------------------
Total from Investment Activities 4.74
- ------------------------------------------------------------------------------------
Distributions:
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.
22
<PAGE> 28
One Group(R)
Equity Income Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks current income
through regular payment of dividends
with the secondary goal of achieving
capital appreciation by investing
primarily in equity securities.
LOGO INVESTMENT STRATEGY
The Fund attempts to keep its yield
above the Standard & Poor's 500
Composite Price Index ("S&P 500")*
by investing in common stocks of
corporations which regularly pay
dividends, as well as stocks with
favorable long-term fundamental
characteristics. Continued payment
of dividends cannot be assured.
Because achieving yield is the
primary consideration in selecting
securities, stocks of companies that
are out of favor in the financial
community may also be purchased.
This Fund was formerly called The
One Group Income Equity Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in the
equity securities of companies
described above, including common
stocks, debt securities, and
preferred stocks that are
convertible into common stocks. A
portion of the Fund's assets will be
held in cash equivalents. For a list
of all the securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Before you invest, please read "More
About the Funds" and "Investment
Practices."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
* "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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .66% .66% .66% 66%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00% none
Other Expenses (after fee
waiver) (6) .14% .14% .14% .14%
Total Fund Operating Expenses (after
fee waivers) (7) 1.05% 1.80% 1.80% 80%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .74% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Without the fee waiver, Other Expenses would be .22% for all classes of
shares.
(7) Without the voluntary reduction of Investment Advisory fees, 12b-1 fees
and Other Expenses, Total Operating Expenses would be 1.31% for Class A
shares, 1.96% for Class B shares, 1.96% for Class C shares and .96% for
Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 63 $ 84 $107 $174
Class A
(without fee
waivers) $ 65 $ 92 $121 $202
Class B $ 68 $ 87 $117 $192
Class B
(without fee
waivers) $ 70 $ 92 $126 $212
Class C $ 28 $ 57 $ 97 $212
Class C
(without fee
waivers) $ 30 $ 62 $106 $229
Class I $ 8 $ 26 $ 44 $ 99
Class I
(without fee
waivers) $ 10 $ 31 $ 53 $118
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 63 $ 84 $107 $174
Class A
(without fee
waivers) $ 65 $ 92 $121 $202
Class B $ 18 $ 57 $ 97 $192
Class B
(without fee
waivers) $ 20 $ 62 $106 $212
Class C $ 18 $ 57 $ 97 $212
Class C
(without fee
waivers) $ 20 $ 62 $106 $229
Class I $ 8 $ 26 $ 44 $ 99
Class I
(without fee
waivers) $ 10 $ 31 $ 53 $118
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
23
<PAGE> 29
One Group(R) Equity Income Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 21.93 $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24 $ 11.35
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.32 0.36 0.40 0.40 0.39 0.43 0.49
Net realized and unrealized
gains from investments 4.36 4.89 3.22 2.28 0.01 0.97 0.90
- -------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 4.68 5.25 3.62 2.68 0.40 1.40 1.39
- -------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.31) (0.36) (0.40) (0.40) (0.39) (0.43) (0.50)
From net realized gains (2.23) (0.61) (0.70) (0.37) -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (2.54) (0.97) (1.10) (0.77) (0.39) (0.43) (0.50)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.07 $ 21.93 $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24
- -------------------------------------------------------------------------------------------------------------------
Total Return 23.18% 30.90% 24.53% 21.04% 3.27% 11.56% 12.36%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $691,878 $649,007 $321,827 $170,919 $198,787 $153,144 $125,050
Ratio of expenses to average
net assets 1.00% 1.00% 0.98% 1.01% 0.98% 0.90% 0.70%
Ratio of net investment
income to average net
assets 1.39% 1.91% 2.44% 2.85% 3.18% 3.37% 4.12%
Ratio of expenses to average
net assets* 1.00% 1.00% 1.01% 1.01% 1.05% 1.07% 1.23%
Ratio of net investment
income to average net
assets* 1.39% 1.91% 2.41% 2.85% 3.11% 3.20% 3.59%
Portfolio turnover (a) 14.64% 28.18% 14.92% 4.03% 22.69% 7.53% 5.99%
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
CLASS I 1991 1990 1989
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.06 $ 10.32 $ 9.10
- ------------------------------------------------------------------------
Investment Activities:
Net investment income 0.54 0.53 0.45
Net realized and unrealized
gains from investments 0.26 0.77 1.22
- ----------------------------------------------------------------------------------------
Total from Investment
Activities 0.80 1.30 1.67
- --------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.51) (0.56) (0.45)
From net realized gains -- -- --
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.56) (0.45)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.35 $ 11.06 $ 10.32
- -------------------------------------------------------------------------------------------------------------------
Total Return 7.48% 12.79% 18.59%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $73,552 $37,056 $24,591
Ratio of expenses to average
net assets 0.42% 0.49% 0.66%
Ratio of net investment
income to average net
assets 4.80% 4.94% 5.35%
Ratio of expenses to average
net assets* 1.16% 1.23% 1.42%
Ratio of net investment
income to average net
assets* 4.06% 4.20% 4.59%
Portfolio turnover (a) 9.36% 9.81% 7.14%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.90 $ 17.64 $ 15.11 $ 13.20 $ 13.20 $ 12.23 $ 12.34
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.25 0.31 0.38 0.03 0.36 0.40 0.20
Net realized and unrealized gains from
investments 4.37 4.87 3.20 2.29 -- 0.98 (0.10)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.62 5.18 3.58 2.32 0.36 1.38 0.10
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.25) (0.31) (0.35) (0.03) (0.34) (0.41) (0.21)
In excess of net investment income -- -- -- (0.01) (0.02) -- --
From net realized gains (2.23) (0.61) (0.70) (0.37) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (2.48) (0.92) (1.05) (0.41) (0.36) (0.41) (0.21)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.04 $ 21.90 $ 17.64 $ 15.11 $ 13.20 $ 13.20 $ 12.23
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.91% 30.39% 24.23% 20.79% 2.95% 11.38% 2.16%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $117,682 $78,976 $44,284 $13,793 $12,054 $9,513 $118
Ratio of expenses to average net assets 1.25% 1.25% 1.23% 1.26% 1.23% 1.11% 1.29%(c)
Ratio of net investment income to average
net assets 1.15% 1.65% 2.19% 2.61% 3.01% 3.32% 3.97%(c)
Ratio of expenses to average net assets* 1.35% 1.34% 1.36% 1.36% 1.40% 1.43% 1.49%(c)
Ratio of net investment income to average
net assets* 1.05% 1.56% 2.06% 2.51% 2.84% 3.00% 3.77%(c)
Portfolio turnover (a) 14.64% 28.18% 14.92% 4.03% 22.69% 7.53% 5.99%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) Class A
Shares commenced offering on February 18, 1992. (c) Annualized.
24
<PAGE> 30
One Group(R) Equity Income Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.95 $ 17.68 $ 15.14 $13.23 $ 13.83
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.17 0.24 0.26 0.11
Net realized and unrealized gains (losses) from
investments 4.36 4.89 3.23 2.29 (0.60)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.62 5.06 3.47 2.55 (0.49)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.18) (0.23) (0.25) (0.11)
In excess of net investment income -- -- -- (0.02) --
From net realized gains (2.23) (0.61) (0.70) (0.37) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.49) (0.79) (0.93) (0.64) (0.11)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.08 $ 21.95 $ 17.68 $15.14 $ 13.23
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.97% 29.48% 23.41% 19.91% .(337)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $165,813 $79,518 $29,169 $3,468 $1,714
Ratio of expenses to average net assets 1.99% 2.00% 1.98% 2.01% 1.95%(c)
Ratio of net investment income to average net assets 0.39% 0.89% 1.44% 1.88% 2.70%(c)
Ratio of expenses to average net assets* 1.99% 2.00% 2.01% 2.02% 1.95%(c)
Ratio of net investment income to average net assets* 0.39% 0.89% 1.41% 1.87% 2.70%(c)
Portfolio turnover (d) 14.64% 28.18% 14.92% 4.03% 22.69%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not Annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.40
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.06
Net realized and unrealized gains (losses) from
investments 3.39
- ----------------------------------------------------------------------------
Total from Investment Activities 3.45
- ----------------------------------------------------------------------------
Distributions:
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.
25
<PAGE> 31
One Group(R)
Diversified Equity Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long term capital
growth and growth of income with a
secondary objective of providing a
moderate level of current income.
LOGO INVESTMENT STRATEGY
The Fund invests primarily in common
stocks of overlooked or undervalued
companies that have the potential
for earnings growth over time. The
Fund uses a multi-style approach,
meaning that it may invest across
varied capitalization levels
targeting both value and growth
oriented companies. Because the Fund
seeks returns over the long term,
Banc One Investment Advisors will
not attempt to time the market. This
Fund was formerly known as The One
Group Value Growth Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in equity
securities described above. Up to
35% of its total assets may be
invested in U.S. government
securities, other investment grade
fixed income securities, cash, and
cash equivalents. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. As a result, your
investment in the Fund may increase
or decrease in value. The Fund also
may invest in fixed income
securities. The value of these
securities will change in response
to interest rate changes and other
factors. This is especially true to
the extent that the Fund invests in
debt securities with speculative
characteristics. Before you invest,
please read "More About the Funds"
and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) .73% .73% .73% .73%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .23% .23% .23% .23%
Total Fund Operating Expenses (after
fee waiver) (5) 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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.31% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $116 $191
Class A
(without fee
waiver) $ 65 $ 92 $121 $202
Class B $ 70 $ 92 $126 $209
Class C $ 30 $ 62 $106 $229
Class I $ 10 $ 31 $ 53 $118
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $116 $191
Class A
(without fee
waiver) $ 65 $ 92 $121 $202
Class B $ 20 $ 62 $106 $209
Class C $ 20 $ 62 $106 $229
Class I $ 10 $ 31 $ 53 $118
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
26
<PAGE> 32
One Group(R) Diversified Equity Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, MARCH 26, 1996
-------------------------- TO JUNE 30,
CLASS I 1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.51 $ 10.39 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.08 0.11 0.03
Net realized and unrealized gains from investments 3.36 2.85 0.39
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.44 2.96 0.42
- --------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.08) (0.11) (0.03)
From net realized gains (1.36) (1.73) --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (1.44) (1.84) (0.03)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.51 $ 11.51 $ 10.39
- --------------------------------------------------------------------------------------------------------------
Total Return 32.26% 31.97% 10.49%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $630,340 $430,837 $191,212
Ratio of expenses to average net assets 0.98% 0.98% 0.95%(d)
Ratio of net investment income to average net assets 0.66% 1.06% 1.13%(d)
Ratio of expenses to average net assets* 0.98% 1.00% 1.04%(d)
Ratio of net investment income to average net assets* 0.66% 1.04% 1.04%(d)
Portfolio turnover (e) 62.37% 113.17% 65.21%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Period from date reorganized as a fund of One
Group. (b) Represents total return for Class A Shares from December 1, 1995
through March 25, 1996 plus total return for Class I Shares for the period
from March 26, 1996 through June 30, 1996. (c) Not
annualized. (d) Annualized. (e) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED NOVEMBER 30,
---------------------- --------- ----------------------
CLASS A 1998 1997 1996(a) 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.50 $ 10.39 $ 11.15 $ 9.00 $ 10.02
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.05 0.09 0.94 0.12 0.13
Net realized and unrealized gains (losses)
from investments 3.36 2.83 0.08 2.44 (0.56)
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.41 2.92 1.02 2.56 (0.43)
- --------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.05) (0.08) (0.94) (0.12) (0.14)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (1.36) (1.73) (0.83) (0.29) (0.45)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (1.41) (1.81) (1.78) (0.41) (0.59)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.50 $ 11.50 $ 10.39 $ 11.15 $ 9.00
- --------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 31.96% 31.53% 10.40%(b) 29.57% (4.32)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $80,500 $47,306 $35,984 $217,978 $173,198
Ratio of expenses to average net assets 1.23% 1.23% 0.97%(c) 0.95% 0.96%
Ratio of net investment income to average
net assets 0.40% 0.83% 0.85%(c) 1.25% 1.34%
Ratio of expenses to average net assets* 1.33% 1.34% 1.05%(c) 0.95% 0.96%
Ratio of net investment income to average
net assets* 0.30% 0.72% 0.77%(c) 1.25% 1.34%
Portfolio turnover (d) 62.37% 113.17% 65.21% 77.00% 53.00%
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------
CLASS A 1993 1992 1991
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.42 $ 7.80 $ 6.39
- ---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.11 0.11 0.12
Net realized and unrealized gains (losses)
from investments 0.83 1.75 1.44
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.94 1.86 1.56
- --------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.12) (0.10) (0.14)
In excess of net investment income -- -- --
From net realized gains (0.22) (0.14) (0.01)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.24) (0.15)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.02 $ 9.42 $ 7.80
- --------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.13% 24.27% 24.97%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $171,141 $133,614 $93,400
Ratio of expenses to average net assets 0.96% 0.97% 0.95%
Ratio of net investment income to average
net assets 1.21% 1.25% 1.73%
Ratio of expenses to average net assets* 0.96% 0.97% 1.02%
Ratio of net investment income to average
net assets* 1.21% 1.25% 1.66%
Portfolio turnover (d) 66.00% 43.00% 54.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
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.
27
<PAGE> 33
One Group(R) Diversified Equity Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS SEPTEMBER 9,
JUNE 30, ENDED YEAR ENDED 1994 TO
-------------------- JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1998 1997 1996(a) 1995 1994(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.47 $ 10.39 $ 11.16 $ 9.01 $ 9.85
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.02) 0.01 0.91 0.05 0.02
Net realized and unrealized gains (losses) from
investments 3.31 2.82 0.07 2.46 (0.84)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.29 2.83 0.98 2.51 (0.82)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.02) (0.91) (0.07) (0.02)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (1.36) (1.73) (0.83) (0.29) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.36) (1.75) (1.75) (0.36) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.40 $ 11.47 $ 10.39 $ 11.16 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 30.89% 30.52% 9.96%(c) 28.74% (8.31)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $25,501 $10,517 $4,673 $2,923 $412
Ratio of expenses to average net assets 1.98% 1.98% 1.86%(d) 1.70% 1.71%(d)
Ratio of net investment income to average net assets (0.35)% 0.07% 0.13%(d) 0.38% 0.76%(d)
Ratio of expenses to average net assets* 1.98% 2.00% 1.94%(d) 1.70% 1.71%(d)
Ratio of net investment income to average net assets* (0.35)% 0.05% 0.05%(d) 0.38% 0.76%(d)
Portfolio turnover (e) 62.37% 113.17% 65.21% 77.00% 53.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Upon reorganizing as a fund of One Group, the Paragon Value
Growth Fund became the Value Growth Fund. Financial highlights for the periods
prior to March 26, 1996 represent the Paragon Value Growth Fund. The per share
data for the periods prior to March 26, 1996 have been restated to reflect the
impact of restatement of net asset value from $15.21 to $10.00 effective March
26, 1996. (b) Class B Shares commenced offering September 9, 1994. (c) Not
annualized. (d) Annualized. (e) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.76
- ------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 2.35
- ------------------------------------------------------------------------------
Total from Investment Activities 2.35
- ------------------------------------------------------------------------------
Distributions:
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.
28
<PAGE> 34
One Group(R)
Small Cap Growth Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
growth primarily by investing in a
portfolio of equity securities of
small capitalization and emerging
growth companies.
LOGO INVESTMENT STRATEGY
The Fund invests primarily in common
stocks, debt securities, preferred
stocks, convertible securities,
warrants, and other equity
securities of small capitalization
companies. Generally, Banc One
Investment Advisors selects a
portfolio of companies with a market
capitalization equivalent to the
median market capitalization of the
Standard & Poor's Small Cap 600
Index ("S&P Small Cap 600")*. The
Fund may occasionally hold
securities of companies with larger
capitalizations if doing so
contributes to the Fund's investment
objective. Companies listed on the
S&P Small Cap 600 range in size from
$35 million to $6 billion. This Fund
was formerly called The One Group
Small Capitalization Fund.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 65% of its
total assets in the securities of
small cap companies. Up to 35% of
its total assets may be invested in
U.S. Government Securities, other
investment grade fixed income
securities, cash, and cash
equivalents. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. As a result, your
investment in the Fund may increase
or decrease in value. Also, smaller
companies may be subject to greater
business risks than larger
companies. Before you invest, please
read "More About the Funds" and
"Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
* "S&P Small Cap 600" is a
registered service mark of
Standard & Poor's Corporation,
which does not sponsor and is in
no way affiliated with the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .31% .31% .31% .31%
Total Fund Operating Expenses (after
fee waiver) (5) 1.30% 2.05% 2.05% 1.05%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.40% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 92 $120 $201
Class A
(without fee
waiver) $ 66 $ 94 $125 $212
Class B $ 71 $ 94 $130 $219
Class C $ 31 $ 64 $110 $238
Class I $ 11 $ 33 $ 58 $128
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 92 $120 $201
Class A
(without fee
waiver) $ 66 $ 94 $125 $212
Class B $ 21 $ 64 $110 $219
Class C $ 21 $ 64 $110 $238
Class I $ 11 $ 33 $ 58 $128
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
29
<PAGE> 35
One Group(R) Small Cap Growth Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, for years ended 1998, 1997 and 1996,
whose report, along with the Fund's financial statements, is incorporated by
reference in the Statement of Additional Information, which is available upon
request. Information for years ended prior to December 31, 1996 have been
audited by other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 26,
JUNE 30, 1996 TO
---------------------------- JUNE 30,
CLASS I 1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.94 $ 10.75 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) -- (0.02) --
Net realized and unrealized gains from investments 2.44 1.31 0.78
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.44 1.29 0.78
- -----------------------------------------------------------------------------------------------------------------------
Distributions:
From net realized gains (1.33) (1.10) (0.03)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (0.03)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.05 $ 10.94 $ 10.75
- -----------------------------------------------------------------------------------------------------------------------
Total Return 23.58% 13.44% 13.39%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $114,951 $78,318 $83,371
Ratio of expenses to average net assets 1.06% 1.02% 0.96%(d)
Ratio of net investment income (loss) to average net
assets (0.05)% (0.16)% (0.16)%(d)
Ratio of expenses to average net assets* 1.09% 1.12% 1.05%(d)
Ratio of net investment income (loss) to average net
assets* (0.08)% (0.26)% (0.25)%(d)
Portfolio turnover (e) 83.77% 92.01% 59.57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Period from date reorganized as a fund of One
Group. (b) Represents total return for Class A Shares from December 1, 1995
through March 25, 1996 plus total return for Class I Shares for the period
from March 26, 1996 through June 30, 1996. (c) Not
annualized. (d) Annualized. (e) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
JUNE 30, ENDED YEAR ENDED NOVEMBER 30,
---------------------- JUNE 30, ------------------------------------------------
CLASS A 1998 1997 1996(A) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48 $ 7.38
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.03) (0.04) (0.07) (0.04) (0.04) (0.02) 0.01
Net realized and unrealized gains
(losses) from investments 2.44 1.35 1.40 2.35 (0.63) 0.88 2.10
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.41 1.31 1.33 2.31 (0.67) 0.86 2.11
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- -- -- -- -- (0.01) (0.01)
From net realized gains (1.33) (1.10) (2.10) (0.17) (0.08) (0.22) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (2.10) (0.17) (0.08) (0.23) (0.01)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.02 $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 23.28% 13.52% 12.85%(b) 25.07% (6.66)% 9.10% 28.59%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $21,634 $17,299 $18,356 $95,467 $77,540 $74,982 $55,719
Ratio of expenses to average net
assets 1.31% 1.27% 1.05%(c) 1.03% 1.00% 1.01% 1.00%
Ratio of net investment income (loss)
to average net assets (0.31)% (0.41)% (0.33)%(c) (0.36)% (0.38)% (0.21)% 0.15%
Ratio of expenses to average net
assets* 1.44% 1.45% 1.07%(c) 1.03% 1.00% 1.01% 1.00%
Ratio of net investment income (loss)
to average net assets* (0.44)% (0.59)% (0.35)%(c) (0.36)% (0.38)% (0.21)% 0.15%
Portfolio turnover (d) 83.77% 92.01% 59.57% 65.00% 51.00% 59.00% 42.00%
<CAPTION>
FIVE MONTHS
ENDED
NOVEMBER 30,
CLASS A 1991(e)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.37
- ------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.01
Net realized and unrealized gains
(losses) from investments 1.01
- -------------------------------------------------------------------------------
Total from Investment Activities 1.02
- --------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.01)
From net realized gains --
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.01)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.38
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.12%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $34,546
Ratio of expenses to average net
assets 1.05%(c)
Ratio of net investment income (loss)
to average net assets 0.31%(c)
Ratio of expenses to average net
assets* 1.05%(c)
Ratio of net investment income (loss)
to average net assets* 0.31%(c)
Portfolio turnover (d) 12.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Upon reorganizing as a fund of One Group, the Paragon Gulf
South Growth Fund became the Gulf South Growth Fund. Financial highlights for
the periods prior to March 26, 1996 represent the Paragon Gulf South Growth
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $15.70
to $10.00 effective March 26, 1996. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued. (e) Period from commencement of operations.
30
<PAGE> 36
One Group(R) Small Cap Growth Fund Financial Highlights
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED Months Year September 12,
JUNE 30, ended ended 1994 to
----------------------- June 30, November 30, November 30,
CLASS B 1998 1997 1996(a) 1995 1994(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.84 $ 10.72 $ 11.56 $ 9.47 $ 10.40
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment loss (0.03) (0.10) (0.06) (0.07) (0.01)
Net realized and unrealized gains (losses) from
investments 2.31 1.32 1.35 2.33 (0.92)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.28 1.22 1.29 2.26 (0.93)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net realized gains (1.33) (1.10) (2.13) (0.17) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (2.13) (0.17) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.79 $ 10.84 $ 10.72 $ 11.56 $ 9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.24% 12.74% 12.47%(c) 24.21% (9.08)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $8,567 $3,835 $2,545 $1,814 $231
Ratio of expenses to average net assets 2.06% 2.02% 1.87%(d) 1.78% 1.75%(d)
Ratio of net investment income (loss) to average
net assets (1.02)% (1.16)% (1.10)%(d) (1.16)% (0.90)%(d)
Ratio of expenses to average net assets* 2.09% 2.12% 1.92%(d) 1.78% 1.75%(d)
Ratio of net investment income (loss) to average
net assets* (1.05)% (1.26)% (1.15)%(d) (1.16)% (0.90)%(d)
Portfolio turnover (e) 83.77% 92.01% 59.57% 65.00% 51.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Upon reorganizing as a fund of One Group, the Paragon Gulf
South Growth Fund became the Gulf South Growth Fund. Financial highlights for
the periods prior to March 26, 1996 represent the Paragon Gulf South Growth
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $15.48
to $10.00 effective March 26, 1996. (b) Class B Shares commenced offering
September 12, 1994. (c) Not annualized. (d) Annualized. (e) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.03
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.02)
Net realized and unrealized gains (losses) from
investments 0.29
- ----------------------------------------------------------------------------
Total from Investment Activities 0.27
- ----------------------------------------------------------------------------
Distributions:
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.
31
<PAGE> 37
One Group(R)
Small Cap Value Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
growth by investing primarily in
equity securities of companies with
small capitalizations.
LOGO INVESTMENT STRATEGY
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.
LOGO PORTFOLIO SECURITIES
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 small
cap companies. While the Fund
invests primarily in securities of
U.S. companies, up to 25% of its
total assets may be invested in the
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. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. As a result, your
investment in the Fund may increase
or decrease in value. Also, smaller
companies may be subject to greater
business risks than larger
companies. Before you invest, please
read "More About the Funds" and
"Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .70% .70% .70%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses (after
reimbursements) (5) .21% .21% .21%
Total Fund Operating Expenses (after
fee waiver) (6) 1.16% 1.91% 1.91%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.70%
none
.21%
.91%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .74% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without expense reimbursements, Other Expenses would be .22% for all
classes of shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees
and reimbursement of Other Expenses, Total Operating Expenses would be
1.31% for Class A shares, 1.96% for Class B shares, 1.96% for Class C
shares and .96% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 87 $113 $186
Class A
(without fee
waiver) $ 65 $ 92 $121 $202
Class B $ 69 $ 90 $123 $204
Class B
(without fee
waiver) $ 70 $ 92 $126 $212
Class C $ 29 $ 60 $103 $223
Class C
(without fee
waiver) $ 30 $ 62 $106 $229
Class I $ 9 $ 29 $ 50 $112
Class I
(without fee
waiver) $ 10 $ 31 $ 53 $118
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 87 $113 $186
Class A
(without fee
waiver) $ 65 $ 92 $121 $202
Class B $ 19 $ 60 $103 $204
Class B
(without fee
waiver) $ 20 $ 62 $106 $212
Class C $ 19 $ 60 $103 $223
Class C
(without fee
waiver) $ 20 $ 62 $106 $229
Class I $ 9 $ 29 $ 50 $112
Class I
(without fee
waiver) $ 10 $ 31 $ 53 $118
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
32
<PAGE> 38
One Group(R) Small Cap Value Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, for years ended 1998, 1997, and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
CLASS I 1998 1997 1996 1995(A)
<S> <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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
CLASS A 1998 1997 1996 1995(a)
<S> <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.
33
<PAGE> 39
One Group(R) Small Cap Value Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
CLASS B 1998 1997 1996 1995(a)
<S> <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.
34
<PAGE> 40
One Group(R)
Diversified Mid Cap Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
growth by investing primarily in
equity securities of companies with
intermediate capitalizations.
LOGO INVESTMENT STRATEGY
The Fund invests primarily in equity
securities of mid cap companies.
These are companies with
capitalizations of $500 million to
$5 billion. Banc One Investment
Advisors believes that there are
many companies of this size with
strong 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.
LOGO PORTFOLIO SECURITIES
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 mid
cap companies. While the Fund
invests primarily in securities of
U.S. companies, up to 25% of its
total assets may be invested in the
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. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. As a result, your
investment in the Fund may increase
or decrease in value. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waivers) (3) .60% .60% .60% .60%
12b-1 Fees (after
reimbursements) (4) .25% 1.00% 1.00% none
Other Expenses (5) .26% .26% .26% .26%
Total Fund Operating Expenses (after
fee waiver) (6) 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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .74% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) With expense reimbursement, Other Expenses would be .27% for all classes
of shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees
and reimbursements of Other Expenses, Total Operating Expenses would be
1.36% for Class A shares, 2.01% for Class B shares, 2.01% for Class C
shares and 1.01% for Class I shares.
EXAMPLE An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 63 $ 86 $110 $181
Class A
(without fee
waiver) $ 66 $ 93 $123 $207
Class B $ 69 $ 88 $121 $198
Class B
(without fee
waiver) $ 70 $ 93 $128 $217
Class C $ 29 $ 58 $101 $218
Class C
(without fee
waiver) $ 30 $ 63 $108 $234
Class I $ 9 $ 27 $ 48 $106
Class I
(without fee
waiver) $ 10 $ 32 $ 56 $124
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 63 $ 86 $110 $181
Class A
(without fee
waiver) $ 66 $ 93 $123 $207
Class B $ 19 $ 58 $101 $198
Class B
(without fee
waiver) $ 20 $ 63 $108 $217
Class C $ 19 $ 58 $101 $218
Class C
(without fee
waiver) $ 20 $ 63 $108 $234
Class I $ 9 $ 27 $ 48 $106
Class I
(without fee
waiver) $ 10 $ 32 $ 56 $124
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
35
<PAGE> 41
One Group(R) Diversified Mid Cap Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 20.93 $ 17.61 $ 15.15 $ 13.34 $ 14.49 $ 12.37 $ 10.40 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.01) 0.01 0.04 0.06 0.07 0.10 0.11 0.09
Net realized and unrealized
gains (losses) from
investments and futures 0.93 4.88 3.74 2.57 (0.54) 2.87 2.43 0.43
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.92 4.89 3.78 2.63 (0.47) 2.97 2.54 0.52
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income -- (0.01) (0.04) (0.06) (0.07) (0.10) (0.11) (0.09)
In excess of net investment
income -- -- -- -- -- -- -- --
From net realized gain (1.39) (1.56) (1.28) (0.76) (0.49) (0.75) (0.46) (0.03)
In excess of net realized
gain -- -- -- -- (0.02) -- -- --
Return of capital -- -- -- -- (0.10) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.39) (1.57) (1.32) (0.82) (0.68) (0.85) (0.57) (0.12)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.46 $ 20.93 $ 17.61 $ 15.15 $ 13.34 $ 14.49 $ 12.37 $ 10.40
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 4.61% 27.91% 25.03% 19.88% (3.27%) 24.01% 24.56% 8.92%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $987,256 $803,670 $677,608 $579,094 $460,673 $311,688 $161,312 $108,046
Ratio of expenses to average
net assets 0.90% 0.84% 0.81% 0.89% 0.90% 0.86% 0.84% 0.84%(c)
Ratio of net investment
income to average net
assets (0.08)% 0.05% 0.24% 0.37% 0.53% 0.71% 1.09% 1.56%(c)
Ratio of expenses to average
net assets* -- -- -- -- -- -- -- --
Portfolio turnover 26.89% 37.54%(a) 34.87% 53.55% 37.51% 33.99% 34.44% 2.92%
</TABLE>
* 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. (b) For the period June
1, 1991 (commencement of operations) to December 31, 1991. (c) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.89 $ 17.61 $ 15.15 $ 13.34 $ 14.49 $ 12.37 $10.95
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.07) (0.03) 0.02 0.06 0.07 0.10 0.08
Net realized and unrealized gains (losses)
from investments and futures 0.92 4.87 3.74 2.57 (0.54) 2.87 1.88
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.85 4.84 3.76 2.63 (0.47) 2.97 1.96
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income -- -- (0.02) (0.06) (0.07) (0.10) (0.08)
In excess of net investment income -- -- -- -- -- -- --
From net realized gain (1.39) (1.56) (1.28) (0.76) (0.49) (0.75) (0.46)
In excess of net realized gain -- -- -- -- (0.02) -- --
Return of capital -- -- -- -- (0.10) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.39) (1.56) (1.30) (0.82) (0.68) (0.85) (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 20.35 $ 20.89 $ 17.61 $ 15.15 $ 13.34 $ 14.49 $12.37
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.30% 27.56% 24.91% 19.88% (3.27%) 24.01% 27.93%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $278,279 $234,020 $91,516 $71,858 $64,326 $53,977 $5,111
Ratio of expenses to average net assets 1.15% 1.09% 0.93% 0.89% 0.90% 0.86% 0.85%(c)
Ratio of net investment income to average net
assets (0.33)% (0.20)% 0.12% 0.37% 0.53% 0.71% 1.05%(c)
Ratio of expenses to average net assets* -- -- -- -- -- -- --
Portfolio turnover 26.89% 37.54%(a) 34.87% 53.55% 37.51% 33.99% 34.44%(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) 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. (b) For the period May 1,
1992 (initial offering date for Class A shares) through December 31,
1992. (c) Annualized.
36
<PAGE> 42
One Group(R) Diversified Mid Cap Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
CLASS B 1998 1997 1996(a)
<S> <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.
37
<PAGE> 43
One Group(R)
Diversified International Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
growth by investing primarily in
equity securities of foreign
issuers.
LOGO INVESTMENT STRATEGY
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.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets 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. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Because the Fund's investments are
tied to an index, fluctuations in
the indices will affect the value of
your investment in the Fund. Also,
investments in foreign securities
involve risks different from
investments in U.S. securities.
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. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .80% .80% .80% .80%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses (after
reimbursements) (5) .22% .22% .22% .22%
Total Fund Operating Expenses (after
fee waiver) (6) 1.27% 2.02% 2.02% 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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without expense reimbursements, Other Expenses would be .23% for all
classes of shares.
(6) Without the voluntary reduction of 12b-1 fees and reimbursement of Other
Expenses, Total Operating Expenses would be 1.38% for Class A shares,
2.03% for Class B shares, 2.03% for Class C shares and 1.03% for Class I
shares.
EXAMPLE An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 91 $119 $198
Class A
(without fee
waiver) $ 66 $ 94 $124 $210
Class B $ 71 $ 93 $129 $216
Class B
(without fee
waiver) $ 71 $ 94 $129 $219
Class C $ 31 $ 63 $109 $235
Class C
(without fee
waiver) $ 31 $ 64 $109 $236
Class I $ 10 $ 32 $ 56 $125
Class I
(without fee
waiver) $ 11 $ 33 $ 57 $126
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 91 $119 $198
Class A
(without fee
waiver) $ 66 $ 94 $124 $210
Class B $ 21 $ 63 $109 $216
Class B
(without fee
waiver) $ 21 $ 64 $109 $219
Class C $ 21 $ 63 $109 $235
Class C
(without fee
waiver) $ 21 $ 64 $109 $236
Class I $ 10 $ 32 $ 56 $125
Class I
(without fee
waiver) $ 11 $ 33 $ 57 $126
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
38
<PAGE> 44
The One Group(R) Diversified International Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.14 $ 11.79 $ 11.05 $ 10.01 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14 0.10 0.11 0.10 0.01
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 0.01
- ------------------------------------------------------------------------------------------------------------------------------
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 $ 10.01
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 16.43% 3.98% 7.90% 11.47% 1.26%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $569,522 $487,986 $389,997 $106,300 $ 36,545
Ratio of expenses to average net assets 1.09% 1.10% 1.10% 1.16% 1.15%(c)
Ratio of net investment income to average net assets 1.04% 1.05% 1.01% 1.43% 1.18%(c)
Ratio of expenses to average net assets* -- -- -- 1.24% 1.92%(c)
Portfolio turnover 8.50% 3.56%(b) 6.37% 2.09% 0.30%(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 December 3, 1994 (commencement of operations) through December 31,
1994. (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) Annualized. (d) Not Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
CLASS A 1998 1997 1996 1995
<S> <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.
39
<PAGE> 45
The One Group(R) Diversified International Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
CLASS B 1998 1997 1996(A)
<S> <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.
40
<PAGE> 46
One Group(R)
Market Expansion Index Fund
LOGO INVESTMENT OBJECTIVE
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").*
LOGO INVESTMENT STRATEGY
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.
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. Small
capitalization companies are then
added to the Fund in equal
weightings according to an analysis
of the industry diversification 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. Perfect
correlation would be 1.00.
LOGO PORTFOLIO SECURITIES
The Fund invests in a representative
sampling of stocks which are
included in the S&P SmallCap and S&P
MidCap Indices. The Fund also may
invest up to 25% of its total assets
in the securities of foreign issuers
through Depository Receipts, and may
hold up to 5% of its total assets in
cash and cash equivalents. In
addition, the Fund may invest up to
5% of its total assets in futures
contracts and related options.
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Because the Fund's investments are
tied to an index, fluctuations in
the index will affect the value of
your investment in the Fund. Also,
investments in foreign securities
involve risks different from
investments in U.S. securities.
Finally, small companies may be
subject to greater business risks
than larger company. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
*"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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .15% .15% .15% .15%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00% none
Other Expenses (after
reimbursements) (6) .42% .42% .42% .42%
Total Fund Operating Expenses (after
fee waiver) (7) .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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .35% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Without expense reimbursements, Other Expenses would be .52% for all
classes of shares.
(7) Without the voluntary reduction of investment advisory and 12b-1 fees
and reimbursement of other expenses, total operating expenses would be
1.22% for Class A shares, 1.87% for Class B shares, 1.87% for Class C
shares and .87% for class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A $ 60 $ 77
Class A
(without fee
waiver) $ 64 $ 89
Class B $ 66 $ 80
Class B
(without fee
waiver) $ 69 $ 89
Class C $ 26 $ 50
Class C
(without fee
waiver) $ 29 $ 59
Class I $ 6 $ 18
Class I
(without fee
waiver) $ 9 $ 28
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A $ 60 $ 77
Class A
(without fee
waiver) $ 64 $ 89
Class B $ 16 $ 50
Class B
(without fee
waiver) $ 19 $ 59
Class C $ 16 $ 50
Class C
(without fee
waiver) $ 19 $ 59
Class I $ 6 $ 18
Class I
(without fee
waiver) $ 9 $ 28
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
41
<PAGE> 47
One Group(R) Market Index Expansion Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS I 1998(A)
<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.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS A 1998(A)
<S> <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.
42
<PAGE> 48
One Group(R) Market Index Expansion Fund Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS B 1998(A)
<S> <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.
43
<PAGE> 49
more about the funds
44
Portfolio Quality
- ----------------------------------------------------
The Funds only purchase securities that meet certain rating criteria.
- - If the Funds invest in municipal bonds, the bonds must be rated as investment
grade.
- - Other municipal securities, such as tax-exempt commercial paper, notes and
variable rate demand obligations, must be rated in one of the two highest
investment grade categories at the time of investment.
- - Corporate bonds generally will be rated in one of the three highest investment
grade categories.
- - Banc One Investment Advisors reserves the right to invest in corporate bonds
which present attractive opportunities and are rated in the lowest investment
grade category. These corporate bonds may be riskier than higher rated bonds.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the One Group Board of Trustees in determining whether an
investment is illiquid.
Special Risk
Considerations
- ----------------------------------------------------
DERIVATIVES: Some of the Funds may invest in securities that are considered to
be "derivatives." Derivatives are securities or contracts that derive their
value from the performance of underlying assets or securities. These include:
- - options, futures contracts, and options on futures contracts
- - warrants
- - mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed (Interest Only (IOs) and Principal Only (POs))
- - asset-backed securities
- - swap, cap and floor transactions
- - new financial products
- - >currency forwards
- - >structured instruments
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. For a more detailed discussion of these risks, please read "Investment
Risks." A Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments.
SMALL CAPITALIZATION COMPANIES: Investments in smaller, younger companies may be
riskier than investments in larger, more established companies. These companies
may be more vulnerable to changes in economic conditions, specific industry
conditions, market fluctuations, and other factors effecting the profitability
of other companies. Because economic events may have a greater impact on smaller
companies, there may be a greater and more frequent fluctuation in their stock
price. This may cause frequent and unexpected increases or decreases in the
value of your investment.
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
INDEX FUNDS: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuations in the value of your investment.
INTERNATIONAL FUNDS: Investments in foreign securities involve risks different
from investments in U.S. securities. For more details, see "Investment
<PAGE> 50
45
Practices" and "Investment Risks." Because of these risk factors, the share
price of the International Equity Index Fund is expected to be volatile, and you
should be able to sustain sudden, and sometimes substantial, fluctuations in the
value of your investment. 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 will
be redenominated in Euros. All government bonds issued by participating nations
will be in Euros, and outstanding government bonds will be 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 Fund.
<PAGE> 51
how to do business with One Group Mutual Funds
46
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4 p.m.
Eastern Time ("ET") will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any organization
authorized to act in a fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares may be
more appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
One Group Fund Direct IRA. One Group offers a retirement plan. 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.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before
4 p.m. ET. When that happens, NAV will be calculated as of the time the NYSE
closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANK ONE
CORPORATION and its affiliates). The minimum initial investment for an IRA
is $250
- Subsequent investments must be at least $100 ($25 for employees of BANK ONE
CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3.Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork later.
<PAGE> 52
47
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)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10) calendar
days if purchases are made by check or under the Systematic Investment Plan
(see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "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 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, 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 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.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
<PAGE> 53
48
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. 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 include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC. 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.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C> <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>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
<PAGE> 54
49
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial purchase
price, nor is a sales charge assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A Shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of 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
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.
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.
<PAGE> 55
50
- 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.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of your account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
<PAGE> 56
51
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of account
that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
Exchanging
Fund Shares
- ----------------------------------------------------
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another 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:
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
<PAGE> 57
52
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
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
<PAGE> 58
53
in a Systematic Withdrawal Plan. This is because Class A shares have an up-front
sales charge.
2. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments provided the payments are limited to no more
than 10% of your account value annually, measured from the date the
redemption request is received.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING
REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and 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. 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.
<PAGE> 59
shareholder information
54
Voting Rights
- ----------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANK ONE CORPORATION (One First National Plaza, Chicago Illinois, 60670),
through its affiliates, may be deemed for purposes of the Investment Company Act
of 1940, to control the Funds. This is because as of December 1, 1998, BANK ONE
CORPORATION or its affiliates possessed the power to vote substantially all of
the Class I shares of the Funds.
On the same date, the following shareholders beneficially owned more than 25% of
the following classes of shares of the Funds. As a consequence, they may be
considered to be controlling persons of these classes of the Funds listed below.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C> <C>
Banc One Sec. Svgs. Plan-Equity Fund Equity Index Fund 32.61% Beneficial
100 E. Broad Street Class I
Columbus, OH 43215-3607
FCC Pension Balanced Fund 33.90% Beneficial
100 E. Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends on the last business day of each month.
Dividends are distributed on the first business day of the next month. Capital
gains, if any, for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
<PAGE> 60
55
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 The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 61
organization and management of the funds
fund name
56
THE FUNDS
Each Fund is a series of One Group Mutual Funds, an open-end management
investment company. One Group currently offers of 49 separate Funds. Fourteen of
the Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund described in this prospectus is diversified.
Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid advisory fees at the
following rates:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
One Group(R) Balanced Fund .56%
One Group(R) Large Cap Growth Fund .74%
One Group(R) Large Cap Value Fund .74%
One Group(R) Mid Cap Growth Fund .74%
One Group(R) International Equity Index
Fund .47%
One Group(R) Mid Cap Value Fund .74%
One Group(R) Equity Index Fund .10%
One Group(R) Equity Income Fund .74%
One Group(R) Diversified Equity Fund .74%
One Group(R) Small Cap Growth Fund .74%
One Group(R) Small Cap Value Fund .70%*
One Group(R) Diversified Mid Cap Fund .60%*
One Group(R) Diversified International
Fund .80%*
One Group(R) Market Expansion Index Fund .00%*
</TABLE>
* The predecessors of these Funds had a December 31 year end. The advisory fees
shown are as of December 31, 1998.
As the assets in the Funds increase, the investment advisory fees for each of
the Funds, other than the Balanced Fund, the International Equity Index Fund,
the Equity Index Fund, and the Diversified Index Fund are reduced as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
First $1.5 billion .74%
Next $500 million .70%
Thereafter .65%
</TABLE>
THE SUB-ADVISOR
Independence International Associates, Inc. ("Independence International"), 53
State Street, Boston, Massachusetts, 02109, is the sub-advisor to the
International Equity Index Fund. Independence International specializes in the
management of international equity portfolios. Independence International is an
indirect subsidiary of John Hancock Mutual Life Insurance Company. As of June
30, 1998, Independence International had approximately $2.2 billion in assets
under management.
<PAGE> 62
fund assets
57
For the fiscal year ended June 30, 1998, Banc One Investment Advisors paid
Independence International sub-investment advisory fees at the following rates:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
Up to $10 million .275%
Over $10,000,000 up to $25,000,000 .225%
Over $25,000,000 up to $50,000,000 .195%
Over $50,000,000 up to $100,000,000 .125%
Over $100,000,000 .060%
</TABLE>
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of One Group. For the first $1.5 billion in One Group
assets, The One Group Services Company receives an annual fee of .20% of each
Fund's average daily net assets. The annual rate declines to .18% on assets up
to $2 billion, and to .16% when assets exceed $2 billion. The fee is calculated
daily and paid monthly. Some Funds are not included in the calculations. Banc
One Investment Advisors, the Sub-Administrator, provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND
SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Funds' custodian, State Street holds the Funds' assets,
settles all portfolio trades and assists in calculating the Funds' net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
the Funds' securities lending activities under an agreement with State Street
Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for all systems and interfaces. Neither One Group nor its shareholders will bear
any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 63
details about the funds' investment practices and policies
fund name
58
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 code
<S> <C> <C> <C>
One Group(R) Balanced Fund 1
One Group(R) Large Cap Growth Fund 2
One Group(R) Large Cap Value Fund 3
One Group(R) Mid Cap Growth Fund 4
One Group(R) International Equity Index 5
One Group(R) Mid Cap Value Fund 6
One Group(R) Equity Index Fund 7
One Group(R) Equity Income Fund 8
One Group(R) Diversified Equity Fund 9
One Group(R) Small Cap Growth Fund 10
One Group(R) Small Cap Value Fund 11
One Group(R) Diversified Mid Cap Fund 12
One Group(R) Diversified International Fund 13
One Group(R) Market Expansion Index Fund 14
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-14 Market
CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-14 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-14 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-14 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1-14 Liquidity
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 and the 1-14 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-14 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-14 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-14 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
</TABLE>
<PAGE> 64
59
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1-14 Market
including One Group money market funds and shares of other
investment companies for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing
in funds for which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock that 1-14 Market
convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the 1-14 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the 1-14 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment 1-14 Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-14 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-14 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Stocks issued by foreign companies, as 1-6, 8-14 Market
well as commercial paper of foreign issuers and obligations Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Includes American Depository Foreign Investment
Receipts.
RESTRICTED SECURITIES: Securities not registered under the 1-14 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1-14 Credit
interest rates which are reset daily, weekly, quarterly or Liquidity
some other period and which may be payable to the Fund on Market
demand.
WARRANTS: Securities, typically issued with preferred stock 1-3, 5, Market
or bonds, that give the holder the right to buy a 7, 9-14 Credit
proportionate amount of common stock at a specified price.
PREFERRED STOCK: A class of stock that generally pays a 1-14 Market
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1, 11-13 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), Real Estate Credit
Mortgage Investment Conduits ("REMICs") and Stripped Regulatory
Mortgage-Backed Securities ("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and 1 Market
non-convertible debt securities. Credit
DEMAND FEATURES: Securities that are subject to puts and 1 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1, 11-13 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells 1, 11-13 Pre-payment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
</TABLE>
<PAGE> 65
60
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage 1 Pre-payment
pool which provide for a fixed initial mortgage interest Market
rate for a specified period of time, after which the rate Credit
may be subject to periodic adjustments. Regulatory
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-14 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts 1-14 Management
and other financial products continue to be developed and Credit
the Funds may invest in such options, contracts and Market
products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 1 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities and single
family revenue bonds.
OBLIGATIONS OF SUPRANATIONAL AGENCIES: Obligations of 5, 11-13 Credit
supranational agencies who are chartered to promote economic Foreign Investment
development and are supported by various governments and
governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Funds may engage 5, 13 Management
in transactions in financial futures and related options, Liquidity
which are generally described above. The Funds will enter Credit
into these transactions in foreign currencies for hedging Market
purposes only. Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement 5, 13 Management
to purchase or sell one specified currency for another Liquidity
currency at a specified future date and price. The Funds Credit
will enter into forward foreign exchange transactions for Market
hedging purposes only. Political
Leverage
Foreign Investment
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs 1-4, Market
represent ownership in a long-term unit investment trust 6-10, 14
that holds a portfolio common stocks designed to track the
price performance and dividend yield of the S&P 500 Index. A
SPDR entitles a holder to receive proportionate quarterly
cash distributions corresponding to the dividends that
accrue to the S&P 500 Index stocks in the underlying
portfolio, less trust expenses.
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay 11-13 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero-Coupon
equals the difference between their issue price and their
maturity value.
CORPORATE DEBT SECURITIES: Corporate Bonds and 2 Market
non-convertible debt securities. Credit
</TABLE>
<PAGE> 66
61
Investment Risks
- ----------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risk than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price 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 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
<PAGE> 67
62
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.
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.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors or the Sub-Advisor decides that the Funds
should temporarily be invested in cash and cash equivalents. Cash equivalents
include:
- - Securities issued by the U.S. Government, its agencies and instrumentalities
- - Repurchase Agreements
- - Certificates of Deposit
- - Bankers' Acceptances
- - Commercial Paper (rated in one of the two highest rating categories)
- - Variable Rate Master Demand Notes
- - Bank Money Market Deposit Accounts
The Balanced Fund, the Large Cap Growth Fund, the Large Cap Value Fund, the Mid
Cap Value Fund, the Equity Income Fund, the Mid Cap Growth Fund, the Diversified
Equity Fund, and the Small Cap Growth Fund may temporarily invest up to 100% of
their total assets in cash and cash equivalents. The International Equity Index
Fund and Equity Index Fund may temporarily invest only 10% of their total assets
in cash and cash equivalents, while the Small Cap Value Fund, the Diversified
Mid Cap Fund and the Diversified International Fund may invest up to 20% of
their total assets in cash and cash equivalents. The International Equity Index
Fund may invest up to 20% of its total assets in debt securities issued or
guaranteed by foreign governments or any of their political subdivisions,
agencies or instrumentalities, or by supranational issuers rated in one of the
three highest rating categories.
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights, other than for the Small Cap Value Fund, the
Diversified Mid Cap Fund, the Diversified International Fund and the Market
Expansion Index Fund. The portfolio turnover for those Funds is for the fiscal
year ended December 31, 1998. To the extent portfolio turn over results in
short-term capital gains, such gains will generally be taxed at ordinary income
tax rates.
<PAGE> 68
appendix
63
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH'S IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
<PAGE> 69
64
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
AAA Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
AA These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/
MUNICIPAL BOND RATINGS
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity to
meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Non-Investment Grade
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
Investment Grade
AAA Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
AA High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the
<PAGE> 70
65
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
BA These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
CAA Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
CA Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 &
VMIG1
Short-term municipal securities rated MIG1 or VMIG1 are of the best quality.
They have strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG2 &
VMIG2
These Short-term municipal securities are of high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG3 &
VMIG3
Favorable quality. All security elements are accounted for, but the undeniable
strength of the preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for refinancing is
likely to be less well established.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
AAA Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
AA High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
A Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the ad-
<PAGE> 71
66
verse effects of changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 72
(This page intentionally left blank)
<PAGE> 73
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
SUB-ADVISOR
Independence International Associates, Inc.
53 State Street
Boston, MA 02109
DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company
3435 Stelzer road
Columbus, OH 43219
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8328
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20003
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THE
FUNDS. THE CURRENT STATEMENT OF ADDITIONAL
INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE
WITHOUT CHARGE BY CALLING 1-800-480-4111 OR BY
WRITING TO THE ONE GROUP SERVICES COMPANY AT
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
THE SEC MAINTAINS A WEB SITE (WWW.SEC.GOV)
THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIALS INCORPORATED BY
REFERENCE AND OTHER INFORMATION REGARDING ONE
GROUP.
TOG-F-120
<PAGE> 74
ONE GROUP MUTUAL FUNDS
BOND FUNDS
COMBINED PROSPECTUS
MARCH 18, 1999
ONE GROUP(R) INTERMEDIATE BOND FUND
ONE GROUP(R) INCOME BOND FUND
ONE GROUP(R) GOVERNMENT BOND FUND
ONE GROUP(R) ULTRA SHORT-TERM BOND FUND
ONE GROUP(R) SHORT-TERM BOND FUND
ONE GROUP(R) TREASURY & AGENCY BOND FUND
ONE GROUP(R) HIGH YIELD BOND FUND
ONE GROUP(R) BOND FUND
- --------------------------------------------------------------------------------
This prospectus describes eight funds with a variety of investment objectives,
including current income, total return, capital preservation, state tax-exempt
income, and low volatility. The information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK ONE CORPORATION OR ITS AFFILIATES: - ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY FEDERAL OR
STATE GOVERNMENTAL AGENCY: - INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 75
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Intermediate Bond Fund...................... 2
One Group(R) Income Bond Fund............................ 5
One Group(R) Government Bond Fund........................ 8
One Group(R) Ultra Short-Term Bond Fund.................. 11
One Group(R) Short-Term Bond Fund........................ 14
One Group(R) Treasury & Agency Fund...................... 17
One Group(R) High Yield Bond Fund........................ 20
One Group(R) Bond Fund................................... 22
MORE ABOUT THE FUNDS........................................ 25
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 28
Purchasing Fund Shares................................... 28
Sales Charges............................................ 30
Sales Charge Reductions and Waivers...................... 32
Exchanging Fund Shares................................... 34
Redeeming Fund Shares.................................... 35
SHAREHOLDER INFORMATION..................................... 37
Voting Rights............................................ 37
Dividend Policies........................................ 37
Tax Treatment of the Funds............................... 38
Tax Treatment of Shareholders............................ 38
Shareholder Inquiries.................................... 38
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 39
The Funds................................................ 39
The Board of Trustees.................................... 39
The Advisor.............................................. 39
The Sub-Advisor.......................................... 39
Banc One High Yield Partners--Prior Performance of
Pacholder Associates, Inc.............................. 39
The Distributor.......................................... 41
The Administrator and Sub-Administrator.................. 41
The Transfer Agent, Custodian and Sub-Custodian.......... 41
Year 2000................................................ 41
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 42
Investment Practices..................................... 42
Investment Risks......................................... 45
Investment Policies...................................... 46
APPENDIX: DESCRIPTION OF RATINGS............................ 47
</TABLE>
table of contents
<PAGE> 76
1
a brief preview of the funds
WHAT ARE THE GOALS OF ONE GROUP BOND FUNDS?
The Funds are designed for a variety of investment objectives,
including:
- current income
- total return
- current income consistent with the preservation of capital
- current income with a primary focus on income that is exempt
from state income taxes
- current income consistent with low volatility of principal.
Each Fund pursues a different objective and involves different
risks. Please read about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Intermediate Bond Fund, the Short-Term Bond Fund, the
Ultra Short-Term Bond Fund, the Income Bond Fund, and the Bond
Fund invest in high and medium grade debt securities of all
types with average maturities ranging from one to twenty
years. The Income Bond Fund and the High Yield Bond Fund also
may invest in lower grade debt securities, although the Income
Bond Fund will limit its investments in such securities to no
more than 30% of its total assets. The Government Bond Fund
and the Treasury & Agency Fund invest in obligations issued or
guaranteed by the U.S. government, its agencies and
instrumentalities. Several of the Funds may invest in
preferred stock. The Funds also may lend their portfolio
securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in fixed income investments that are subject
to market fluctuations as a result of changes in interest
rates. As a result, the value of investments in the Funds may
decrease during periods of rising interest rates and increase
during periods of declining interest rates. In addition, some
of the Funds invest in mortgage-related securities which have
significantly greater price and yield volatility than
traditional fixed income securities. Fixed income securities
also are subject to the risk that the issuer of the security
will be unable to meet its payment obligation. Also, the
Income Bond Fund and the High Yield Bond Fund may invest in
securities in ANY rating category, some of which are regarded
as predominately speculative. An investment in the Funds is
not a deposit of BANK ONE CORPORATION or its affiliates and is
not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. For more
information about risks, please read "More About the Funds"
and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A,
Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I shares are
offered to institutional investors, including affiliates of
BANK ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization
authorized to act in fiduciary, advisory, agency, custodial or
similar capacities. Class I shares are not available to
Individual Retirement Accounts ("IRA"). Class C shares are not
available for purchase in all of the Funds. The section called
"How To Do Business With One Group Mutual Funds" will provide
more information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are
distributed on the first business day of each month. Any
capital gains are distributed at least annually. Distributions
are paid in additional shares of the same class unless you
elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. Banc One High Yield
Partners, LLC (the "Sub-Advisor") serves as Sub-Advisor to the
High Yield Bond Fund. The Sub-Advisor's fees are paid by Banc
One Investment Advisors. A more detailed discussion regarding
Banc One Investment Advisors, its services and compensation
can be found in the Prospectus under the headings "The
Advisor" and "Shareholder Expenses." Additional information
regarding the Sub-Advisor is located in the Prospectus under
the heading "The Sub-Advisor."
<PAGE> 77
One Group(R)
Intermediate Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks current income
consistent with the preservation of
capital by investing in high and
medium-grade fixed income securities
with intermediate maturities.
LOGO INVESTMENT STRATEGY
Generally, the Fund invests in debt
securities of all types including
bonds, notes, U.S. government
obligations, and taxable and
tax-exempt municipal securities
rated as investment grade at the
time of investment, (or, if unrated,
determined by Banc One Investment
Advisors, to be of comparable
quality). The Fund's average
weighted maturity will ordinarily
range between three and ten years,
taking into account expected
prepayment of principal on certain
investments, although the Fund may
shorten the weighted average
maturity to as little as one year
for temporary defensive purposes.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
80% of its total assets in debt
securities. Debt securities include
bonds, notes and other obligations.
As a matter of fundamental policy,
at least 65% of the Fund's total
assets will consist of bonds and at
least 50% of total assets will
consist of obligations issued by the
U.S. government or its agencies and
instrumentalities, some of which may
be subject to repurchase agreements.
Up to 20% of the Fund's total assets
may be invested in preferred stock.
For a list of all the securities in
which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in debt
securities that are rated in the
lowest investment grade category.
Such investments are considered to
have speculative characteristics. In
addition, the Fund invests in fixed
income securities. The value of
these securities will change in
response to interest rate changes
and other factors. This is
especially true to the extent the
Fund invests in debt securities in
the lowest investment grade
category. The Fund also invests in
mortgage-related securities which
may have greater price and yield
volatility than traditional fixed
income securities. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average
daily net assets)
Investment Advisory Fees (after fee
waiver) (4) .36% .36% .36%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .22% .22% .22%
Total Fund Operating Expenses (after
fee waivers) (6) .83% 1.48% 1.48%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.36%
none
.22%
.58%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 70 $ 89 $143
Class A
(without fee
waivers) $ 56 $ 80 $106 $181
Class B $ 65 $ 77 $101 $159
Class B
(without fee
waivers) $ 68 $ 87 $119 $197
Class C $ 25 $ 47 $ 81 $177
Class C
(without fee
waivers) $ 28 $ 57 $ 99 $214
Class I $ 6 $ 19 $ 32 $ 73
Class I
(without fee
waiver) $ 8 $ 26 $ 46 $101
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 70 $ 89 $143
Class A
(without fee
waivers) $ 56 $ 80 $106 $181
Class B $ 15 $ 47 $ 81 $159
Class B
(without fee
waivers) $ 18 $ 57 $ 99 $197
Class C $ 15 $ 47 $ 81 $177
Class C
(without fee
waivers) $ 18 $ 57 $ 99 $214
Class I $ 6 $ 19 $ 32 $ 73
Class I
(without fee
waiver) $ 8 $ 26 $ 46 $101
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 78
One Group(R) Intermediate Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.48 $ 10.29 $ 10.37 $ 9.21 $ 10.41 $ 10.28 $ 10.55 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.63 0.65 0.64 0.59 0.56 0.59 0.71 0.40
Net realized and unrealized
gains (losses) from
investments and futures 0.14 0.18 (0.07) 1.16 (1.20) 0.26 (0.10) 0.57
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.77 0.83 0.57 1.75 (0.64) 0.85 0.61 0.97
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.64) (0.64) (0.65) (0.59) (0.55) (0.59) (0.71) (0.40)
In excess of net investment
income -- -- -- -- -- -- -- --
From net realized gain -- -- -- -- (0.01) (0.13) (0.17) (0.02)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.64) (0.65) (0.59) (0.56) (0.72) (0.88) (0.42)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 10.48 $ 10.29 $ 10.37 $ 9.21 $ 10.41 $ 10.28 $ 10.55
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 7.62% 8.37% 5.78% 19.48% (6.31)% 8.41% 6.00% 16.62%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $567,609 $482,679 $395,105 $393,656 $381,036 $413,299 $215,923 $130,367
Ratio of expenses to average
net assets 0.66% 0.61% 0.67% 0.73% 0.74% 0.74% 0.74% 0.75%(b)
Ratio of net investment
income to average net
assets 6.02% 6.26% 6.29% 5.98% 5.73% 5.44% 6.91% 6.59%(b)
Ratio of expenses to average
net assets* -- -- -- -- -- -- -- --
Portfolio Turnover 50.32% 31.66% 31.62% 36.47% 54.60% 92.80% 56.30% 7.38%
</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) For
the period June 1, 1991 (commencement of operations) to December 31,
1991. (b) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(a)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.29 $ 10.37 $ 9.21 $ 10.41 $ 10.28 $10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.61 0.62 0.64 0.59 0.56 0.59 0.49
Net realized and unrealized gains
(losses) from investments and futures 0.14 0.18 (0.07) 1.16 (1.20) 0.26 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Activities 0.75 0.80 0.57 1.75 (0.64) (0.85) (0.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.61) (0.62) (0.65) (0.59) (0.55) (0.59) (0.49)
In excess of net investment income -- -- -- -- -- -- --
From net realized gain -- -- -- -- (0.01) (0.13) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.62) (0.65) (0.59) (0.56) (0.72) (0.66)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 10.47 $ 10.29 $ 10.37 $ 9.21 $ 10.41 $10.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.37% 8.04% 5.65% 19.48% (6.31%) 8.41% 11.17%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $88,072 $42,343 $18,324 $11,654 $11,983 $16,491 $4,509
Ratio of expenses to average net assets 0.91% 0.86% 0.79% 0.73% 0.74% 0.74% 0.75%(b)
Ratio of net investment income to
average net assets 5.77% 6.01% 6.17% 5.98% 5.73% 5.44% 7.04%(b)
Ratio of expenses to average net assets* -- -- -- -- -- -- --
Portfolio Turnover 50.32% 31.66% 31.62% 36.47% 54.60% 92.80% 56.30%(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 1, 1992 (initial offering date of Class A shares) through
December 31, 1992. (b) Annualized.
3
<PAGE> 79
One Group(R) Intermediate Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
CLASS B 1998 1997 1996(a)
<S> <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.
4
<PAGE> 80
One Group(R)
Income Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of high, medium and low grade debt securities.
LOGO INVESTMENT STRATEGY
The Fund invests in all types of debt securities rated as investment grade
or below investment grade, as well as convertible securities, preferred stock,
and loan participations. The Fund's average weighted maturity will normally
range between five and twenty years, although the Fund may shorten its weighted
average to as little as two years if deemed appropriate for temporary defensive
purposes.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 70% of its total assets in debt securities of all
types rated as investment grade at the time of investment or, if unrated,
determined to be of comparable quality by Banc One Investment Advisors. In
addition, up to 30% of the Fund's total assets may be invested in convertible
securities, preferred stock, loan participations and debt securities rated below
investment grade or, if unrated, determined by Banc One Investment Advisors to
be of comparable quality. Securities rated below investment grade are called
"high yield bonds," "non-investment grade bonds" and "junk bonds." These
securities generally are rated in the fifth or lower rating categories (for
example, BB or lower by Standard & Poor's Corporation and Ba or lower by Moody's
Investors Service, Inc.), and are considered to be speculative. Even though it
may invest in debt securities in all rating categories, the Fund will not invest
more than 20% of its total assets in securities rated below the fifth rating
category. As a matter of fundamental policy, at least 65% of the Fund's total
assets will consist of bonds. The Fund also may purchase taxable or tax-exempt
municipal securities. For a list of all the securities in which the Fund may
invest, please read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in debt securities rated below investment grade that are
considered speculative. While these securities generally provide a higher yield
than higher rated debt securities, they are subject to a greater degree of risk.
Issuers of these securities may include smaller, less creditworthy companies or
highly indebted firms. The credit quality of securities in the high yield bond
market can change suddenly and unexpectedly. Before you invest, please read
"More About the Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .41% .41% .41% .42%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .21% .21% .21% .21%
Total Fund Operating Expenses (after
fee waiver) (6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.16% for Class A shares, 1.81% for
Class B shares, 1.81% for Class C shares and .81% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 56 $ 80 $106 $180
Class B $ 65 $ 78 $103 $164
Class B
(without fee
waivers) $ 68 $ 87 $118 $196
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 28 $ 57 $ 98 $213
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 8 $ 26 $ 45 $100
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 56 $ 80 $106 $180
Class B $ 15 $ 48 $ 83 $164
Class B
(without fee
waivers) $ 18 $ 57 $ 98 $196
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 18 $ 57 $ 98 $213
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 8 $ 26 $ 45 $100
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 81
One Group(R) Income Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, for years ended 1998, 1997 and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
---------------------------------------------- -------------------
CLASS I 1998 1997 1996 1995(A) 1995 1994(b)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.01 $ 7.85 $ 8.18 $ 7.68 $ 8.25 $ 8.36
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.50 0.46 0.47 0.52 0.47
Net realized and unrealized gain (loss) from
investments and futures 0.14 0.17 (0.24) 0.72 (0.57) (0.09)
- -------------------------------------------------------------------------------------------------------------------------------
Total income from Investment Activities 0.61 0.67 0.22 1.19 (0.05) 0.38
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.49) (0.45) (0.47) (0.52) (0.47)
From net realized gains (0.05) (0.02) (0.10) (0.22) -- (0.02)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.51) (0.55) (0.69) (0.52) (0.49)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.10 $ 8.01 $ 7.85 $ 8.18 $ 7.68 $ 8.25
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 7.82% 8.86% 3.14% 15.90%(c) (0.48)% 5.16%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $385,672 $94,544 $187,112 $191,930 $ 7,101 $ 5,128
Ratio of expenses to average net assets 0.65% 0.62% 0.57% 0.55%(d) 0.04% --
Ratio of net investment income to average net assets 5.79% 6.08% 6.02% 6.34%(d) 6.70% 6.21%(d)
Ratio of expenses to average net assets* -- -- 0.66% 0.67%(d) 2.78% 2.64%(d)
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(c) 71.65% 26.54%(c)
</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) For the period March 5, 1993
(commencement of operations) through January 31, 1994. (c) Not
Annualized. (d) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
----------------------------------------- --------------------
CLASS A 1998 1997 1996 1995(A) 1995 1994(b)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.00 $ 7.84 $ 8.18 $ 7.68 $ 8.25 $ 8.36
- ---------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.44 0.48 0.41 0.44 0.52 0.47
Net realized and unrealized gain (loss) from
investments and futures 0.14 0.17 (0.25) 0.72 (0.57) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment activities 0.58 0.65 0.16 1.16 (0.05) 0.38
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.44) (0.47) (0.40) (0.44) (0.52) (0.47)
From net realized gain (0.05) (0.02) (0.10) (0.22) -- (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.49) (0.50) (0.66) (0.52) (0.49)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 8.09 $ 8.00 $ 7.84 $ 8.18 $ 7.68 $ 8.25
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 7.44% 8.58% 2.75% 15.55%(c) (0.45)% 5.16%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $15,785 $7,832 $8,798 $6,095 $ 69 $ 65
Ratio of expenses to average net assets 0.90% 0.87% 0.84% 0.94%(d) 0.04% --
Ratio of net investment income to average net assets 5.57% 5.83% 5.75% 5.72%(d) 6.70% 5.96%(d)
Ratio of expenses to average net assets* -- -- 0.90% 1.15%(d) 2.78% 3.67%(d)
Ratio of net investment income to average net assets* -- -- -- -- --
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(c) 71.65% 26.54%(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 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) For the period March 5,
1993 (commencement of operations) through January 31, 1994. (c) Not
Annualized. (d) Annualized.
6
<PAGE> 82
One Group(R) Income Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------------------------ DECEMBER 2,
CLASS B 1998 1997 1996 1995(A) 1994(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.00 $ 7.85 $ 8.18 $ 8.13 $ 8.16
- --------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.39 0.42 0.45 0.24 0.40
Net realized and unrealized gain (loss) from
investments and futures 0.14 0.17 (0.23) 0.27 (0.55)
- --------------------------------------------------------------------------------------------------------------------
Total income from investment activities 0.53 0.59 0.22 0.51 (0.15)
- --------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.35) (0.42) (0.45) (0.24) (0.40)
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) (0.40)
- --------------------------------------------------------------------------------------------------------------------
Conversion to Class A Shares -- -- -- -- (7.61)(c)
- --------------------------------------------------------------------------------------------------------------------
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%(d) (1.82)%(d)
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%(e) --
Ratio of net investment income to average net assets 4.80% 5.08% 5.01% 5.00%(e) 6.48%(e)
Ratio of expenses to average net assets* -- -- 1.67% 1.78%(e) 2.58%(e)
Portfolio Turnover 41.69% 38.70% 103.93% 173.26%(d) 71.65%(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 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. (b) For the
period February 8, 1994 (initial offering date of Class B Shares) through
December 2, 1994. On December 2, 1994, the Fund terminated its offering of
Class B Shares and such shares converted to Class A Shares. (c) On December
2, 1994, the Fund terminated its offering of Class B Shares under the
then-current sales load schedule and such shares converted to Class A
Shares. (d) Not Annualized. (e) Annualized.
7
<PAGE> 83
One Group(R)
Government Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of
current income with liquidity and
safety of principal.
LOGO INVESTMENT STRATEGY
The Fund limits its investments to
securities issued by the U.S.
government and its agencies and
instrumentalities or related to
securities issued by the U.S.
government and its agencies and
instrumentalities. The Fund's
average weighted maturity will
ordinarily range between three and
fifteen years, taking into account
expected prepayment of principal on
certain investments. However, the
Fund's average weighted remaining
maturity may be outside this range
if warranted by market conditions.
LOGO PORTFOLIO SECURITIES
At least 65% of the Fund's total
assets will be invested in debt
instruments with principal and
interest guaranteed by the U.S.
government or its agencies and
instrumentalities, some of which may
be subject to repurchase agreements,
and other securities representing an
interest in or secured by mortgages
that are issued or guaranteed by
certain U.S. government agencies or
instrumentalities. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund's ability to achieve higher
income is not as great as that of
funds that invest in lower-quality
instruments. In addition, the Fund
invests in fixed income securities.
The value of these securities will
change in response to interest rate
changes and other factors. The Fund
also invests in mortgage-related
securities which may have greater
price and yield volatility than
traditional fixed income securities.
Before you invest, please read "More
About the Funds" and "Investment
Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Chargee (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees .45% .45% .45% .45%
12b-1 Fees (after fee waiver) (4) .25% .90% .90% none
Other Expenses .24% .24% .24% .24%
Total Fund Operating Expenses (after
fee waiver) (5) .94% 1.59% 1.59% .69%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.04% for Class A shares and 1.69% for Class B shares and Class
C shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 74 $ 95 $155
Class A
(without fee
waiver) $ 55 $ 77 $100 $166
Class B $ 66 $ 80 $107 $172
Class B
(without fee
waiver) $ 67 $ 83 $112 $183
Class C $ 26 $ 50 $ 87 $189
Class C
(without fee
waiver) $ 27 $ 53 $ 92 $200
Class I $ 7 $ 22 $ 38 $ 86
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 74 $ 95 $155
Class A
(without fee
waiver) $ 55 $ 77 $100 $166
Class B $ 16 $ 50 $ 87 $172
Class B
(without fee
waiver) $ 17 $ 53 $ 92 $183
Class C $ 16 $ 50 $ 87 $189
Class C
(without fee
waiver) $ 17 $ 53 $ 92 $200
Class I $ 7 $ 22 $ 38 $ 86
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
8
<PAGE> 84
One Group(R) Government Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(B)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.15 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.60 0.62 0.62 0.62 0.51 0.20
Net realized and unrealized gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.46 (0.77) 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.02 0.75 0.37 1.08 (0.26) 0.35
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.60) (0.62) (0.62) (0.61) (0.50) (0.20)
In excess of net investment income -- -- -- (0.01) (0.02) --
In excess of net realized gains -- -- -- -- (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.62) (0.62) (0.62) (0.54) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 10.81% 8.10% 3.81% 12.04% (2.73)% 9.03%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $851,517 $724,423 $677,326 $379,826 $209,692 $52,152
Ratio of expenses to average net assets 0.62% 0.62% 0.68% 0.71% 0.68% 0.69%(b)
Ratio of net investment income to average net assets 6.05% 6.45% 6.34% 6.65% 5.13% 5.43%(b)
Ratio of expenses to average net assets* 0.67% 0.68% 0.69% 0.73% 0.71% 1.05%(b)
Ratio of net investment income to average net assets* 6.00% 6.39% 6.33% 6.63% 5.10% 5.07%(b)
Portfolio Turnover (c) 91.49% 60.53% 62.70% 106.14% 377.78% 139.24%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced offering on February 8, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.17 $ 10.22
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.60 0.60 0.61 0.48 0.17
Net realized and unrealized gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.45 (0.79) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.00 0.73 0.35 1.06 (0.31) 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.60) (0.60) (0.59) (0.47) (0.17)
In excess of net investment income -- -- -- (0.01) (0.02) --
In excess of net realized gains -- -- -- -- (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.60) (0.60) (0.60) (0.51) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.17
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.54% 7.83% 3.58% 11.84% (3.16)% 5.35%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $31,548 $34,727 $38,800 $8,130 $1,690 $840
Ratio of expenses to average net assets 0.87% 0.87% 0.93% 0.97% 0.92% 0.95%(b)
Ratio of net investment income to average net assets 5.80% 6.20% 6.09% 6.46% 4.84% 5.56%(b)
Ratio of expenses to average net assets* 1.02% 1.03% 1.04% 1.09% 1.05% 1.44%(b)
Ratio of net investment income to average net assets* 5.65% 6.04% 5.98% 6.34% 4.71% 5.07%(b)
Portfolio Turnover (c) 91.49% 60.53% 62.70% 106.14% 377.78% 139.24%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on March 5, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
9
<PAGE> 85
One Group(R) Government Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.04
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.54 0.55 0.18
Net realized and unrealized gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.46 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.94 0.67 0.29 1.01 (0.51)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.54) (0.54) (0.55) (0.16)
In excess of net investment income -- -- -- -- (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.54) (0.54) (0.55) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 9.86% 7.14% 2.95% 11.20% .(499)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $20,922 $11,729 $10,782 $2,513 $656
Ratio of expenses to average net assets 1.52% 1.52% 1.58% 1.62% 1.52%(c)
Ratio of net investment income to average net assets 5.14% 5.55% 5.44% 5.76% 4.60%(c)
Ratio of expenses to average net assets* 1.67% 1.68% 1.69% 1.74% 1.63%(c)
Ratio of net investment income to average net assets* 4.99% 5.39% 5.33% 5.64% 4.49%(c)
Portfolio Turnover (d) 91.49% 60.53% 62.70% 106.14% 377.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
10
<PAGE> 86
One Group(R)
Ultra Short-Term Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of
current income consistent with low
volatility of principal by investing
in a diversified portfolio of
short-term investment grade
securities.
LOGO INVESTMENT STRATEGY
The Fund invests in all types of
debt securities, including money
market instruments, adjustable rate
mortgage backed securities and
taxable and tax-exempt municipal
securities. The Fund will maintain a
maximum duration approximately equal
to that of a two-year U.S. Treasury
security, although the Fund's actual
duration is expected to be
approximately equal to that of a one
year U.S. Treasury security. This
Fund was formerly called The One
Group Ultra Short-Term Income Fund.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
80% of its total assets in debt
securities. In addition, up to 20%
of the Fund's total assets may be
invested in other securities,
including preferred stock. The Fund
will invest in adjustable rate
mortgage pass-through securities and
other securities representing an
interest in or secured by mortgages
with periodic interest rate resets
(some of which may be subject to
repurchase agreements). These
securities often are issued or
guaranteed by the U.S. government,
its agencies or instrumentalities.
However, the Fund may also purchase
mortgage-backed securities that are
issued by non-governmental entities.
Such securities may or may not have
private insurer guarantees of timely
payments. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in fixed income
investments that are subject to
market fluctuations as a result of
changes in interest rates. As a
result, the value of investments in
the Fund may decrease during periods
of rising interest rates. In
addition, the Fund invests in
mortgage-related securities which
may have greater price and yield
volatility than traditional fixed
income securities. The Fund also
uses investment management hedging
techniques that may expose the Fund
to special risks. Before you invest,
please read "More About the Funds"
and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 3.00% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 3.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average
daily net assets)
Investment Advisory Fees (after fee
waiver) (4) .30% .30% .30%
12b-1 Fees (after fee waiver) (5) .25% .75% .75%
Other Expenses .25% .25% .25%
Total Fund Operating Expenses (after
fee waivers) (6) .80% 1.30% 1.30%
CLASS I
none
none
none
none
.30%
none
.25%
.55%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .55% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.15% for Class A shares, 1.80% for
Class B shares, 1.80% for Class C shares, and .80% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 38 $ 55 $ 73 $126
Class A
(without fee
waivers) $ 41 $ 65 $ 91 $166
Class B $ 43 $ 61 $ 71 $130
Class B
(without fee
waivers) $ 48 $ 77 $ 97 $179
Class C $ 23 $ 41 $ 71 $157
Class C
(without fee
waivers) $ 28 $ 57 $ 97 $212
Class I $ 6 $ 18 $ 31 $ 69
Class I
(without fee
waiver) $ 8 $ 26 $ 44 $ 99
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 38 $ 55 $ 73 $126
Class A
(without fee
waivers) $ 41 $ 65 $ 91 $166
Class B $ 13 $ 41 $ 71 $130
Class B
(without fee
waivers) $ 18 $ 57 $ 97 $179
Class C $ 13 $ 41 $ 71 $157
Class C
(without fee
waivers) $ 18 $ 57 $ 97 $212
Class I $ 6 $ 18 $ 31 $ 69
Class I
(without fee
waiver) $ 8 $ 26 $ 44 $ 99
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 87
One Group(R) Ultra Short-Term Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.79 $ 9.84 $ 9.85 $ 10.03 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.62 0.62 0.55 0.36 0.17
Net realized and unrealized gains
(losses) from investments and futures (0.01) 0.05 (0.07) (0.05) (0.15) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.58 0.67 0.55 0.50 0.21 0.20
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.59) (0.60) (0.48) (0.37) (0.17)
In excess of net investment income -- -- -- (0.03) (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.59) (0.60) (0.51) (0.39) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.79 $ 9.84 $ 9.85 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 6.00% 7.14% 5.71% 5.14% 2.16% 4.93%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $188,133 $114,413 $57,276 $51,050 $139,593 $154,413
Ratio of expenses to average net assets 0.30% 0.35% 0.45% 0.61% 0.65% 0.58%(b)
Ratio of net investment income to
average net assets 5.92% 6.02% 6.20% 5.18% 3.70% 4.71%(b)
Ratio of expenses to average net
assets* 0.81% 0.81% 1.06% 1.01% 0.81% 1.03%(b)
Ratio of net investment income to
average net assets* 5.41% 5.56% 5.59% 4.78% 3.54% 4.26%(b)
Portfolio Turnover (c) 41.15% 70.36% 67.65% 2.91% 242.20% 109.96%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on February 2, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.78 $ 9.83 $ 9.84 $ 10.03 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.58 0.58 0.52 0.36 0.14
Net realized and unrealized gains
(losses) from investments and futures (0.01) 0.09 (0.06) (0.06) (0.17) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.55 0.67 0.52 0.46 0.19 0.17
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.58) (0.57) (0.46) (0.34) (0.14)
In excess of net investment income -- -- -- (0.01) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.58) (0.57) (0.47) (0.38) (0.14)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.78 $ 9.83 $ 9.84 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.75% 7.00% 5.42% 4.84% 1.95% 4.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $24,747 $29,643 $3,969 $4,631 $19,053 $3,106
Ratio of expenses to average net assets 0.54% 0.61% 0.70% 0.86% 0.89% 0.81%(b)
Ratio of net investment income to
average net assets 5.66% 5.78% 5.95% 4.88% 3.54% 4.47%(b)
Ratio of expenses to average net asset* 1.15% 1.17% 1.41% 1.36% 1.14% 1.34%(b)
Ratio of net investment income to
average net asset* 5.05% 5.22% 5.24% 4.38% 3.29% 3.95%(b)
Portfolio Turnover (c) 41.15% 70.36% 67.65% 2.91% 242.20% 109.96%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced offering on March 10, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
12
<PAGE> 88
One Group(R) Ultra Short-Term Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 9.76 $ 9.84 $ 9.86 $ 9.98
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.52 0.47 0.12
Net realized and unrealized gains (losses) from
investments and futures (0.01) 0.05 (0.07) (0.04) (0.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.51 0.59 0.45 0.43 0.01
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.54) (0.53) (0.45) (0.12)
In excess of net investment income -- -- -- -- (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.54) (0.53) (0.45) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 9.81 $ 9.76 $ 9.84 $ 9.86
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.32% 6.22% 4.63% 4.77% (0.09)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,531 $2,818 $1,144 $160 $15
Ratio of expenses to average net assets 0.99% 1.07% 1.20% 1.31% 1.41%(c)
Ratio of net investment income to average net assets 5.23% 5.18% 5.45% 4.91% 3.49%(c)
Ratio of expenses to average net assets* 1.75% 1.81% 2.06% 1.96% 1.83%(c)
Ratio of net investment income to average net assets* 4.47% 4.44% 4.59% 4.26% 3.07%(c)
Portfolio Turnover (d) 41.15% 70.36% 67.65% 2.91% 242.20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares issued.
13
<PAGE> 89
One Group(R)
Short-Term Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks current income
consistent with preservation of
capital through investment in
high-and medium-grade fixed income
securities.
LOGO INVESTMENT STRATEGY
The Fund invests in all types of
debt securities with short to
intermediate maturities. The Fund's
effective average weighted maturity
ordinarily will be three years or
less 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. This Fund was formerly called
The One Group Limited Volatility
Bond Fund.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in debt securities with
short to intermediate maturities. At
least 65% of the Fund's total assets
will consist of bonds. 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. For a
list of all the securities in which
the Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in debt
securities that are rated in the
lowest investment grade category.
Such investments are considered to
have speculative characteristics. In
addition, the Fund invests in fixed
income securities. The value of
these securities will change in
response to interest rate changes
and other factors. Also, the Fund
invests in mortgage-related
securities which may have greater
price and yield volatility than
traditional fixed income securities.
Before you invest, please read "More
About the Funds" and "Investment
Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 3.00% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 3.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average daily
net assets)
Investment Advisory Fees (after fee
waiver) (4) .32% .32% .32% .32%
12b-1 Fees (after fee waiver) (5) .25% .75% .75% none
Other Expenses .21% .21% .21% .21%
Total Fund Operating Expenses (after
fee waiver) (6) .78% 1.28% 1.28% .53%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C Shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.16% for Class A shares, 1.81% for
Class B shares, 1.81% for Class C shares and .81% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 38 $ 54 $ 72 $124
Class A
(without fee
waivers) $ 41 $ 66 $ 92 $167
Class B $ 43 $ 61 $ 70 $128
Class B
(without fee
waivers) $ 48 $ 77 $ 98 $180
Class C $ 23 $ 41 $ 70 $155
Class C
(without fee
waivers) $ 28 $ 57 $ 98 $213
Class I $ 5 $ 17 $ 30 $ 66
Class I
(without fee
waivers) $ 8 $ 26 $ 45 $100
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 38 $ 54 $ 72 $124
Class A
(without fee
waivers) $ 41 $ 66 $ 92 $167
Class B $ 13 $ 41 $ 70 $128
Class B
(without fee
waivers) $ 18 $ 57 $ 98 $180
Class C $ 13 $ 41 $ 70 $155
Class C
(without fee
waivers) $ 18 $ 57 $ 98 $213
Class I $ 5 $ 17 $ 30 $ 66
Class I
(without fee
waiver) $ 8 $ 26 $ 45 $100
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
14
<PAGE> 90
One Group(R) Short-Term Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
SEPTEMBER 4,
YEAR ENDED JUNE 30, 1990 TO
-----------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.42 $ 10.53 $ 10.33 $ 10.87 $ 10.72 $ 10.26 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.63 0.63 0.64 0.60 0.54 0.61 0.70 0.58
Net realized and unrealized gains
(losses) from investments and
futures 0.04 0.05 (0.11) 0.19 (0.45) 0.25 0.47 0.25
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.67 0.68 0.53 0.79 0.09 0.86 1.17 0.83
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.63) (0.63) (0.64) (0.59) (0.55) (0.62) (0.70) (0.57)
In excess of net investment income -- -- -- -- (0.02) -- -- --
Net realized gains -- -- -- -- (0.06) (0.09) (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.63) (0.64) (0.59) (0.63) (0.71) (0.71) (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.51 $ 10.47 $ 10.42 $ 10.53 $ 10.33 $ 10.87 $ 10.72 $ 10.26
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 6.59% 6.75% 5.13% 7.96% 0.79% 8.27% 11.75% 9.76%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $592,669 $563,979 $604,916 $410,746 $447,394 $397,820 $301,907 $154,991
Ratio of expenses to average net
assets 0.53% 0.51% 0.51% 0.52% 0.50% 0.56% 0.52% 0.32%(b)
Ratio of net investment income to
average net assets 6.01% 6.06% 6.06% 5.82% 5.10% 5.70% 6.63% 7.49%(b)
Ratio of expenses to average net
assets* 0.82% 0.81% 0.82% 0.85% 0.85% 0.90% 1.04% 0.92%(b)
Ratio of net investment income to
average net assets* 5.72% 5.76% 5.75% 5.49% 4.75% 5.36% 6.11% 6.89%(b)
Portfolio Turnover (a) 56.99% 66.61% 75.20% 76.43% 30.61% 40.28% 43.87% 24.69%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares
issued. (b) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(C)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.46 $ 10.41 $ 10.52 $ 10.32 $ 10.87 $ 10.72 $ 10.61
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.61 0.61 0.63 0.56 0.52 0.59 0.24
Net realized and unrealized gains (losses) from
investments and futures 0.04 0.05 (0.13) 0.21 (0.46) 0.24 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.66 0.50 0.77 0.06 0.83 0.37
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.61) (0.61) (0.61) (0.56) (0.51) (0.59) (0.26)
In excess of net investment income -- -- -- (0.01) (0.04) -- --
Net realized gains -- -- -- -- (0.06) (0.09) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.61) (0.61) (0.57) (0.61) (0.68) (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.50 $ 10.46 $ 10.41 $ 10.52 $ 10.32 $ 10.87 $ 10.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.32% 6.47% 4.86% 7.67% 0.49% 8.04% 9.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $15,582 $20,055 $21,343 $12,516 $15,216 $15,719 $161
Ratio of expenses to average net assets 0.78% 0.76% 0.76% 0.77% 0.75% 0.76% 0.99%(b)
Ratio of net investment income to average net
assets 5.77% 5.81% 5.81% 5.57% 4.92% 5.35% 5.95%(b)
Ratio of expenses to average net assets* 1.17% 1.16% 1.17% 1.20% 1.20% 1.27% 1.29%(b)
Ratio of net investment income to average net
assets* 5.38% 5.41% 5.40% 5.14% 4.47% 4.84% 5.65%(b)
Portfolio Turnover (a) 56.99% 66.61% 75.20% 76.43% 30.61% 40.28% 43.87%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) Class A Shares commenced offering on February
18, 1992.
15
<PAGE> 91
One Group(R) Short-Term Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
CLASS B 1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.49 $ 10.60 $ 10.40 $ 10.78
- ------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.55 0.55 0.53 0.17
Net realized and unrealized gains (losses) from
investments and futures 0.04 0.04 (0.10) 0.19 (0.37)
- ------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.62 0.59 0.45 0.72 (0.20)
- ------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.55) (0.56) (0.52) (0.15)
In excess of net realized gains -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.55) (0.56) (0.52) (0.18)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.57 $ 10.53 $ 10.49 $ 10.60 $ 10.40
- ------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.98% 5.74% 4.28% 7.18% (1.81)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,851 $4,920 $4,923 $2,906 $1,974
Ratio of expenses to average net assets 1.11% 1.20% 1.26% 1.28% 1.26%(c)
Ratio of net investment income to average net assets 5.44% 5.21% 5.31% 5.10% 4.39%(c)
Ratio of expenses to average net assets* 1.64% 1.81% 1.82% 1.86% 1.86%(c)
Ratio of net investment income to average net assets* 4.91% 4.60% 4.75% 4.52% 3.79%(c)
Portfolio Turnover (d) 56.99% 66.61% 75.20% 76.43% 30.61%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
16
<PAGE> 92
One Group(R)
Treasury & Agency Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of
current income by investing in U.S.
Treasury and other U.S. agency
obligations with a primary, but not
exclusive, focus on issues that
produce income exempt from state
income taxes.
LOGO INVESTMENT STRATEGY
The Fund invests in U.S. Treasury
and other U.S. agency obligations
including fixed income securities
and mortgage-related securities.
Normally, the Fund's average
weighted maturity will range between
two and five years.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
65% of its total assets in U.S.
Treasury bills, notes and other
obligations issued or guaranteed by
the U.S. Treasury ("Treasury
Obligations") and securities issued
or guaranteed by U.S. government
agencies and instrumentalities.
Treasury Obligations may include
Separately Traded Registered
Interest and Principal Securities
("STRIPS"), Coupon Under Book Entry
Safekeeping ("CUBES"). 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 ("ARMs"), as well as engage in
securities lending. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in fixed income
securities. The value of these
securities will change in response
to interest rate changes and other
factors. Before you invest, please
read "More About the Funds" and
"Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 3.00% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 3.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average
daily net assets)
Investment Advisory Fees (after fee
waiver) (4) .20% .20% .20%
12b-1 Fees (after fee waiver) (5) .25% .75% .75%
Other Expenses .25% .25% .25%
Total Fund Operating Expenses (after
fee waiver) (6) .70% 1.20% 1.20%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.20%
none
.25%
.45%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .40% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of fees, Total Operating Expenses would
be 1.00% for Class A shares, 1.65% for Class B shares, 1.65% for Class C
shares and .65% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 37 $ 52 $ 68 $114
Class A
(without fee
waivers) $ 40 $ 61 $ 84 $149
Class B $ 42 $ 58 $ 66 $119
Class B
(without fee
waivers) $ 47 $ 72 $ 90 $162
Class C $ 22 $ 38 $ 66 $145
Class C
(without fee
waivers) $ 27 $ 52 $ 90 $195
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waivers) $ 7 $ 21 $ 36 $ 81
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 37 $ 52 $ 68 $114
Class A
(without fee
waivers) $ 40 $ 61 $ 84 $149
Class B $ 12 $ 38 $ 66 $119
Class B
(without fee
waivers) $ 17 $ 52 $ 90 $162
Class C $ 12 $ 38 $ 66 $145
Class C
(without fee
waivers) $ 17 $ 52 $ 90 $195
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waivers) $ 7 $ 21 $ 36 $ 81
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
17
<PAGE> 93
One Group(R) Treasury & Agency Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20,
1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.00
- -----------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.28
Net realized and unrealized gains (losses) from
investments and futures 0.15 (0.01)
- -----------------------------------------------------------------------------------------
Total from Investment Activities 0.77 0.27
- -----------------------------------------------------------------------------------------
Distributions:
Net investment income (0.62) (0.28)
Net realized gains (0.05) --
- -----------------------------------------------------------------------------------------
Total Distributions (0.67) (0.28)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 9.99
- -----------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.91% 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $95,073 $110,084
Ratio of expenses to average net assets 0.35% 0.45%(c)
Ratio of net investment income to average net assets 6.16% 6.44%(c)
Ratio of expenses to average net assets* 0.65% 0.78%(c)
Ratio of net investment income to average net assets* 5.86% 6.11%(c)
Portfolio Turnover (d) 41.60% 54.44%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (D) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
JANUARY 20,
1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.98 $10.00
- -----------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.63 0.29
Net realized and unrealized gains (losses) from
investments and futures 0.16 (0.02)
- -----------------------------------------------------------------------------------------
Total from Investment Activities 0.79 0.27
- -----------------------------------------------------------------------------------------
Distributions:
Net investment income (0.63) (0.29)
Net realized gains (0.05) --
- -----------------------------------------------------------------------------------------
Total Distributions (0.68) (0.29)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 9.98
- -----------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.10% 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $35,213 $94
Ratio of expenses to average net assets 0.58% 0.71%(c)
Ratio of net investment income to average net assets 5.87% 6.47%(c)
Ratio of expenses to average net assets* 0.98% 1.15%(c)
Ratio of net investment income to average net assets* 5.47% 6.03%(c)
Portfolio Turnover (d) 41.60% 54.44%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
18
<PAGE> 94
One Group(R) Treasury & Agency Fund Financial Highlights
<TABLE>
<CAPTION>
JANUARY 20,
1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 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.
19
<PAGE> 95
One Group(R)
High Yield Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of
current income by investing
primarily in a diversified portfolio
of debt securities which are rated
below investment grade or unrated.
Capital appreciation is a secondary
objective.
LOGO INVESTMENT STRATEGY
The Fund invests in all types of
high yield, high risk debt
securities. The Fund also may invest
in convertible securities, preferred
stock, common stock, and loan
participations. The Fund's average
weighted maturity will normally
range between five and ten years,
although the Fund may shorten its
average weighted maturity to as
little as two years if deemed
appropriate for temporary defensive
purposes.
LOGO PORTFOLIO SECURITIES
The Fund normally invests at least
80% of its total assets in debt
securities, loan participations,
convertible securities and preferred
stock which are rated below
investment grade or unrated,
although the Fund may invest up to
100% of the Fund's total assets in
such securities. Securities rated
below investment grade are called
"high yield bonds," "non-investment
grade bonds," "below investment
grade bonds" or "junk bonds." These
securities generally are rated in
the fifth or lower rating categories
(for example, BB or lower by
Standard & Poor's Corporation and Ba
or lower by Moody's Investors
Service, Inc.), and are considered
to be speculative. The Fund also may
invest up to 20% of its total assets
in other securities, including
investment grade debt securities. As
a matter of fundamental policy, at
least 65% of the Fund's total assets
will consist of bonds. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in debt securities
which are considered speculative.
While these securities generally
provide a higher yield than higher
rated debt securities, they are
subject to a greater degree of risk.
Issuers of these securities may
include highly leveraged, less
creditworthy companies or
financially distressed firms. The
credit quality of these securities
can change suddenly and
unexpectedly. Before you invest,
please read "More About the Funds,"
"Special Investment Risks," and
"Investment Risks."
LOGO FUND MANAGEMENT
Banc One High Yield Partners, LLC
serves as sub-advisor to the Fund.
Banc One High Yield Partners, LLC is
controlled by Banc One Investment
Advisors and Pacholder Associates,
Inc. Anthony L. Longi, Jr., an
officer of Banc One High Yield
Partners, LLC is the Manager of the
Fund. As an officer of Pacholder
Associates, Inc., Mr. Longi has
served as portfolio manager of the
Pacholder Fund, Inc. since 1994 and
as a high yield research analyst
with Pacholder Associates, Inc.
since 1987.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .60% .60% .60%
12b-1 Fees (after fee waiver) (4) .25% .90% .90%
Other Expenses .27% .27% .27%
Total Fund Operating Expenses (after
fee waivers) (5) 1.12% 1.77% 1.77%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.60%
none
.27%
.87%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .75% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares and 1.00% for Class B and Class C shares.
(5) Without the voluntary reduction of Investment Advisory, 12b-1 fees and
expense reimbursements, Total Operating Expenses would be 1.37% for
Class A shares, 2.02% for Class B shares, 2.02% for Class C shares and
1.02% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A $56 $79
Class A
(without
fee
waiver) $58 $86
Class B $68 $86
Class B
(without
fee
waiver) $71 $93
Class C $28 $56
Class C
(without
fee
waiver) $31 $63
Class I $ 9 $28
Class I
(without
fee
waiver) $10 $32
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
Class A $56 $79
Class A
(without
fee
waiver) $58 $86
Class B $18 $56
Class B
(without
fee
waiver) $21 $63
Class C $18 $56
Class C
(without
fee
waiver) $21 $63
Class I $ 9 $28
Class I
(without
fee
waiver) $10 $32
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
20
<PAGE> 96
One Group(R) High Yield Bond Fund Financial Highlights
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1998, there are no Financial
Highlights for the Fund.
21
<PAGE> 97
One Group(R)
Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks to maximize total
return by investing primarily in a
diversified portfolio of
intermediate and long-term debt
securities.
LOGO INVESTMENT STRATEGY
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.
LOGO PORTFOLIO SECURITIES
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 may purchase
taxable or tax-exempt municipal
securities. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in debt
securities that are rated in the
lowest investment grade category.
Such investments are considered to
have speculative characteristics. In
addition, the Fund invests in fixed
income securities. The value of
these securities will change in
response to interest rate changes
and other factors. This is
especially true to the extent the
Fund invests in debt securities in
the lowest investment grade
category. The Fund also invests in
mortgage-related securities which
may have greater price and yield
volatility than traditional fixed
income securities. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .40% .40% .40%
12b-1 Fees (after fee waiver) (4) .25% .90% .90%
Other Expenses (5) .20% .20% .20%
Total Fund Operating Expenses (after
fee waivers) (6) .85% 1.50% 1.50%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.40%
none
.20%
.60%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without a fee waiver, Other Expenses would be .21% for all classes of
shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees
and reimbursement of Other Expenses, Total Operating Expenses would be
1.16% for Class A shares, 1.81% for Class B shares, 1.81% for Class C
shares and .81% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $53 $71 $ 90 $145
Class A
(without fee
waivers) $56 $80 $106 $180
Class B $65 $77 $102 $161
Class B
(without fee
waivers) $68 $87 $118 $196
Class C $25 $47 $ 82 $179
Class C
(without fee
waivers) $28 $57 $ 98 $213
Class I $ 6 $19 $ 33 $ 75
Class I
(without fee
waiver) $ 8 $26 $ 45 $100
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $53 $71 $ 90 $145
Class A
(without fee
waivers) $56 $80 $106 $180
Class B $15 $47 $ 82 $161
Class B
(without fee
waivers) $18 $57 $ 98 $196
Class C $15 $47 $ 82 $179
Class C
(without fee
waivers) $18 $57 $ 98 $213
Class I $ 6 $19 $ 33 $ 75
Class I
(without fee
waiver) $ 8 $26 $ 45 $100
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
22
<PAGE> 98
One Group(R) Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(A)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32 $ 10.25 $ 10.55 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.65 0.66 0.68 0.63 0.61 0.76 0.83 0.51
Net realized and unrealized gains
(losses) from investments and
futures 0.19 0.32 (0.18) 1.45 (1.31) 0.38 (0.17) 0.57
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.84 0.98 0.50 2.08 (0.70) 1.14 0.66 1.08
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.65) (0.66) (0.68) (0.64) (0.59) (0.76) (0.83) (0.51)
From net realized gain -- -- -- -- (0.02) (0.31) (0.13) (0.02)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.65) (0.66) (0.68) (0.64) (0.61) (1.07) (0.96) (0.53)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32 $ 10.25 $ 10.55
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes sales charge) 8.17% 9.97% 5.08% 23.75% (6.99)% 11.39% 6.56% 18.45%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,277,246 $1,101,894 $ 757,627 $485,851 $395,116 $455,786 $312,366 $237,673
Ratio of expenses to average net
assets 0.64% 0.61% 0.66% 0.74% 0.74% 0.73% 0.73% 0.75%(b)
Ratio of net investment income to
average net assets 6.10% 6.41% 6.71% 6.39% 6.36% 7.20% 8.08% 8.44%(b)
Ratio of expenses to average net
assets* -- -- -- -- -- -- -- --
Portfolio Turnover 34.69% 17.60% 24.92% 41.91% 75.67% 111.52% 90.45% 8.19%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A) For
the period June 1, 1991 (commencement of operations) to December 31,
1991. (b) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32 $ 10.25 $10.23
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.61 0.63 0.67 0.63 0.61 0.76 0.56
Net realized and unrealized gains (losses) from
investments and futures 0.21 0.32 (0.18) 1.45 (1.31) 0.38 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.82 0.95 0.49 2.08 (0.70) 1.14 0.71
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.63) (0.63) (0.67) (0.64) (0.59) (0.76) (0.56)
From net realized gain -- -- -- -- (0.02) (0.31) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.63) (0.67) (0.64) (0.61) (1.07) (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32 $10.25
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 7.92% 9.65% 4.98% 23.75% (6.99)% 11.39% 9.59%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $226,261 $125,515 $46,977 $31,714 $32,053 $45,410 $9,392
Ratio of expenses to average net assets 0.89% 0.86% 0.78% 0.74% 0.74% 0.73% 0.74%(b)
Ratio of net investment income to average net
assets 5.85% 6.16% 6.59% 6.39% 6.36% 7.20% 8.12%(b)
Ratio of expenses to average net assets* -- -- -- -- -- -- --
Portfolio Turnover 34.69% 17.60% 24.92% 41.91% 75.67% 111.52% 90.45%(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 1, 1992 (Initial offering date for Class A Shares) through
December 31, 1992. (b) Annualized.
23
<PAGE> 99
One Group(R) Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
CLASS B 1998 1997 1996(A)
<S> <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.
24
<PAGE> 100
more about the funds
25
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments with maturities of 90 days or more issued by
the U.S. Treasury, U.S. government agencies, corporations, municipalities,
securities issued or guaranteed by foreign governments, their agencies or
instrumentalities, securities issued by domestic and supranational banks,
mortgage-related securities, asset-backed securities, stripped government
securities and zero coupon obligations.
Portfolio Quality
- ----------------------------------------------------
The Funds only purchase securities that meet the following criteria:
DEBT SECURITIES
- - >The Government Bond Fund and the Treasury & Agency Fund may invest in debt
securities rated in any of the three highest investment grade rating
categories.
- - >The Ultra Short-Term 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 "Special Risk Considerations" and "High
Yield/Junk Bonds" for more information about the Income 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 Intermediate Bond Fund, the Short-Term Bond Fund, the Bond Fund and the
Ultra Short-Term Bond Fund may only invest in municipal bonds rated in any of
the four highest rating categories.
- - >The Intermediate Bond Fund, the Ultra Short-Term 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.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the One Group Board of Trustees in determining whether an
investment is illiquid.
Special Risk
Considerations
- ----------------------------------------------------
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually, changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: Some of the Funds may invest in securities that are considered to
be derivatives. "Derivatives" are securities or contracts that derive
<PAGE> 101
26
their value from the performance of underlying assets or securities. These
include:
- - options, futures contracts, and options on futures contracts
- - mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed (Interest Only (IOs) and Principal Only (POs))
- - asset-backed securities
- - swap, cap and floor transactions
- - new financial products
- - structured instruments
- - inverse floating rate instruments
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. For a more detailed discussion of these risks, please read "Investment
Risks." The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments.
LOWER RATED SECURITIES: The Intermediate Bond Fund, the Ultra Short-Term Bond
Fund, the Short-Term Bond Fund, the Bond Fund and the Income Bond Fund may
invest in debt securities rated in the lowest investment grade category.
Securities in this rating category are considered to have speculative
characteristics. Changes in economic conditions or other circumstances may have
a greater effect on the ability of issuers of these securities to make principal
and interest payments than they do on issuers of higher grade securities.
HIGH YIELD/JUNK BONDS: The Income Bond Fund and the High Yield Bond Fund invest
in high yield securities that are unrated or rated below investment grade
(commonly known as "junk bonds"). These securities are considered to be high
risk investments. You should not invest in the Funds unless you are willing to
assume the greater risk associated with high yield securities. These risks
include the following:
- GREATER RISK OF LOSS. There is a greater risk that issuers of lower rated
securities will default than issuers of higher rated securities. Issuers of
lower rated securities may be less creditworthy, highly indebted,
financially distressed, or bankrupt. These issuers are more vulnerable to
real or perceived economic changes, political changes or adverse industry
developments. If an issuer fails to pay principal or interest, the Funds
would experience a decrease in income and a decline in the market value of
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 rates on new issues of
non-investment grade bonds is relatively short. It may be that future
default rates on new issues of non-investment grade securities will be more
widespread and higher than in the past, especially if economic conditions
deteriorate.
- CREDIT QUALITY. Credit quality of non-investment grade securities can
change suddenly and unexpectedly, and even recently-issued credit ratings
may not fully reflect the actual risks posed by a particular high-yield
security. For these reasons, the Funds will not rely solely on ratings
issued by established credit rating agencies, but will use such ratings in
conjunction with Banc One Investment Advisor's or the Sub-Advisor's
independent and ongoing review of credit quality. (Please see "Description
of Ratings" in the Appendix for additional information). Because
investments in lower rated or unrated securities involve
<PAGE> 102
27
greater investment risk, achievement of the Funds' investment objectives
will be more dependent on Banc One Investment Advisor's or the
Sub-Advisor's credit analysis than would be the case if the Funds were
investing in higher rated securities. The Funds may seek to hedge
investments through transactions in options, futures contracts and related
options. The Funds also may use swap agreements to further manage exposure
to lower rated securities.
- EXPERIENCE OF ADVISOR AND SUB-ADVISOR. The High Yield Bond Fund's portfolio
manager has been responsible for the day-to-day management of the Pacholder
Fund, Inc. since 1994. The Pacholder Fund, Inc. is a closed end fund that
invests primarily in high risk, high yield securities. Open-end investment
companies, like the Fund, are subject to different regulatory requirements
than closed-end funds such as the Pacholder Fund, Inc. The Sub-Advisor,
Banc One Investment Advisors and the portfolio manager have limited
experience in managing an open-end investment company (like the Fund) that
primarily invests in high yield, high risk bonds.
FOREIGN SECURITIES: Investments in foreign securities involve risks different
from investments in U.S. securities. This includes the risk that fluctuations in
exchange rates between the U.S. dollar and foreign currencies may negatively
affect an investment. For more details, see "Investment Practices" and
"Investment Risks." Because of these risk factors, the share price of a Fund
investing in foreign securities is expected to be volatile, and you should be
able to sustain sudden, and sometimes substantial, fluctuations in the value of
your investment. 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 will
be redenominated in euros. All government bonds issued by participating nations
will be in euros, and outstanding government bonds will be 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 a Fund.
<PAGE> 103
how to do business with One Group Mutual Funds
28
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4 p.m.
Eastern Time ("ET"), will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any organization
authorized to act in a fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- - If you intend to hold your shares six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
One Group Fund Direct IRA. The One Group offers a retirement plan. 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.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before
4:00 p.m. ET. When that happens, NAV will be calculated as of the time the
NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment for all Funds except the Treasury & Agency
Fund is $1,000 ($100 for employees of BANK ONE CORPORATION and its
affiliates). The minimum initial investment for the Treasury & Agency Fund
is $50,000. The minimum initial investment for an IRA is $250.
- Subsequent investments for all Funds except the Treasury & Agency Fund must
be at least $100 ($25 for employees of BANK ONE CORPORATION and its
affiliates). Subsequent investments for the Treasury & Agency Fund must be
at least $1,000.
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges
<PAGE> 104
29
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)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10) calendar
days if purchases are made by check or under the Systematic Investment Plan
(see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes, simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "One Group" to State Street Bank and
Trust Company (see address above), authorize a bank transfer or initiate a
wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO 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, 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
CONVERSION FEATURE
- - Your Class B shares automatically convert to Class A shares.
- - Class B shares of the Intermediate Bond Fund, the Income Bond Fund, the
Government Bond Fund, the High Yield Bond Fund and the Bond Fund automatically
convert to Class A shares 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 to Class A shares after six years.
- - Conversion periods are measured from the end of the month in which the Class B
shares were purchased.
<PAGE> 105
30
- - After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any Federal income tax.
- - Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together for
purposes of calculating the six and eight year time periods.
Sales Charges
- ----------------------------------------------------
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. 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 to select Shareholder Servicing Agents. Those Shareholder Servicing
Agents who may receive special incentives include Banc One Securities
Corporation, The Advisors Group, United Planners Financial Services of America,
Inc., The Legend Group, and Rosewood Retirement Advisory Services, LLC. 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.
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 and the commissions paid to Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.70%
$100,000-$249,999 2.50% 2.56% 2.18%
$250,000-$499,999 2.00% 2.04% 1.64%
$500,000-$999,999 1.50% 1.52% 1.20%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you buy Class A shares of THE INTERMEDIATE BOND FUND, THE INCOME BOND FUND,
THE GOVERNMENT BOND FUND, THE HIGH YIELD BOND FUND and THE BOND FUND the
following table shows the amount of sales charge and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C> <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 amount 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.
<PAGE> 106
31
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:
<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 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> <C>
0-1 3.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase to Shareholder Servicing Agents who sell Class B shares of THE
INTERMEDIATE BOND FUND, THE INCOME BOND FUND, THE GOVERNMENT BOND FUND, THE HIGH
YIELD BOND FUND and 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> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial purchase
price, nor is a sales charge assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of One Group in connection with a fund
<PAGE> 107
32
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
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% 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 .25% of the average
daily net assets of the Class A shares of the Funds. In addition, The One
Group Services Company received 12b-1 fees totaling .90% of the average daily
net assets of the Class B shares of the Intermediate Bond Fund, the Income
Bond Fund, and the Government Bond Fund, and .75% for Class B shares of the
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.
Sales Charge
Reductions
and Waivers
- ----------------------------------------------------
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A, Class B
or Class C shares of a Fund (except a money market fund) that you (and your
spouse and minor children) already own to the amount of your next Class A
purchase for purposes of calculating the sales charge. An Intermediary also
may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more Funds over the next 13 months and pay the same
sales charge that you would have paid if all shares were purchased at once. A
percentage of your investment will be held in escrow until the full amount
covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and their
spouses and immediate family members) of:
- 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.
<PAGE> 108
33
- An investment sub-advisor of a One Group Fund and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANK ONE CORPORATION and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
custodial or similar capacity.
- Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with The One Group
Services Company.
- 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.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
<PAGE> 109
34
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of account
that you have, is waiving their commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance of the purchase. To see if you qualify, contact The One
Group Services Company at 1-800-480-4111 or your Shareholder Servicing Agent.
Exchanging
Fund Shares
- ----------------------------------------------------
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another 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 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 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 do not charge a sales charge and you want to exchange them for shares
of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
- - If you exchange Class B or Class C shares of a Fund, you will not pay a sales
charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable for
Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results in a
capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, 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
<PAGE> 110
35
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
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
<PAGE> 111
36
payments provided the payments are limited to no more than 10% of your
account value annually, measured from the date the redemption request is
received.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan. These payments may be less than $100
each.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and 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. 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 then weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- - You generally will recognize a gain or loss on a redemption for Federal income
tax purposes. You should talk to your tax advisor before making a redemption.
<PAGE> 112
shareholder information
37
Voting Rights
- ----------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each Class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or Class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANK ONE CORPORATION (One First National Plaza, Chicago Illinois, 60670),
through its affiliates, may be deemed for purposes of the Investment Company Act
of 1940 to control the Funds. This is because as of December 1, 1998, BANK ONE
CORPORATION or its affiliates possessed the power to vote substantially all of
the Class I shares of the Funds.
On the same date, the following shareholders beneficially owned more than 25% of
the following classes of shares of the Funds. As a consequence, they may be
considered to be controlling persons of these classes of the Funds listed below:
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C> <C>
The One Group Investor Growth & High Yield Bond Fund 52.67% Beneficial
Income Fund Class I
c/o Mark Redman
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund High Yield Bond Fund 46.71% Beneficial
c/o Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually. To maintain a relatively even rate
of distributions from the Treasury & Agency Fund, the monthly distributions for
that Fund may be fixed from time to time at rates consistent with Banc One
Investment Advisors' long-term earnings expectations.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
<PAGE> 113
38
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF ZERO-COUPON SECURITIES
Some of the Funds may acquire certain securities issued with original issue
discount (including zero-coupon securities). Current Federal tax requires that a
holder (such as a Fund) of such a security must include in taxable income a
portion of the original issue discount which accrues during the tax year on such
security even if a Fund receives no payment in cash on the security during the
year. As an investment company, a Fund must pay out substantially all of its net
investment income each year, including any original issue discount. Accordingly,
a Fund may be required to pay out in income distribution each year an amount
which is greater than the total amount of cash interest a Fund actually
received. Such distributions will be made from the cash assets of a Fund or by
liquidation of investments if necessary. If a distribution of cash necessitates
the liquidation of investments, Banc One Investment Advisors or the Sub-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 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 the shares as a
distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 114
organization and management of the funds
fund name
THE FUNDS
Each Fund is a series of One Group Mutual Funds, an open-end management
investment company. One Group currently offers 49 separate Funds. Each Fund
described in this prospectus is diversified. Eight of the Funds are described in
this prospectus; the other Funds are described in separate prospectuses. Each
Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid investment advisory fees
at the following rates:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
One Group(R) Intermediate Bond Fund .40%*
One Group(R) Income Bond Fund .40%*
One Group(R) Government Bond Fund .44%
One Group(R) Ultra Short-Term Bond Fund .21%
One Group(R) Short-Term Bond Fund .31%
One Group(R) Treasury & Agency Fund .20%
One Group(R) Bond Fund .40%*
</TABLE>
* The predecessors to these Funds had December 31 year ends. The advisory fees
shown are as of December 31, 1998.
THE SUB-ADVISOR
Banc One High Yield Partners, LLC ("Banc One High Yield Partners") makes the
day-to-day investment decisions for the High Yield Bond Fund and administers the
Fund's investment program, subject to supervision by Banc One Investment
Advisors and the Trustees. Banc One High Yield Partners was formed in May, 1998
to provide investment advice related to high yield, high risk investments to the
High Yield Bond Fund and other advisory clients. Banc One High Yield Partners is
controlled by Banc One Investment Advisors and Pacholder Associates, Inc., an
investment advisory firm which specializes in high yield, high risk, fixed
income securities. Banc One High Yield Partners is entitled to a fee for its
services. The fee, which is equal to .70% of the Fund's average daily net
assets, is calculated daily and paid monthly. Banc One Investment Advisors pays
Banc One High Yield Partners' fee. Banc One High Yield Partners has agreed to
waive part of its fee. The fee waiver is voluntary and may be terminated at any
time.
BANC ONE HIGH YIELD PARTNERS -- PRIOR PERFORMANCE OF PACHOLDER ASSOCIATES, INC.
Banc One High Yield Partners, the Sub-Advisor of the High Yield Bond Fund, was
formed as a limited liability company under an agreement between Banc One
Investment Advisors and Pacholder Associates, Inc. ("Pacholder"). Under the
Agreement, Pacholder is responsible for providing portfolio management services
on behalf of Banc One High Yield Partners for the High Yield Bond Fund.
Pacholder is also responsible for advising the Pacholder Fund, Inc., a
closed-end fund (the "Pacholder Fund") through a limited liability company known
as Pacholder & Company, LLC.(1)
The following table shows historical performance of the Pacholder Fund, a fund
with substantially similar investment objectives, policies, strategies and risks
to the High Yield Bond Fund as measured against a specified market index. THIS
INFORMATION IS PROVIDED TO SHOW THE PAST PERFORMANCE OF PACHOLDER IN MANAGING A
SUBSTANTIALLY SIMILAR FUND. THIS INFORMATION DOES NOT REPRESENT THE PERFORMANCE
OF THE HIGH YIELD BOND FUND. YOU SHOULD NOT CON-
- ---------------
(1) Prior to August 21, 1998, Pacholder was responsible for advising the
Pacholder Fund through a partnership known
as Pacholder & Company.
39
<PAGE> 115
40
SIDER THIS PERFORMANCE DATA AS AN INDICATION OF FUTURE PERFORMANCE OF THE HIGH
YIELD BOND FUND OR THE PACHOLDER FUND.
With the exception of 1995, the expense ratio of the Pacholder Fund has been
higher than the projected expense ratio of High Yield Bond Fund. The expense
ratio has an impact on the total return that shareholders in the fund would
realize. Unlike the High Yield Bond Fund, the Pacholder Fund pays a performance
based investment advisory fee. With the exception of investment advisory fees
paid in 1991 and 1995, the Pacholder Fund's investment advisory fees have been
higher than the contractual advisory fees of the High Yield Bond Fund.
Unlike the High Yield Bond Fund, the Pacholder Fund is a closed-end fund that
has issued both common and preferred stock. Holders of preferred stock in the
Pacholder Fund are entitled to fixed rate distributions. The first column shows
the NAV return realized by holders of common shares in the Pacholder Fund after
distributions were made to preferred shareholders. The second column shows the
NAV return that would have been realized if preferred shares had not been
issued. The third column compares the performance of the Pacholder Fund to a
specified market index.
PACHOLDER FUND HISTORICAL PERFORMANCE(1)
<TABLE>
<CAPTION>
TOTAL RETURN ASSUMING
COMMON STOCK IS NOT
COMMON LEVERAGED THROUGH CS FIRST BOSTON
SHAREHOLDERS' RETURN ISSUANCE OF HIGH YIELD
BASED ON NAV(2) PREFERRED STOCK(3) INDEX
<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%
1 YR Average Annual Return -3.19% -0.40% 0.58%
3 YR Average Annual Return 10.40% 9.17% 8.39%
5 YR Average Annual Return 8.45% 7.98% 8.16%
Average Annual Return since 1990(4) 12.58% 12.18% 11.96%
</TABLE>
(1) Performance information is provided net of Fund expenses. The net investment
performance represents total return, assuming reinvestment of all dividends
and proceeds from capital transactions.
(2) Return to holders of common shares of the Pacholder Fund after distribution
of dividends to preferred shareholders. Performance was derived using the
method for calculating the total return of a closed-end fund as required by
SEC Form N-2. The returns through December 31, 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. The net investment performance has been computed in accordance with
the Performance Presentation Standards established by the Association for
Investment Management and Research ("AIMR-PPS"), but has not been verified
by an entity independent of Banc One Investment Advisors and Pacholder.
AIMR-PPS computation methods differ from those endorsed by the SEC and will
produce different results.
(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.
<PAGE> 116
41
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory reporting and
compliance. For these services, The One Group Services Company receives a fee
based on the total assets of One Group. For the first $1.5 billion in One Group
assets, The One Group Services Company receives an annual fee of .20% of each
Fund's average daily net assets. The annual rate declines to .18% on assets up
to $2 billion, and to .16% when assets exceed $2 billion. The fee is calculated
daily and paid monthly. Some Funds are not included in the calculations.
Banc One Investment Advisors, the Sub-Administrator, provides office space,
equipment and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND
SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent if appropriate, handles shareholder
recordkeeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company, Bank One Trust Company, N.A. is paid a fee paid by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for all systems and interfaces. Neither One Group nor its shareholders will bear
any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 117
details about the funds' investment practices and policies
fund name
42
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
fund code
<S> <C> <C> <C>
One Group(R) Intermediate Bond Fund 1
One Group(R) Income Bond Fund 2
One Group(R) Government Bond Fund 3
One Group(R) Ultra Short-Term Bond Fund 4
One Group(R) Short-Term Bond Fund 5
One Group(R) Treasury & Agency Fund 6
One Group(R) High Yield Bond Fund 7
One Group(R) Bond Fund 8
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-8 Market
CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-8 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-8 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1, 2, 4, 5, 7, 8 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1, 2, 4, 5, 7, 8 Market
exchange for the deposit of funds. Liquidity
Credit
REPURCHASE AGREEMENTS: The purchase of a security and the 1-8 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-8 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-8 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-8 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1-8 Market
including One Group money market funds and shares of other
investment companies 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 that 1, 2, 4, 7, 8 Market
convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the 1-5, 7, 8 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell covered call and secured put options.
</TABLE>
<PAGE> 118
43
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
FUTURES AND RELATED OPTIONS: A contract providing for the 1-5, 7, 8 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment 2, 7 Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1, 2, 4, 5, 7, 8 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1, 2, 4, 5, 7, 8 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Debt issued by foreign governments, 1, 2, 4, 5, 7, 8 Market
foreign corporations, domestic subsidiaries of foreign Political
corporations, and foreign banks, as well as commercial paper Liquidity
of foreign issuers and obligations of foreign banks and Investment
overseas branches of U.S. foreign banks and of foreign
issuers and supranational entities. The High Yield Bond Fund
also may purchase equity securities issued by the entities
listed above.
RESTRICTED SECURITIES: Securities not registered under the 1, 2, 4, 5, 7, 8 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities. Credit
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1-8 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand. The Treasury & Agency Fund will invest in these
securities only if they are issued by the U.S. Treasury or
another U.S. Government Agency.
WARRANTS: Securities, typically issued with preferred stock 2, 7 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
PREFERRED STOCK: A class of stock that generally pays a 1, 2, 4, 5, 7, 8 Market
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-8 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
CORPORATE DEBT SECURITIES: Corporate bonds and 1, 2, 4, 5, 7, 8 Market
non-convertible debt securities. Credit
DEMAND FEATURES: Securities that are subject to puts and 1, 2, 4, 5, 7, 8 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1, 2, 4, 5, 7, 8 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells 1-8 Pre-payment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage 1-8 Pre-payment
pool which provide for a fixed initial mortgage interest Market
rate for a specified period of time, after which the rate Credit
may be subject to periodic adjustments. The Treasury & Regulatory
Agency Fund will only buy ARMs issued by U.S. government
entities.
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-4, 5, 7, 8 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest rate or amount.
</TABLE>
<PAGE> 119
44
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
NEW FINANCIAL PRODUCTS: New options and futures contracts 1-5, 7, 8 Management
and other financial products continue to be developed and Credit
the Funds may invest in such options, contracts and Market
products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1-8 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
interest rates, or one or more other referenced indices. Foreign Investment
MUNICIPAL SECURITIES: Securities issued by a state or 1, 2, 4, 5, 7, 8 Credit
political subdivision to obtain funds for various public Political
purposes. Municipal securities include private activity Tax
bonds and industrial development bonds, as well as General Market
Obligation Notes, Anticipation Notes, Bond Tax Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities and single
family revenue bonds.
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay 1-8 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their
maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero coupon debt 1-8 Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class 1-5, 7, 8 Pre-payment
mortgage securities usually structured with two classes of Market
shares that receive different proportions of the interest Credit
and principal from a pool of mortgage-backed obligations. Regulatory
These include only invests in Stripped Mortgage-Backed
Securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged variable rate 1-5, 7, 8 Market
debt instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest to which Credit
the inverse floater is indexed.
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 1, 2, 4, 5, 7, 8 Credit
assignments of all or a portion of loans to corporations or Political
to governments, including governments of the less developed Liquidity
countries ("LDC's"). Foreign Investment
Market
FIXED RATE MORTGAGE LOANS: Investments in fixed rate 1-8 Credit
mortgage loans or mortgage pools which bear simple interest Pre-payment
at fixed annual rates and have short to long term final Regulatory
maturities. Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term 1, 2, 4, 5, 7, 8 Credit
funding agreements issued by banks and highly rated U.S. Liquidity
insurance companies such as Guaranteed Investment Contracts Market
("GIC's") and Bank Investment Contracts ("BIC's").
COMMON STOCK: Shares of ownership of a company. 7 Market
</TABLE>
<PAGE> 120
45
Investment Risks
- ----------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risk than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price 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. Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that a
Fund's hedging transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater than
the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management may fail
to produce the intended result. This includes the risk that changes in the
value of a hedging instrument will not match those of the asset being hedged.
Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing market
rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest rates
typically causes a fall in values, while a fall in rates typically causes a
rise in values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments in
foreign securities.
- - POLITICAL RISK. The risk of losses attributable to unfavorable governmental or
political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments. This
includes the risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses. Exchange rate
volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. When mortgage and other obligations are pre-paid, a Fund may have
to reinvest in securities with a lower yield. Further, with early prepayment,
a Fund may fail to recover any premium paid, resulting in an unexpected
capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply with
certain
<PAGE> 121
46
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.
Investment Policies
- ----------------------------------------------------
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. In addition to the fundamental
policies mentioned earlier, the following fundamental policies apply to each
Fund as specified. The full text of the fundamental policies can be found in the
Statement of Additional Information.
Each Fund may not:
1. Purchase the securities of an issuer if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of that issuer. This
does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, securities of registered investment companies,
and repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may:
(i) purchase or hold debt instruments in accordance with its investment
objective and policies;
(ii) enter into repurchase agreements; and
(iii) engage in securities lending.
Additional investment policies are set forth in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes as determined by Banc One Investment Advisors
or the Sub-Advisor, the Funds may invest up to 100% of their assets in money
market instruments, and may hold a portion of their assets in cash for liquidity
purposes. While the Funds are engaged in a temporary defensive position, they
will not be pursuing their investment objectives. Therefore, the Funds will
pursue a temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year. Higher portfolio turnover rates will likely result in higher
transaction costs to the Funds and may result in additional tax consequences to
you. The portfolio turnover rate for each Fund for the fiscal year ended June
30, 1998 is shown on the Financial Highlights, other than for the Income Bond
Fund, the Intermediate Bond Fund and the Bond Fund. The portfolio turnover rate
for those Funds is for the fiscal year ended December 31, 1998. The estimated
portfolio turnover rate for the High Yield Bond Fund will not exceed 100%. To
the extent portfolio turnover results in short-term capital gains, such gains
will generally be taxed at ordinary income tax rates.
<PAGE> 122
appendix
47
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors or a Sub-Advisor determines that such securities
are the equivalent of investment grade securities. Securities that have received
different ratings from more than one agency are considered investment grade if
at least one agency has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest payments.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
B Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties which could
lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D In payment default. The D rating category is used when payments on an
obligation are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
FITCH'S IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
F3 Adequate capacity for timely repayment, but more susceptible to adverse
changes in business, economic or financial conditions than for
obligations in higher categories.
<PAGE> 123
48
B Capacity for timely repayment is susceptible to adverse changes in
business, economic or financial conditions.
C High risk of default or which are currently in default.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
PRIME-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT
PRIME Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to
<PAGE> 124
49
have the capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
MOODY'S
Investment Grade
AAA Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
AA High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
BA These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
CAA Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
CA Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
FITCH
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest is
adequate. However, adverse changes in business, economic or financial
conditions and circumstances, are more likely to affect the capacity for
timely repayment than for obligations in higher rated categories.
Non-Investment Grade
BB Obligations for which capacity for timely repayment of principal and
interest is uncertain. These obligations are speculative to some degree
and capacity for repayment remains susceptible over time to adverse
changes in business, financial or economic conditions.
B The Obligor's capacity for timely repayment of principal and interest
is uncertain. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions and these obligations are far more speculative
than those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, eco-
<PAGE> 125
50
nomic, 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.
S&P
An insurer rated "BBB" or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA Extremely strong financial security characteristics. "AAA" is the
highest Insurer Financial Strength Rating assigned by Standard & Poor's.
AA Very strong financial security characteristics, differing only slightly
from those rated higher.
A Strong financial security characteristics, but is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB Good financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
An insurer rated "BB" or lower is regarded as having vulnerable characteristics
that may outweigh its strength. "BB" indicates the least degree of vulnerability
within the range; "CC" the highest.
BB Marginal financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B Weak financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC Very weak financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC Extremely weak financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated "R" has experienced a Regulatory Action regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR Not Rated, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-) Following ratings from "AA" to "CCC" show relative
standing within the major rating categories.
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51
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 &
VMIG1
Short-term municipal securities rated MIG1 or VMIG1 are of the best quality.
They have strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG2 &
VMIG2
These short-term municipal securities rated MIG2 & VMIG2 are of high quality.
Margins of protection are ample although not so large as in the
preceding group.
MIG3 &
VMIG3
Favorable quality. All security elements are accounted for, but the undeniable
strength of the preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for refinancing is
likely to be less well established.
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.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
AAA Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
AA High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
A Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
BA Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
B Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
CAA Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
CA Speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
C Lowest rated class of preferred or preference stock. Issues so rated
can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a pre-
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52
ferred stock in this category than for issues in the "A" category.
BB, B,
CCC
Regarded, on balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest. While such issues will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
NR No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(Including Foreign, Mortgage and Asset-Backed Securities)
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity to
meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
Non-Investment 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.
<PAGE> 128
53
MOODY'S
Investment Grade
AAA Best quality. They carry the smallest degree of investment risk and are
generally referred to as 'gilt edged.' Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
AA High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
BA These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
CAA Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
CA Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
<PAGE> 129
(This page intentionally left blank)
<PAGE> 130
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
SUB-ADVISOR
Banc One High Yield Partners, LLC
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company
3435 Stelzer road
Columbus, OH 43219
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8328
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20003
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THE
FUNDS. THE CURRENT STATEMENT OF ADDITIONAL
INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE
WITHOUT CHARGE BY CALLING 1-800-480-4111 OR BY
WRITING TO THE ONE GROUP SERVICES COMPANY AT
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
THE SEC MAINTAINS A WEB SITE (WWW.SEC.GOV)
THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIALS INCORPORATED BY
REFERENCE AND OTHER INFORMATION REGARDING ONE
GROUP.
TOG-F-122
<PAGE> 131
ONE GROUP MUTUAL FUNDS
MUNICIPAL BOND FUNDS
COMBINED PROSPECTUS
MARCH 18, 1999
ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND
ONE GROUP(R) MUNICIPAL INCOME FUND
ONE GROUP(R) TAX-FREE BOND FUND
ONE GROUP(R) SHORT-TERM MUNICIPAL BOND FUND
ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND
ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND
ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND
ONE GROUP(R) OHIO MUNICIPAL BOND FUND
ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND
ONE GROUP(R) MICHIGAN MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
This prospectus describes ten mutual funds that attempt to produce income exempt
from Federal and/or state income tax. The information in this prospectus is
important. Please read it carefully before you invest, and save it for future
reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK ONE CORPORATION OR ITS AFFILIATES; - ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY FEDERAL OR
STATE GOVERNMENTAL AGENCY; - INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 132
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Intermediate Tax-Free Bond Fund............. 2
One Group(R) Municipal Income Fund....................... 5
One Group(R) Tax-Free Bond Fund.......................... 8
One Group(R) Short-Term Municipal Bond Fund.............. 11
One Group(R) Arizona Municipal Bond Fund................. 14
One Group(R) West Virginia Municipal Bond Fund........... 17
One Group(R) Louisiana Municipal Bond Fund............... 20
One Group(R) Ohio Municipal Bond Fund.................... 23
One Group(R) Kentucky Municipal Bond Fund................ 26
One Group(R) Michigan Municipal Bond Fund................ 29
MORE ABOUT THE FUNDS........................................ 32
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 34
Purchasing Fund Shares................................... 34
Sales Charges............................................ 36
Sales Charge Reductions and Waivers...................... 38
Exchanging Fund Shares................................... 39
Redeeming Fund Shares.................................... 40
SHAREHOLDER INFORMATION..................................... 42
Voting Rights............................................ 42
Dividend Policies........................................ 42
Tax Treatment of the Funds............................... 42
Tax Treatment of Shareholders............................ 42
Shareholder Inquiries.................................... 44
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 45
The Funds................................................ 45
The Board of Trustees.................................... 45
The Advisor.............................................. 45
The Distributor.......................................... 45
The Administrator and Sub-Administrator.................. 45
The Transfer Agent, Custodian and Sub-Custodian.......... 45
Year 2000................................................ 46
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 47
Investment Practices..................................... 47
Investment Risks......................................... 49
Investment Policies...................................... 50
APPENDIX: DESCRIPTION OF RATINGS............................ 52
</TABLE>
table of contents
<PAGE> 133
1
a brief preview of the funds
WHAT ARE THE GOALS OF THE MUNICIPAL BOND FUNDS?
The Funds are designed to produce income exempt from Federal
and/or state income tax. Each Fund pursues a different
investment objective and involves different risks. These Funds
may not be appropriate for Individual Retirement Accounts,
Qualified Plans, and other Retirement Plans that receive
favorable tax treatment. Please read about each Fund before
investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Intermediate Tax-Free Bond Fund, the Municipal Income
Fund, the Tax-Free Bond Fund, and the Short-Term Municipal
Bond Fund invest in debt securities issued by or on behalf of
states, territories, and possessions of the United States and
their agencies that produce interest that is exempt from
Federal income tax. The Arizona Municipal Bond Fund, the West
Virginia Municipal Bond Fund, the Louisiana Municipal Bond
Fund, the Kentucky Municipal Bond Fund, the Ohio Municipal
Bond Fund and the Michigan Municipal Bond Fund invest in debt
securities of their respective states that produce interest
that is exempt from Federal income tax and the personal income
tax of each Fund's respective state. The Funds may also lend
their portfolio securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in fixed-income investments that are subject
to market fluctuations as a result of changes in interest
rates. As a result, the value of investments in the Funds may
decrease during periods of rising interest rates and increase
during periods of declining interest rates. In addition, some
of the Funds invest in mortgage-related securities which may
have greater price and yield volatility than traditional fixed
income securities. Fixed income securities also are subject to
the risk that the issuer of the security will be unable to
meet its repayment obligation. All of the Funds, except the
Intermediate Tax-Free Bond Fund, the Municipal Income Fund,
the Short-Term Municipal Bond Fund and the Tax-Free Bond Fund
are non-diversified funds which expose investors to special
risks, including risks associated with state specific
investments. An investment in the Funds is not a deposit of
BANK ONE CORPORATION or its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A,
Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I shares are
offered to institutional investors, including affiliates of
BANK ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization
authorized to act in fiduciary, advisory, agency, custodial or
similar capacities. Class C shares are not available for
purchase in all of the Funds. The section called "How To Do
Business With One Group Mutual Funds" will provide more
information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are
distributed on the first business day of each month. Any
capital gains are distributed at least annually. Distributions
are paid in additional shares of the same class unless you
elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under
the headings "The Advisor" and "Shareholder Expenses."
<PAGE> 134
One Group(R)
Intermediate Tax-Free Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that
seeks current income exempt from
Federal income taxes consistent with
prudent investment management and
the preservation of capital.
LOGO INVESTMENT STRATEGY
The Fund invests in bonds and notes
of states, territories and
possessions of the United States,
including the District of Columbia,
and their respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which is exempt from Federal income
tax ("Municipal Securities"). The
Fund's average weighted maturity
normally will range between three
and ten years.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
net assets in Municipal Securities.
As a matter of fundamental policy,
the Fund invests at least 65% of its
total assets in bonds. The Fund also
may invest in mortgage-backed
securities, restricted securities,
and mortgage dollar rolls. The
securities in which the Fund invests
may have fixed rates of return or
floating or variable rates. For a
list of all securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in Municipal
Securities that are rated in the
lowest investment grade. Even though
such securities are generally
considered investment grade, they
are considered to have speculative
characteristics. Issuers of such
securities are more vulnerable to
changes in economic conditions than
issuers of higher grade securities.
The Municipal Securities are also
fixed income investments. The value
of these securities will change in
response to interest rate changes
and other factors. In addition, the
Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed income
securities. Before you invest,
please read "More About the Funds"
and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 20% of the Fund's assets may
be invested in Municipal Securities,
the interest on which may be subject
to the Federal alternative minimum
tax for individuals. Shareholders
who are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .39% .39% .39% .39%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .19% .19% .19% .19%
Total Fund Operating Expenses (after
fee waivers) (6) .83% 1.48% 1.48% .58%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.14 % for Class A shares, 1.79% for
Class B shares, 1.79% for Class C shares and .79% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 70 $ 89 $143
Class A
(without fee
waivers) $ 56 $ 80 $105 $177
Class B $ 65 $ 77 $101 $159
Class B
(without fee
waivers) $ 68 $ 86 $117 $193
Class C $ 25 $ 47 $ 81 $177
Class C
(without fee
waivers) $ 28 $ 56 $ 97 $211
Class I $ 6 $ 19 $ 32 $ 73
Class I
(without fee
waiver) $ 8 $ 25 $ 44 $ 98
</TABLE>
Assuming no redemption the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 70 $ 89 $143
Class A
(without fee
waivers) $ 56 $ 80 $105 $177
Class B $ 15 $ 47 $ 81 $159
Class B
(without fee
waivers) $ 18 $ 56 $ 97 $193
Class C $ 15 $ 47 $ 81 $177
Class C
(without fee
waivers) $ 18 $ 56 $ 97 $211
Class I $ 6 $ 19 $ 32 $ 73
Class I
(without fee
waiver) $ 8 $ 25 $ 44 $ 98
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
2
<PAGE> 135
One Group(R) Intermediate Tax-Free Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, for years ended 1998, 1997 and 1996,
whose report, along with the Fund's financial statements, is incorporated by
reference in the Statement of Additional Information, which is available upon
request. Information for years prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.67 $ 10.64 $ 10.49 $ 11.15 $ 10.69
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.52 0.54 0.52 0.53
Net realized and unrealized gains
(losses) from investments 0.31 0.27 0.04 0.15 (0.52) 0.49
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.83 0.81 0.56 0.69 0.00 1.02
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.54) (0.51) (0.54) (0.53) (0.52)
In excess of net investment income -- -- -- -- (0.01) --
Net realized gains (0.08) (0.02) (0.02) -- (0.01) (0.04)
In excess of net realized gains -- -- -- -- (0.11) --
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.56) (0.53) (0.54) (0.66) (0.56)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.15 $ 10.92 $ 10.67 $ 10.64 $ 10.49 $ 11.15
- -------------------------------------------------------------------------------------------------------------------------
Total Return 7.74% 7.76% 5.39% 6.75% (0.11)% 9.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $493,686 $451,089 $217,201 $211,229 $182,611 $166,489
Ratio of expenses to average net assets 0.60% 0.58% 0.54% 0.53% 0.48% 0.54%
Ratio of net investment income to
average net assets 4.70% 5.05% 4.87% 5.17% 4.78% 4.93%
Ratio of expenses to average net
assets* 0.81% 0.81% 0.87% 0.88% 0.84% 0.94%
Ratio of net investment income to
average net assets* 4.49% 4.82% 4.54% 4.82% 4.42% 4.53%
Portfolio turnover (a) 109.03% 86.89% 111.58% 199.76% 105.98% 31.99%
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
CLASS I 1992 1991(C)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.28 $ 10.00
- ---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.49
Net realized and unrealized gains
(losses) from investments 0.42 0.27
- -------------------------------------------------------------------------------------
Total from Investment Activities 0.97 0.76
- -----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.48)
In excess of net investment income -- --
Net realized gains (0.01) --
In excess of net realized gains -- --
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.48)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.28
- -------------------------------------------------------------------------------------------------------------------------
Total Return 9.54% 9.49%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $142,672 $82,192
Ratio of expenses to average net assets 0.55% 0.30%(b)
Ratio of net investment income to
average net assets 5.28% 6.04%(b)
Ratio of expenses to average net
assets* 1.07% 0.90%(b)
Ratio of net investment income to
average net assets* 4.77% 5.44%(b)
Portfolio turnover (a) 11.50% 35.15%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (B) Annualized. (C) The
Class I commenced operations on September 4, 1990.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.91 $ 10.67 $ 10.63 $ 10.48 $ 11.14
Investment Activities:
Net investment income 0.50 0.51 0.50 0.51 0.50
Net realized and unrealized gains
(losses) from investments 0.31 0.26 0.05 0.15 (0.52)
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.81 0.77 0.55 0.66 (0.02)
- --------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.50) (0.51) (0.49) (0.49) (0.52)
In excess of net investment income -- -- -- (0.02) (0.01)
Net realized gains (0.08) (0.02) (0.02) -- --
In excess of net realized gains -- -- -- -- (0.11)
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.53) (0.51) (0.51) (0.64)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.14 $ 10.91 $ 10.67 $ 10.63 $ 10.48
- --------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.50% 7.39% 5.28% 6.49% (0.33)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $14,515 $8,457 $6,622 $5,614 $5,556
Ratio of expenses to average net assets 0.85% 0.83% 0.79% 0.78% 0.73%
Ratio of net investment income to
average net assets 4.45% 4.75% 4.62% 4.91% 4.57%
Ratio of expenses to average net assets* 1.16% 1.15% 1.22% 1.23% 1.19%
Ratio of net investment income to
average net assets* 4.14% 4.43% 4.19% 4.46% 4.11%
Portfolio turnover (a) 109.03% 86.89% 111.58% 199.76% 105.98%
<CAPTION>
YEAR ENDED JUNE 30,
------------------------
CLASS A 1993 1992(C)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.69 $ 10.57
Investment Activities:
Net investment income 0.55 0.15
Net realized and unrealized gains
(losses) from investments 0.44 0.18
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.99 0.33
- --------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.50) (0.21)
In excess of net investment income -- --
Net realized gains (0.04) --
In excess of net realized gains -- --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.21)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.14 $ 10.69
- --------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 9.47% 8.68%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,480 $5
Ratio of expenses to average net assets 0.71% 1.02%(b)
Ratio of net investment income to
average net assets 4.77% 4.91%(b)
Ratio of expenses to average net assets* 1.27% 1.32%(b)
Ratio of net investment income to
average net assets* 4.21% 4.61%(b)
Portfolio turnover (a) 31.99% 11.50%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Annualized. (c) Class
A Shares commenced offering on February 18, 1992.
3
<PAGE> 136
One Group(R) Intermediate Tax-Free Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.68 $ 10.65 $ 10.50 $ 11.18
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.43 0.45 0.43 0.46 0.17
Net realized and unrealized gains (losses) from
investments 0.31 0.27 0.04 0.14 (0.67)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.74 0.72 0.47 0.60 (0.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.43) (0.45) (0.42) (0.45) (0.17)
Net realized gains (0.08) (0.02) (0.02) -- --
In excess of net realized gains -- -- -- -- (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.47) (0.44) (0.45) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.16 $ 10.93 $ 10.68 $ 10.65 $10.50
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.81% 6.82% 4.48% 5.89% (4.48)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,659 $3,307 $2,439 $1,116 $549
Ratio of expenses to average net assets 1.50% 1.47% 1.44% 1.43% 1.40%(c)
Ratio of net investment income to average net assets 3.80% 4.09% 3.97% 4.29% 4.08%(c)
Ratio of expenses to average net assets* 1.81% 1.78% 1.87% 1.88% 1.85%(c)
Ratio of net investment income to average net assets* 3.49% 3.78% 3.54% 3.84% 3.63%(c)
Portfolio turnover (d) 109.03% 86.89% 111.58% 199.76% 105.98%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
4
<PAGE> 137
One Group(R)
Municipal Income Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that
seeks current income exempt from
Federal income taxes.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
of states, territories and
possessions of the United States,
including the District of Columbia,
and their respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which is exempt from Federal income
tax ("Municipal Securities"). The
Fund's average weighted maturity
normally will range from five to
fifteen years, although the Fund may
shorten its average weighted
maturity to as little as two years
if appropriate for temporary
defensive purposes.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
net assets in Municipal Securities.
As a matter of fundamental policy,
the Fund invests at least 65% of its
total assets in bonds. As a matter
of fundamental policy, the Fund will
not invest more than 25% of its net
assets (i) in securities within a
single industry; or (ii) in
securities of governmental units or
issuers in the same state,
territory, or possession. However,
the Fund will, from time to time,
invest more than 25% of its net
assets in municipal housing
authority obligations and
single-family mortgage revenue
bonds. The Fund also may invest in
mortgage-backed securities,
restricted securities, and mortgage
dollar rolls. The securities in
which the Fund invests may have
fixed rates of return or floating or
variable rates. For a list of all
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in Municipal
Securities that are rated in the
lowest investment grade. Even though
such securities are generally
considered investment grade
securities, they are considered to
have speculative characteristics.
Issuers of such securities are more
vulnerable to changes in economic
conditions than issuers of higher
grade securities. The Municipal
Securities are also fixed income
investments. The value of these
securities will change in response
to interest rates and other factors.
In addition, the Fund invests in
mortgage-related securities which
may have greater price and yield
volatility than traditional fixed
income securities. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .35% .35% .35% .35%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .27% .27% .27% .27%
Total Fund Operating Expenses (after
fee waivers) (6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.07% for Class A shares, 1.72% for
Class B shares, 1.72% for Class C shares and .72% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 55 $ 78 $101 $170
Class B $ 65 $ 78 $103 $164
Class B
(without fee
waivers) $ 67 $ 84 $113 $186
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 27 $ 54 $ 93 $203
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 7 $ 23 $ 40 $ 89
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 55 $ 78 $101 $170
Class B $ 15 $ 48 $ 83 $164
Class B
(without fee
waivers) $ 17 $ 54 $ 93 $186
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 17 $ 54 $ 93 $203
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 7 $ 23 $ 40 $ 89
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
5
<PAGE> 138
One Group(R) Municipal Income Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.66 $ 10.11 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.53 0.56 0.57 0.56 0.19
Net realized and unrealized gains
(losses) from investments 0.27 0.18 (0.03) 0.03 (0.42) 0.11
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.78 0.71 0.53 0.60 0.14 0.30
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.53) (0.56) (0.57) (0.56) (0.19)
In excess of net realized gains -- -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.53) (0.56) (0.57) (0.59) (0.19)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.84 $ 9.66 $ 9.69 $ 9.66 $ 10.11
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 8.09% 7.49% 5.54% 6.46% 1.36% 5.18%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $617,885 $408,577 $241,115 $185,916 $152,763 $40,777
Ratio of expenses to average net
assets 0.57% 0.57% 0.56% 0.56% 0.54% 0.54%(b)
Ratio of net investment income to
average net assets 5.08% 5.38% 5.70% 6.02% 5.61% 5.66%(b)
Ratio of expenses to average net
assets* 0.67% 0.68% 0.76% 0.74% 0.71% 1.01%(b)
Ratio of net investment income to
average net assets* 4.98% 5.27% 5.50% 5.84% 5.44% 5.19%(b)
Portfolio turnover (c) 69.76% 62.83% 83.17% 66.02% 101.48% 66.12%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on February 9, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.69 $ 9.72 $ 9.67 $ 10.12 $ 10.06
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.51 0.55 0.55 0.55 0.19
Net realized and unrealized gains
(losses) from investments 0.27 0.18 (0.04) 0.05 (0.43) 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.76 0.69 0.51 0.60 0.12 0.24
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.51) (0.54) (0.55) (0.54) (0.18)
In excess of net realized gains -- -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.51) (0.54) (0.55) (0.57) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.14 $ 9.87 $ 9.69 $ 9.72 $ 9.67 $ 10.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.84% 7.24% 5.35% 6.21% 1.34% 6.86%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $101,805 $41,829 $25,787 $11,462 $10,725 $4,106
Ratio of expenses to average net
assets 0.82% 0.82% 0.81% 0.81% 0.79% 0.80%(b)
Ratio of net investment income to
average net assets 4.83% 5.13% 5.45% 5.76% 5.44% 5.71%(b)
Ratio of expenses to average net
assets* 1.02% 1.03% 1.11% 1.09% 1.06% 1.36%(b)
Ratio of net investment income to
average net assets* 4.63% 4.92% 5.15% 5.48% 5.17% 5.15%(b)
Portfolio turnover (c) 69.76% 62.83% 83.17% 66.02% 101.48% 66.12%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Class A Shares commenced offering on February 23,
1993. (b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares issued.
6
<PAGE> 139
One Group(R) Municipal Income Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.62 $ 10.10
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.44 0.47 0.49 0.24
Net realized and unrealized gains (losses) from
investments 0.26 0.18 (0.03) 0.07 (0.48)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.68 0.62 0.44 0.56 (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.44) (0.47) (0.49) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.44) (0.47) (0.49) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 9.84 $ 9.66 $ 9.69 $ 9.62
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.04% 6.55% 4.65% 5.58% (1.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 56,911 $ 36,258 $ 23,204 $ 8,326 $ 4,855
Ratio of expenses to average net assets 1.47% 1.47% 1.46% 1.46% 1.41%(c)
Ratio of net investment income to average net assets 4.18% 4.48% 4.80% 5.14% 4.95%(c)
Ratio of expenses to average net assets* 1.67% 1.67% 1.76% 1.74% 1.62%(c)
Ratio of net investment income to average net assets* 3.98% 4.28% 4.50% 4.86% 4.74%(c)
Portfolio turnover (d) 69.76% 62.83% 83.17% 66.02% 101.48%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been indicated. (a) Class
B Shares commenced offering on January 14, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4, 1997
CLASS C 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%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
7
<PAGE> 140
One Group(R)
Tax-Free Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that
seeks as high a level of current
income exempt from Federal income
tax as is consistent with relative
stability of principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
of states, territories and
possessions of the United States,
including the District of Columbia,
and their respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which is exempt from Federal income
tax ("Municipal Securities"). The
Fund invests in Municipal Securities
without regard to maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
net assets in Municipal Securities.
As a matter of fundamental policy,
the Fund invests at least 65% of its
total assets in bonds. Up to 20% of
the Fund's total assets may be held
in cash and cash equivalents. The
Fund will, from time to time, invest
more than 25% of its net assets in
municipal housing authority
obligations and single-family
mortgage revenue bonds. The Fund
also may invest in mortgage-backed
securities, restricted securities,
and mortgage dollar rolls. The
securities in which the Fund invests
may have fixed rates of return or
floating or variable rates. For a
list of all securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in Municipal
Securities that are rated in the
lowest investment grade. Even though
such securities are generally
considered investment grade
securities, they are considered to
have speculative characteristics.
Issuers of such securities are more
vulnerable to changes in economic
conditions than issuers of higher
grade securities. The Municipal
Securities are also fixed income
investments. The value of these
securities will change in response
to interest rates and other factors.
In addition, the Fund invests in
mortgage-related securities which
may have greater price and yield
volatility than traditional fixed
income securities. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 20% of the Fund's assets may
be invested in Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Impose
Purchases
(as a percentage of offering
price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (4) .25% .90% .90% none
Other Expenses (after
reimbursements) (5) .22% .22% .22% .22%
Total Fund Operating Expenses (after
fee waivers) (6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without a fee waiver, Other Expenses would be .23% for all classes of
shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.03% for Class A shares, 1.68% for
Class B shares, 1.68% for Class C shares and .68% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 55 $ 76 $ 99 $165
Class B $ 65 $ 78 $103 $164
Class B
(without fee
waivers) $ 67 $ 83 $111 $181
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 27 $ 53 $ 91 $199
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 7 $ 22 $ 38 $ 85
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 55 $ 76 $ 99 $165
Class B $ 15 $ 48 $ 83 $164
Class B
(without fee
waivers) $ 17 $ 53 $ 91 $181
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 17 $ 53 $ 91 $199
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 7 $ 22 $ 38 $ 85
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
8
<PAGE> 141
One Group(R) Tax-Free Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, for years ended 1998, 1997, and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31, FEBRUARY 28,
----------------------------------------------- ------------
CLASS I 1998 1997 1996 1995(A) 1995(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.86 $ 12.36 $ 12.63 $ 12.06 $ 12.06
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.60 0.61 0.65 0.52 0.05
Net realized and unrealized gains (losses) from
investments and futures 0.16 0.51 (0.20) 0.81 --
- --------------------------------------------------------------------------------------------------------------------------
Total income from Investment Activities 0.76 1.12 0.45 1.33 0.05
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.61) (0.62) (0.61) (0.52) (0.05)
From net realized gain (0.03) -- (0.01) (0.24) --
In excess of net realized gain -- -- (0.10) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.62) (0.72) (0.76) (0.05)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.98 $ 12.86 $ 12.36 $ 12.63 $ 12.06
- --------------------------------------------------------------------------------------------------------------------------
Total Return 6.01% 9.32% 3.76% 11.20%(c) 0.39%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $841,715 $355,814 $338,104 $240,160 $220,143
Ratio of expenses to average net assets 0.63% 0.60% 0.58% 0.54%(d) 0.65%(d)
Ratio of net investment income to average net assets 4.61% 4.90% 4.79% 4.95%(d) 5.45%(d)
Ratio of expenses to average net assets* -- -- 0.68% 0.67%(d) 0.79%(d)
Portfolio Turnover 22.05% 32.08% 64.51% 69.31%(c) 60.78%(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 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31. (b) For the period February 1, 1995 (initial offering date of Class I
Shares) through February 28, 1995. (c) Not Annualized. (d) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED FEBRUARY 28,
---------------------------------------- -------------------------------------
CLASS A 1998 1997 1996 1995(A) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 12.87 $ 12.36 $ 12.64 $12.06 $12.13 $13.25 $ 12.49 $12.10
- -----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.56 0.59 0.48 0.60 0.63 0.70 0.76
Net realized and unrealized gains
(losses) from investments and
futures 0.17 0.54 (0.18) 0.82 (0.07) (0.15) 1.01 0.47
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.72 1.10 0.41 1.30 0.53 0.48 1.71 1.23
- -----------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.59) (0.58) (0.48) (0.60) (0.63) (0.70) (0.76)
From net realized gain (0.03) -- (0.01) (0.24) -- (0.96) (0.25) (0.08)
In excess of net realized gain -- -- (0.10) -- -- (0.01) -- --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.59) (0.69) (0.72) (0.60) (1.60) (0.95) (0.84)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.99 $ 12.87 $ 12.36 $12.64 $12.06 $12.13 $ 13.25 $12.49
- -----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 5.74% 9.13% 3.36% 10.95%(c) 4.45% 3.70% 14.37% 10.50%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $47,176 $34,729 $29,352 $7,426 $6,840 $9,234 $11,290 $6,591
Ratio of expenses to average net
assets 0.88% 0.85% 0.83% 0.89%(d) 1.98% -- -- --
Ratio of net investment income to
average net assets 4.36% 4.65% 4.54% 4.57%(d) 5.09% 4.85% 5.49% 5.99%
Ratio of expenses to average net
assets* -- -- 0.89% 1.04%(d) 3.89% 1.44% 1.59% 2.75%
Portfolio Turnover 22.05% 32.08% 64.51% 69.31%(c) 60.78% 175.06% 88.53% 66.28%
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------
CLASS A 1991 1990 1989(B)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $11.77 $11.82 $11.94
- ------------------------------------------------------------------------
Investment Activities:
Net investment income 0.81 0.81 0.89
Net realized and unrealized gains
(losses) from investments and
futures 0.33 0.28 (0.12)
- ---------------------------------------------------------------------------------
Total from Investment Activities 1.14 1.09 0.77
- ------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.81) (0.81) (0.89)
From net realized gain -- (0.33) --
In excess of net realized gain -- -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.81) (1.14) (0.89)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.10 $11.77 $11.82
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 10.13% 9.39% 6.82%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,244 $1,192 $ 673
Ratio of expenses to average net
assets -- -- --
Ratio of net investment income to
average net assets 6.87% 6.60% 7.46%(d)
Ratio of expenses to average net
assets* 2.75% 2.75% 2.25%(d)
Portfolio Turnover 32.40% 85.07% 36.19%(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 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31. (b) For the period March 1, 1988 (commencement of operations) to February
28, 1989. (c) Not Annualized. (d) Annualized.
9
<PAGE> 142
One Group(R) Tax-Free Bond Fund Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 2, FEBRUARY 28,
---------------------------------------- ------------ ------------
CLASS B 1998 1997 1996 1995(A) 1994(B) 1994(c)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.86 $12.36 $12.65 $12.17 $ 12.14 12.37
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.45 0.46 0.52 0.34 0.41 0.03
Net realized and unrealized gains (losses) from
investments and futures 0.18 0.54 (0.21) 0.72 (0.70) (0.23)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from Investment Activities 0.63 1.00 0.31 1.06 (0.29) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.50) (0.49) (0.34) (0.41) (0.03)
From net realized gain (0.03) -- (0.01) (0.24) -- --
In excess of net realized gain -- -- (0.10) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.50) (0.60) (0.58) (0.41) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion to Class A Shares -- -- -- -- 11.44(d) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.99 $12.86 $12.46 $12.65 -- $12.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.98% 8.26% 2.56% 8.81%(e) (4.30)%(e) 1.64%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,142 $1,312 $ 672 $ 238 -- $ 2
Ratio of expenses to average net assets 1.63% 1.60% 1.58% 1.66%(f) 3.18%(f) 0.50%(f)
Ratio of net investment income to average net
assets 3.61% 3.90% 3.79% 3.61%(f) 4.51%(f) 4.10%(f)
Ratio of expenses to average net assets* -- -- 1.70% 2.04%(f) 5.85%(f) 2.91%(f)
Portfolio Turnover 22.05% 32.08% 64.51% 69.31%(e) 60.78%(e) 175.06%(e)
</TABLE>
* 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 April 4, 1995 (re-offering date of Class B Shares) through December
31, 1995. Effective March 1, 1995, the Fund changed its fiscal year end from
February 28 to December 31. (b) For the period March 1, 1994 through December
2, 1994. On December 2, 1994, the Fund terminated its offering of Class B
shares and such shares converted to Class A shares. (c) For the period
February 8, 1994 (initial offering date of Class B shares) through February
28, 1994. (d) On December 2, 1994, the Fund terminated its offering of Class
B shares under the then-current sales load schedule and such shares converted
to Class A shares. (e) Not Annualized. (f) Annualized.
10
<PAGE> 143
One Group(R)
Short-Term Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that seeks as high a level of current income
exempt from Federal income tax as is consistent with relative stability of
principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities of states, territories and possessions of
the United States, including the District of Columbia, and their respective
authorities, political subdivisions, agencies and instrumentalities, the
interest on which is exempt from Federal income tax ("Municipal Securities").
The Fund's average weighted maturity will range between one and three years.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its net assets in Municipal Securities. As a
matter of fundamental policy, the Fund invests at least 65% of its total assets
in bonds. Up to 20% of the Fund's total assets may be held in cash and cash
equivalents. The Fund will, from time to time, invest more than 25% of its net
assets in municipal housing authority obligations and single-family mortgage
revenue bonds. The Fund also may invest in mortgage-backed securities,
restricted securities, and mortgage dollar rolls. The securities in which the
Fund invests may have fixed rates of return or floating or variable rates. For a
list of all securities in which the Fund may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund may invest in Municipal Securities that are rated in the lowest
investment grade. Even though such securities are generally considered
investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities. The Municipal
Securities are also fixed income investments. The value of these securities will
change in response to interest rates and other factors. In addition, the Fund
invests in mortgage-related securities which may have greater price and yield
volatility than traditional fixed income securities. Before you invest, please
read "More About the Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Municipal Securities the
interest on which may be subject to Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal alternative minimum tax
may have all or a portion of their income from the Fund subject to Federal
income tax. In addition, corporate shareholders will be required to take the
interest on Municipal Securities into account in determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 3.00% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds,
as applicable) none(2) 3.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)
Investment Advisory Fees (after fee
waiver) (3) .35% .35% .35% .35%
12b-1 Fees (after fee waiver) (4) .25% .90% .90% none
Other Expenses (5) .27% .27% .27% .27%
Total Fund Operating Expenses (after
fee waivers) (6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without a fee waiver, Other Expenses would be .28% for all classes.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.23% for Class A shares, 1.88% for
Class B shares, 1.88% for Class C shares and .88% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 39 $ 57 $ 77 $134
Class A
(without fee waivers) $ 42 $ 68 $ 96 $174
Class B $ 45 $ 68 $ 83 $148
Class B
(without fee waivers) $ 49 $ 79 $102 $188
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee waivers) $ 29 $ 59 $102 $220
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee waiver) $ 9 $ 28 $ 49 $108
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 39 $ 57 $ 77 $134
Class A
(without fee waivers) $ 42 $ 68 $ 96 $174
Class B $ 15 $ 48 $ 83 $148
Class B
(without fee waivers) $ 19 $ 59 $102 $188
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee waivers) $ 19 $ 59 $102 $220
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee waiver) $ 9 $ 28 $ 49 $108
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 144
One Group(R) Short-Term Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS I 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)
</TABLE>
* 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
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS A 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)
</TABLE>
* 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.
12
<PAGE> 145
One Group(R) Short-Term Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
CLASS B 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)
</TABLE>
* 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.
13
<PAGE> 146
One Group(R)
Arizona Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income exempt
from Federal income tax and Arizona
personal income tax, consistent with
the preservation of principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
issued by or on behalf of Arizona
and its respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which, in the opinion of issuer's
counsel, is exempt from Federal
income tax and Arizona personal
income tax ("Arizona Municipal
Securities"). The Fund's average
weighted maturity normally will be
between five and twenty years,
although the Fund may invest in
securities of any maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in Arizona Municipal
Securities. This is a fundamental
policy. The Fund also may invest up
to 20% of its total assets in bonds
and notes of states (other than
Arizona) as well as of territories
and possessions of the United
States, including the District of
Columbia, and their respective
authorities, agencies,
instrumentalities, and political
subdivisions, the interest on which,
in the opinion of issuer's counsel,
is exempt from Federal income tax
("Municipal Securities"). The
securities in which the Fund invests
may have fixed rates of return or
floating or variable rates. For a
list of all securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in Arizona
Municipal Securities, which may be
impacted by economic and political
developments in Arizona. The Arizona
Municipal Securities also include
fixed income investments. The value
of these securities will change in
response to interest rate changes
and other factors. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Arizona Municipal
Securities and Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities and Arizona Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 66 $ 81 $108 $175
Class B
(without fee
waivers) $ 68 $ 86 $116 $191
Class C $ 26 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 28 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 16 $ 51 $ 88 $175
Class B
(without fee
waivers) $ 18 $ 56 $ 96 $191
Class C $ 16 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 18 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
14
<PAGE> 147
One Group(R) Arizona Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over the past 10 years, or since inception, if less than
10 years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.23
Net realized and unrealized gains from investments 0.16 0.06
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.29
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.23)
Net realized gain (0.07) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.23)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 10.06
- -------------------------------------------------------------------------------------------
Total Return 6.58% 2.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) 2$48,590 25$5,755
Ratio of expenses to average net assets 0.59% 0.59%(c)
Ratio of net investment income to average net assets 4.79% 5.09%(c)
Ratio of expenses to average net assets* 0.65% 0.66%(c)
Ratio of net investment income to average net assets* 4.73% 5.02%(c)
Portfolio turnover (d) 20.89% 5.66%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Period from commencement of operations. (b) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.15
Net realized and unrealized gains (losses) from
investments 0.16 (0.01)
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.62 0.14
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.15)
Net realized gain (0.07) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.15)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.08 $ 9.99
- -------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.30% 1.40%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,321 $1,500
Ratio of expenses to average net assets 0.84% 0.85%(c)
Ratio of net investment income to average net assets 4.53% 4.90%(c)
Ratio of expenses to average net assets* 1.01% 0.96%(c)
Ratio of net investment income to average net assets* 4.36% 4.79%(c)
Portfolio turnover (d) 20.89% 5.66%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Period from commencement of operations. (b) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
15
<PAGE> 148
One Group(R) Arizona Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.09 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.13 0.00
Net realized and unrealized gains (losses) from
investments 0.14 0.09
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.27 0.09
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.13) --
Net realized gains (0.07) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.20) --
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.16 $ 10.09
- -------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.67% 0.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 290 --(c)
Ratio of expenses to average net assets 1.50% --(d)
Ratio of net investment income to average net assets 3.88% --(d)
Ratio of expenses to average net assets* 1.64% --(d)
Ratio of net investment income to average net assets* 3.74% --(d)
Portfolio turnover (e) 20.89% 5.66%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Period from commencement of operations. (b) Not annualized. (c) Amount is
less than $1,000. (d) Since net assets are less than $1,000, ratios have not
been presented. (e) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
16
<PAGE> 149
One Group(R)
West Virginia Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income exempt
from Federal income tax and West
Virginia personal income tax,
consistent with the preservation of
principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
issued by, or on behalf of, West
Virginia and its respective
authorities, political subdivisions,
agencies and instrumentalities, the
interest on which, in the opinion of
issuer's counsel, is exempt from
Federal income tax and West Virginia
personal income tax ("West Virginia
Municipal Securities"). Generally,
the Fund's average weighted maturity
will be between five and twenty
years, although the Fund may invest
in securities of any maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in West Virginia
Municipal Securities. This is a
fundamental policy. The Fund also
may invest up to 20% of its total
assets in bonds and notes of states
(other than West Virginia) as well
as of territories and possessions of
the United States, including the
District of Columbia, and their
respective authorities, agencies,
instrumentalities, and political
subdivisions, the interest on which,
in the opinion of issuer's counsel,
is exempt from Federal income tax
("Municipal Securities"). The
securities in which the Fund invests
may have fixed rates of return or
floating or variable rates. For a
list of all securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in West Virginia
Municipal Securities, which may be
impacted by economic and political
developments in West Virginia. The
West Virginia Municipal Securities
also include fixed income
investments. The value of these
securities will change in response
to interest rate changes and other
factors. Before you invest, please
read "More About the Funds" and
"Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in West Virginia
Municipal Securities and Municipal
Securities the interest on which may
be subject to Federal alternative
minimum tax for individuals.
Shareholders who are subject to the
Federal alternative minimum tax may
have all or a portion of their
income from the Fund subject to
Federal income tax. In addition,
corporate shareholders will be
required to take the interest on
Municipal Securities and West
Virginia Municipal Securities into
account in determining their
alternative minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 66 $ 81 $108 $175
Class B
(without fee
waivers) $ 68 $ 86 $116 $191
Class C $ 26 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 28 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 16 $ 51 $ 88 $175
Class B
(without fee
waivers) $ 18 $ 56 $ 96 $191
Class C $ 16 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 18 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
17
<PAGE> 150
One Group(R) West Virginia Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.22
Net realized and unrealized gains from investments 0.22 0.06
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.28
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.22)
- -------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.22)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.06
- -------------------------------------------------------------------------------------------
Total Return 7.36% 2.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $102,413 $96,270
Ratio of expenses to average net assets 0.60% 0.59%(c)
Ratio of net investment income to average net assets 4.93% 5.04%(c)
Ratio of expenses to average net assets* 0.72% 0.67%(c)
Ratio of net investment income to average net assets* 4.81% 4.96%(c)
Portfolio turnover (d) 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.16
Net realized and unrealized gains from investments 0.21 0.15
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.31
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.16)
- -------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.16)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.36 $ 10.15
- -------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.98% 3.08%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 2,024 $ 808
Ratio of expenses to average net assets 0.85% 0.84%(c)
Ratio of net investment income to average net assets 4.68% 4.94%(c)
Ratio of expenses to average net assets* 1.07% 0.97%(c)
Ratio of net investment income to average net assets* 4.46% 4.81%(c)
Portfolio turnover (d) 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares issued.
18
<PAGE> 151
One Group(R) West Virginia Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.14
Net realized and unrealized gains from investments 0.23 0.12
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.26
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.14)
- -------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.14)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 10.12
- -------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.57% 2.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,352 $614
Ratio of expenses to average net assets 1.50% 1.49%(c)
Ratio of net investment income to average net assets 4.05% 4.08%(c)
Ratio of expenses to average net assets* 1.72% 1.62%(c)
Ratio of net investment income to average net assets* 3.83% 3.95%(c)
Portfolio turnover (d) 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares issued.
19
<PAGE> 152
One Group(R)
Louisiana Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income both
consistent with the preservation of
principal and exempt from Federal
income tax and Louisiana income tax.
LOGO INVESTMENT STRATEGY
The Fund invests in investment grade
municipal securities issued by or on
behalf of Louisiana and its
authorities, political subdivisions,
agencies and instrumentalities, the
interest on which, in the opinion of
issuer's counsel, is exempt from
both Federal income tax and
Louisiana state income tax
("Louisiana Municipal Securities").
The Fund's average weighted maturity
normally will be between five and
twenty years, although the Fund may
invest in securities of any
maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
net assets in Louisiana Municipal
Securities. This is a fundamental
policy. The Fund also may hold up to
20% of its total assets in cash or
invest in municipal securities of
other states ("Municipal
Securities"), short-term taxable
investments including repurchase
agreements, and U.S. government
securities or other cash
equivalents. The securities in which
the Fund invests may have fixed
rates of return or floating or
variable rates. For a list of all
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in Louisiana
Municipal Securities, which may be
impacted by economic and political
developments in Louisiana. The
Louisiana Municipal Securities also
include fixed income investments.
The value of these securities will
change in response to interest rate
changes and other factors. Before
you invest, please read "More About
the Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Louisiana Municipal
Securities and Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities and Louisiana Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.27% for Class A shares, 1.92% for
Class B shares, 1.92% for Class C shares and .92% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 57 $ 83 $112 $191
Class B $ 66 $ 81 $108 $175
Class B
(without fee
waivers) $ 69 $ 90 $124 $207
Class C $ 26 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 29 $ 60 $104 $224
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 9 $ 29 $ 51 $113
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 57 $ 83 $112 $191
Class B $ 16 $ 51 $ 88 $175
Class B
(without fee
waivers) $ 19 $ 60 $104 $207
Class C $ 16 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 19 $ 60 $104 $224
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 9 $ 29 $ 51 $113
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
20
<PAGE> 153
One Group(R) Louisiana Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
Year ended
June 30, MARCH 26, 1996
------------------------ THROUGH JUNE 30,
CLASS I 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%
</TABLE>
* 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>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
JUNE 30, ENDED YEAR ENDED NOVEMBER 30,
---------------------- JUNE 30, ------------------------
CLASS A 1998 1997 1996(A) 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.10 $ 9.93 $ 10.09 $ 9.38 $ 10.27
- -------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.24 0.50 0.49
Net realized and unrealized
gains (losses) from
investments 0.16 0.17 (0.16) 0.71 (0.79)
- -------------------------------------------------------------------------------------------------------
Total from Investment
Activities 0.63 0.64 0.08 1.21 (0.30)
- -------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.47) (0.24) (0.50) (0.49)
Net realized gains -- -- -- -- (0.10)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.47) (0.24) (0.50) (0.59)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.38
- -------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 6.35% 6.55% 0.84%(b) 13.11% (2.97)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $47,078 $48,498 $53,479 $206,119 $196,820
Ratio of expenses to average
net assets 0.85% 0.87% 0.69%(c) 0.62% 0.65%
Ratio of net investment
income to average net
assets 4.60% 4.66% 4.71%(c) 5.07% 4.97%
Ratio of expenses to average
net assets* 1.18% 1.19% 0.86%(c) 0.77% 0.80%
Ratio of net investment
income to average net
assets* 4.27% 4.34% 4.54%(c) 4.92% 4.82%
Portfolio turnover (d) 12.03% 17.39% 16.72% 28.00% 24.00%
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------
CLASS A 1993 1992 1991
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.92 $ 9.73 $ 9.51
- --------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.55 0.56
Net realized and unrealized
gains (losses) from
investments 0.42 0.26 0.22
- -----------------------------------------------------------------------------------------
Total from Investment
Activities 0.94 0.82 0.78
- --------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.55) (0.56)
Net realized gains (0.07) (0.07) --
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.62) (0.56)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.27 $ 9.92 $ 9.73
- -------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 9.65% 8.64% 8.45%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $196,534 $135,692 $88,503
Ratio of expenses to average
net assets 0.62% 0.58% 0.61%
Ratio of net investment
income to average net
assets 5.07% 5.70% 5.86%
Ratio of expenses to average
net assets* 0.78% 0.83% 0.86%
Ratio of net investment
income to average net
assets* 4.91% 5.45% 5.61%
Portfolio turnover (d) 25.00% 32.00% 35.00%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Upon reorganizing as a fund of 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.
21
<PAGE> 154
One Group(R) Louisiana Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
SEVEN SEPT. 16,
YEAR ENDED MONTHS 1994
JUNE 30, ENDED YEAR ENDED, THROUGH
------------------------ JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1998 1997 1996(a) 1995 1994(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.93 $ 10.09 $ 9.36 $ 9.73
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.40 0.21 0.42 0.08
Net realized and unrealized gains (losses)
from investments 0.16 0.17 (0.16) 0.73 (0.37)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.57 0.57 0.05 1.15 (0.29)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.40) (0.21) (0.42) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (0.40) (0.21) (0.42) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.69% 5.87% 0.48%(c) 12.52% (2.94)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,474 $3,835 $3,223 $2,115 $ 204
Ratio of expenses to average net assets 1.50% 1.51% 1.50%(d) 1.37% 1.41%(d)
Ratio of net investment income to average net
assets 3.95% 4.02% 3.98%(d) 4.27% 4.45%(d)
Ratio of expenses to average net assets* 1.83% 1.85% 1.70%(d) 1.52% 1.56%(d)
Ratio of net investment income to average net
assets* 3.62% 3.68% 3.78%(d) 4.12% 4.30%(d)
Portfolio turnover (e) 12.03% 17.39% 16.72% 28.00% 24.00%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Upon reorganizing as a fund of One Group, the Paragon Louisiana Tax-Free
Fund became the Louisiana Municipal Bond Fund. Financial highlights for the
periods prior to March 26, 1996 represents the Paragon Louisiana Tax-Free
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $10.70
to $10.00 effective March 26, 1996. (b) Class B Shares commenced offering
on September 16, 1994. (c) Not annualized. (d) Annualized. (e) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
22
<PAGE> 155
One Group(R)
Ohio Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income exempt
from Federal income tax and Ohio
personal income tax, consistent with
the preservation of principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
issued by, or on behalf of, Ohio and
its respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which, in the opinion of issuer's
counsel, is exempt from Federal
income tax and Ohio personal income
tax ("Ohio Municipal Securities").
Generally, the Fund's average
weighted maturity will be between
five and twenty years, although the
Fund may invest in securities of any
maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in Ohio Municipal
Securities. This is a fundamental
policy. The Fund also may invest up
to 20% of its total assets in bonds
and notes of states (other than
Ohio) as well as territories and
possessions of the United States,
including the District of Columbia,
and their respective authorities,
agencies, instrumentalities, and
political subdivisions, the interest
on which, in the opinion of issuer's
counsel, is exempt from Federal
income tax ("Municipal Securities").
The securities in which the Fund
invests may have fixed rates of
return or floating or variable
rates. For a list of all securities
in which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in Ohio Municipal
Securities, which may be impacted by
economic and political developments
in Ohio. The Ohio Municipal
Securities also include fixed income
investments. The value of these
securities will change in response
to interest rate changes and other
factors. Before you invest, please
read "More About the Funds" and
"Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Ohio Municipal
Securities and Municipal Securities,
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities and Ohio Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .40% .40% .40%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .22% .22% .22%
Total Fund Operating Expenses (after
fee waiver) (6) ,87% 1.52% 1.52%
CLASS I
none
none
none
none
.40%
none
.22%
.62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers.
Without the voluntary waiver of fees, 12b-1 fees would be .35% for Class
A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum
sales charge; (2) 5% annual return; and
(3) redemption at the end of each time
period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 56 $ 80 $106 $181
Class B $ 65 $ 78 $103 $164
Class B
(without fee
waivers) $ 68 $ 87 $119 $197
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 28 $ 57 $ 99 $214
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 8 $ 26 $ 46 $101
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 53 $ 72 $ 91 $147
Class A
(without fee
waivers) $ 56 $ 80 $106 $181
Class B $ 15 $ 48 $ 83 $164
Class B
(without fee
waivers) $ 18 $ 57 $ 99 $197
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee
waivers) $ 18 $ 57 $ 99 $214
Class I $ 6 $ 20 $ 35 $ 77
Class I
(without fee
waiver) $ 8 $ 26 $ 46 $101
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above
reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
23
<PAGE> 156
One Group(R) Ohio Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992(c)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.88 $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.56 0.56 0.55 0.51 0.54 0.56
Net realized and unrealized gains (losses)
from investments 0.20 0.19 0.04 0.07 (0.50) 0.62 0.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.76 0.75 0.60 0.62 0.01 1.16 1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.56) (0.56) (0.55) (0.52) (0.53) (0.55)
In excess of net realized gains -- -- -- -- (0.02) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.56) (0.56) (0.55) (0.54) (0.53) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 10.88 $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 7.13% 7.22% 5.69% 6.07% 0.07% 11.43% 10.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $149,890 $133,172 $80,611 $79,993 $93,261 $74,792 $45,199
Ratio of expenses to average net assets 0.54% 0.54% 0.57% 0.58% 0.53% 0.55% 0.63%(b)
Ratio of net investment income to average
net assets 5.09% 5.24% 5.17% 5.29% 4.76% 5.14% 5.61%(b)
Ratio of expenses to average net assets* 0.83% 0.84% 0.95% 0.91% 0.86% 0.94% 1.21%(b)
Ratio of net investment income to average
net assets* 4.80% 4.94% 4.79% 4.96% 4.43% 4.75% 5.03%(b)
Portfolio turnover (a) 10.49% 7.45% 24.61% 77.69% 16.77% 26.67% 9.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) Fund commenced operation on July 2, 1991.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.91 $ 10.72 $ 10.68 $ 10.61 $ 11.13 $ 10.48 $ 10.29
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.54 0.54 0.55 0.53 0.50 0.52 0.20
Net realized and unrealized gains (losses)
from investments 0.20 0.19 0.03 0.07 (0.48) 0.64 0.21
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.74 0.73 0.58 0.60 0.02 1.16 0.41
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.54) (0.54) (0.54) (0.51) (0.50) (0.51) (0.22)
In excess of net investment income -- -- -- (0.02) (0.02) -- --
In excess of net realized gains -- -- -- -- (0.02) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.54) (0.54) (0.53) (0.54) (0.51) (0.22)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.11 $ 10.91 $ 10.72 $ 10.68 $ 10.61 $ 11.13 $ 10.48
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.87% 6.95% 5.44% 5.79% (0.05)% 11.40% 10.85%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $17,297 $16,114 $16,507 $12,006 $14,883 $13,092 $41
Ratio of expenses to average net assets 0.79% 0.79% 0.82% 0.82% 0.78% 0.77% 1.01%(b)
Ratio of net investment income to average net
assets 4.83% 4.96% 4.92% 5.01% 4.63% 4.85% 5.16%(b)
Ratio of expenses to average net assets* 1.18% 1.19% 1.30% 1.25% 1.21% 1.25% 1.40%(b)
Ratio of net investment income to average net
assets* 4.44% 4.56% 4.44% 4.58% 4.20% 4.37% 4.77%(b)
Portfolio turnover (a) 10.49% 7.45% 24.61% 77.69% 16.77% 26.67% 9.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) Class A Shares commenced offering on February
18, 1992.
24
<PAGE> 157
One Group(R) Ohio Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.98 $ 10.79 $10.75 $10.68 $ 11.31
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.48 0.43 0.17
Net realized and unrealized gains (losses) from
investments 0.20 0.19 0.03 0.07 (0.62)
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.67 0.66 0.51 0.50 (0.45)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.47) (0.47) (0.43) (0.17)
In excess of net investment income -- -- -- -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.47) (0.47) (0.43) (0.18)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 10.98 $10.79 $10.75 $ 10.68
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.20% 6.26% 4.79% 5.17% .(402)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $26,138 $14,316 $8,854 $3,209 $2,043
Ratio of expenses to average net assets 1.44% 1.44% 1.47% 1.48% 1.28%(c)
Ratio of net investment income to average net assets 4.19% 4.33% 4.27% 4.40% 4.23%(c)
Ratio of expenses to average net assets* 1.83% 1.84% 1.95% 1.91% 1.68%(c)
Ratio of net investment income to average net assets* 3.80% 3.93% 3.79% 3.97% 3.83%(c)
Portfolio turnover (d) 10.49% 7.45% 24.61% 77.69% 16.77%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
25
<PAGE> 158
One Group(R)
Kentucky Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income exempt
from Federal income tax and Kentucky
personal income tax, consistent with
the preservation of principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
issued by, or on behalf of, Kentucky
and its respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which, in the opinion of issuer's
counsel, is exempt from Kentucky
personal income tax ("Kentucky
Municipal Securities"), as well as
debt securities that, in the opinion
of issuer's counsel, produce
interest that is exempt from Federal
income tax ("Municipal Securities").
Generally, the Fund's average
weighted maturity will be between
five and twenty years, although the
Fund may invest in securities of any
maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in Municipal
Securities. Alternatively, the Fund
invests its assets so that at least
80% of its annual interest income is
exempt from Federal income tax. The
Fund invests at least 65% of its
total assets in Kentucky Municipal
Securities. Each of these investment
policies is fundamental. The Fund
may also invest up to 35% of its
total assets in bonds and notes of
states (other than Kentucky) as well
as territories and possessions of
the United States, including the
District of Columbia, and their
respective authorities, agencies,
instrumentalities, and political
subdivisions, the interest on which
is exempt from Federal income tax.
The securities in which the Fund
invests may have fixed rates of
return or floating or variable
rates. For a list of all securities
in which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in Kentucky
Municipal Securities, which may be
impacted by economic and political
developments in Kentucky. The Fund's
investments also include fixed
income investments. The value of
these securities will change in
response to interest rate changes
and other factors. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Kentucky Municipal
Securities and Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities and Kentucky Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 66 $ 81 $108 $175
Class B
(without fee
waivers) $ 68 $ 86 $116 $191
Class C $ 26 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 28 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 75 $ 96 $159
Class A
(without fee
waivers) $ 56 $ 79 $104 $175
Class B $ 16 $ 51 $ 88 $175
Class B
(without fee
waivers) $ 18 $ 56 $ 96 $191
Class C $ 16 $ 51 $ 88 $192
Class C
(without fee
waivers) $ 18 $ 56 $ 96 $208
Class I $ 7 $ 23 $ 40 $ 89
Class I
(without fee
waiver) $ 8 $ 25 $ 43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
26
<PAGE> 159
One Group(R) Kentucky Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate a shareholder would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20, FEBRUARY 1, MARCH 12,
YEAR ENDED JUNE 30, 1995 TO 1994 TO 1993 TO
--------------------------------- JUNE 30, JANUARY 19, JANUARY 31,
CLASS I 1998 1997 1996 1995(a) 1995(b) 1994(b)(c)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.50 0.50 0.20 0.41 0.36
Net realized and unrealized gains (losses)
from investments 0.20 0.16 0.12 0.43 (0.95) 0.43
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.71 0.66 0.62 0.63 (0.54) 0.79
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.50) (0.50) (0.20) (0.42) (0.34)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.50) (0.50) (0.20) (0.42) (0.34)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.40 $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 7.11% 6.74% 6.35% 6.56%(d) (5.17)%(d) 8.05%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $122,220 $116,830 $30,300 $32,520 $41,953 $64,663
Ratio of expenses to average net assets 0.60% 0.59% 0.68% 0.65%(e) 1.03%(e) 0.70%(e)
Ratio of net investment income to average
net assets 4.94% 5.12% 4.60% 4.70%(e) 4.27%(e) 4.19%(e)
Ratio of expenses to average net assets* 0.69% 0.72% 1.02% 0.97%(e) 1.05%(e) 0.91%(e)
Ratio of net investment income to average
net assets* 4.85% 4.99% 4.26% 4.38%(e) 4.25%(e) 3.98%(e)
Portfolio turnover (f) 5.81% 13.30% 16.78% 19.75% 10.00% 5.00%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from date reorganized as a fund of One Group. (b)
Prior to reorganizing as a fund of One Group, the Fund offered only one class
of shares. (c) Period from commencement of operations. (d) Not
annualized. (e) Annualized. (f) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1995 TO
---------------------------- JUNE 30,
CLASS A 1998 1997 1996 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.21 $10.05 $ 9.93 $ 9.49
- ----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.48 0.44 0.19
Net realized and unrealized gains from investments 0.20 0.16 0.12 0.44
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.64 0.56 0.63
- ----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.48) (0.44) (0.19)
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.48) (0.44) (0.19)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.41 $10.21 $10.05 $ 9.93
- ----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.86% 6.46% 5.70% 5.66%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $7,899 $5,554 $8,178 $8,818
Ratio of expenses to average net assets 0.85% 0.84% 0.93% 0.90%(c)
Ratio of net investment income to average net assets 4.69% 4.66% 4.35% 4.44%(c)
Ratio of expenses to average net assets* 1.04% 1.04% 1.37% 1.33%(c)
Ratio of net investment income to average net assets* 4.50% 4.46% 3.91% 4.01%(c)
Portfolio turnover (d) 5.81% 13.30% 16.78% 19.75%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from date reorganized as a fund of 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.
27
<PAGE> 160
28
One Group(R) Kentucky Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
MARCH 16, 1995
TO
YEAR ENDED JUNE 30, JUNE 30,
------------------------------------------
CLASS B 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%
</TABLE>
* 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.
<PAGE> 161
One Group(R)
Michigan Municipal Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified fund
that seeks current income exempt
from Federal income tax and Michigan
personal income tax, consistent with
the preservation of principal.
LOGO INVESTMENT STRATEGY
The Fund invests in debt securities
issued by or on behalf of Michigan
and its respective authorities,
political subdivisions, agencies and
instrumentalities, the interest on
which, in the opinion of issuer's
counsel, is exempt from Federal
income tax and Michigan personal
income tax ("Michigan Municipal
Securities"). The Fund may invest in
securities of any maturity.
LOGO PORTFOLIO SECURITIES
The Fund invests at least 80% of its
total assets in Michigan Municipal
Securities. This is a fundamental
policy. The Fund also may invest up
to 20% of its total assets in bonds
and notes of states (other than
Michigan) as well as of territories
and possessions of the United
States, including the District of
Columbia, and their respective
authorities, agencies,
instrumentalities, and political
subdivisions, the interest on which,
in the opinion of issuer's counsel,
is exempt from Federal income tax
("Municipal Securities"). The
securities in which the Fund invests
may have fixed rates of return or
floating or variable rates. For a
list of all securities in which the
Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in Michigan
Municipal Securities, which may be
impacted by economic and political
developments in Michigan. The Fund's
investments also include fixed
income investments. The value of
these securities will change in
response to interest rate changes
and other factors. Before you
invest, please read "More About the
Funds" and "Investment Risks."
LOGO TAX CONSIDERATIONS
Up to 100% of the Fund's assets may
be invested in Michigan Municipal
Securities and Municipal Securities
the interest on which may be subject
to Federal alternative minimum tax
for individuals. Shareholders who
are subject to the Federal
alternative minimum tax may have all
or a portion of their income from
the Fund subject to Federal income
tax. In addition, corporate
shareholders will be required to
take the interest on Municipal
Securities and Michigan Municipal
Securities into account in
determining their alternative
minimum taxable income.
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts and fixed income traders.
The team works together to establish
general duration and sector
strategies for the Fund. Each team
member makes recommendations about
securities in the Fund. The research
analysts and trading personnel
provide individual security and
sector recommendations, while the
portfolio managers select and
allocate individual securities in a
manner designed to meet the
investment objectives of the Fund.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.0 none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .40% .40% .40% .40%
12b-1 Fees (after fee waiver) (4) .25% .90% .90% none
Other Expenses (after
reimbursements) (5) .25% .25% .25% .25%
Total Fund Operating Expenses (after
fee waivers) (6) .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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without expense reimbursements, Other Expenses would be .26% for all
classes of shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.06% for Class A shares, 1.71% for
Class B shares, 1.71% for Class C shares and .71% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual return;
and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 72 $ 93 $151
Class A
(without fee
waivers) $ 55 $ 77 $101 $169
Class B $ 66 $ 79 $104 $167
Class B
(without fee
waivers) $ 67 $ 84 $113 $185
Class C $ 26 $ 49 $ 84 $185
Class C
(without fee
waivers) $ 27 $ 54 $ 93 $202
Class I $ 7 $ 21 $ 36 $ 81
Class I
(without fee
waiver) $ 7 $ 23 $ 40 $ 88
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 54 $ 72 $ 93 $151
Class A
(without fee
waivers) $ 55 $ 77 $101 $169
Class B $ 16 $ 49 $ 84 $167
Class B
(without fee
waivers) $ 17 $ 54 $ 93 $185
Class C $ 16 $ 49 $ 84 $185
Class C
(without fee
waivers) $ 17 $ 54 $ 93 $202
Class I $ 7 $ 21 $ 36 $ 81
Class I
(without fee
waiver) $ 7 $ 23 $ 40 $ 88
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF THE PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
29
<PAGE> 162
One Group(R) Michigan Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen, LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.51 0.49 0.48 0.50 0.44
Net realized and unrealized gains (losses) from
investments and futures 0.13 0.45 (0.14) 1.06 (1.06) 0.59
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.63 0.96 0.35 1.54 (0.56) 1.03
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.51) (0.47) (0.48) (0.50) (0.43)
From net realized gain (0.02) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.51) (0.47) (0.48) (0.50) (0.43)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 5.94% 9.42% 3.44% 16.49% (5.42)% 11.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $298,842 $61,768 $41,909 $32,419 $24,157 $15,772
Ratio of expenses to average net assets 0.66% 0.67% 0.77% 0.79% 0.53% 0.19%(b)
Ratio of net investment income to average net assets 4.52% 4.84% 4.68% 4.71% 5.01% 5.12%(b)
Ratio of expenses to average net assets* 0.67% 0.73% 0.85% 1.04% 1.05% 1.21%(b)
Portfolio turnover 23.33% 37.84% 24.49% 26.97% 25.93% 41.70%(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 from February 1, 1993 (commencement of operations) through
December 31, 1993. (b) Annualized. (c) Not Annualized.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.49 0.48 0.48 0.50 0.44
Net realized and unrealized gains (losses) from
investments and futures 0.13 0.44 (0.14) 1.06 (1.06) 0.59
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.60 0.93 0.34 1.54 (0.56) 1.03
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.48) (0.46) (0.48) (0.50) (0.43)
From net realized gain (0.02) -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.48) (0.46) (0.48) (0.50) (0.43)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 5.61% 9.15% 3.32% 16.49% (5.42)% 11.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $22,876 $18,687 $18,575 $21,034 $21,106 $26,342
Ratio of expenses to average net assets 0.91% 0.92% 0.88% 0.79% 0.53% 0.19%(b)
Ratio of net investment income to average net assets 4.27% 4.59% 4.57% 4.71% 5.01% 5.12%(b)
Ratio of expenses to average net assets* 0.92% 0.98% 0.96% 1.04% 1.05% 1.21%(b)
Portfolio turnover 23.33% 37.84% 24.49% 26.97% 25.93% 41.70%(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 February 1, 1993 (commencement of operations) through December 31,
1993. (b) Annualized. (c) Not Annualized.
30
<PAGE> 163
One Group(R) Michigan Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
CLASS B 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 23.33% 37.84% 24.49%(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.
31
<PAGE> 164
more about the funds
32
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments issued by the U.S. Treasury, U.S. government
agencies, mortgage related securities, municipalities and zero coupon
obligations as well as debt instruments issued by states and their respective
authorities, political subdivisions, agencies and instrumentalities.
PORTFOLIO QUALITY
- ----------------------------------------------------
The Funds only purchase securities that meet certain rating criteria:
- - Municipal Securities that are bonds must be rated as investment grade.
- - Arizona Municipal Securities, West Virginia Municipal Securities, Louisiana
Municipal Securities, Ohio Municipal Securities, Kentucky Municipal Securities
and Michigan Municipal Securities that are bonds must be rated as investment
grade.
- - Other securities such as taxable and tax-exempt commercial paper, notes, and
variable demand obligations must be rated in one of the two highest investment
grade categories.
- - The Louisiana Municipal Bond Fund may also invest in short-term tax-exempt
municipal securities rated at least MIG3 (VMIG3) by Moody's or SP-2 by S&P.
These securities may have speculative characteristics.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
- ----------------------------------------------------
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
- ----------------------------------------------------
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually, changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: Some of the Funds may invest in securities that are considered to
be "derivatives." Derivatives are securities or contracts that derive their
value from the performance of underlying assets or securities. These include:
- - options
- - futures contracts
- - options on futures contracts
- - mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed (Interest Only (IOs) and Principal Only (POs) securities.
- - structured instruments
- - swaps, caps and floors
- - new financial products
- - inverse floating rate instruments
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
NON-DIVERSIFIED FUNDS: All of the Funds (except the Intermediate Tax-Free Bond
Fund, the Municipal Income Fund, the Short-Term Municipal Bond Fund and the
Tax-Free Bond Fund) are "non-diversified" funds. This means that the Funds may
invest a more significant portion of their assets in the securities of a single
issuer than can a "diversified" fund. In addition, the Funds' investments are
concentrated geographically. These concentrations increase the risk of loss to
the Funds if an issuer fails to make interest or principal payments or if the
market value of a security declines.
MUNICIPAL SECURITIES: Because the Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Louisiana Municipal Bond Fund, the Ohio Municipal Bond
Fund, the Kentucky Municipal Bond Fund, and the Michigan Municipal
<PAGE> 165
33
Bond Fund are not diversified and because they concentrate in securities of
Arizona, West Virginia, Louisiana, Ohio, Kentucky and Michigan issuers,
respectively, certain factors may have a disproportionate negative effect on the
Funds' investments. These factors may include certain economic conditions,
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives. For instance, the Ohio economy
relies to a significant degree on manufacturing. As a result, economic activity
in Ohio tends to be cyclical, which may affect the market value of Ohio
Municipal Securities or the ability of issuers to make timely payments of
interest and principal. In addition, agriculture is an important segment of the
Ohio economy, and the state has instituted several programs to provide financial
assistance to farmers. Similarly, coal mining and related industries are an
important part of the West Virginia economy. Increased government regulation and
a reduced demand for coal has adversely affected that industry. While revenues
in recent years have been adequate, an aging population and little or no
population growth have put increasing financial pressure on state and local
governments.
The Louisiana economy, like that of West Virginia, is heavily dependent on a
single industry, in this case energy (oil and gas). Louisiana continues to
recover from the oil price declines of the mid-1980's, although its debt burden
is well above that of other states, while wealth and income indicators are below
the national average. Both West Virginia and Louisiana post unemployment rates
above the national average.
Arizona's population growth continues to outpace the national average. However,
this growth is expensive and Arizona's economic outlook depends on its ability
to match long-term revenues with expenditures. In addition, Arizona's continued
growth depends to some extent on its ability to manage its water resources.
As of June 30, 1998, the Kentucky unemployment rate was below the national
average, and the state showed a surplus in its General Fund for the prior fiscal
year. However, unlike the municipal securities of most states, nearly all
Kentucky Municipal Securities are not general obligations of the issuer; rather,
payment depends on revenues generated by the property financed by the security.
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 the financing of education
costs from property taxes to sales taxes.
For a more complete description of the risks of investing in state specific
securities, please see the Statement of Additional Information.
<PAGE> 166
how to do business with One Group Mutual Funds
34
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Years Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4:00 p.m.
Eastern time ("ET"), will be effective that day. On occasion, the NYSE will
close before 4:00 p.m. When that happens, purchases received after the NYSE
closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
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
refer to these entities as "Intermediaries."
- - If you intend to hold your shares six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before
4:00 p.m. ET. When that happens, NAV will be calculated as of the time the
NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANK ONE
CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of BANK ONE
CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
<PAGE> 167
35
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
5.All checks should be in U.S. dollars. Third party checks will not be accepted.
Redemptions from a Fund will not be permitted for ten (10) calendar days if
purchases are made by check or under the Systematic Investment Plan (see
below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "One Group" to State Street Bank and
Trust Company (see address above), authorize a bank transfer or initiate a
wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO 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, 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
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any Federal income tax.
- - Because the share price of the Class A shares may be higher than that of the
Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
<PAGE> 168
36
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. Occasionally,
The One Group Services Company, at its own expense, also will provide cash
incentives to select Shareholder Servicing Agents. Those Shareholder Servicing
Agents who may receive special incentives include Banc One Securities
Corporation, The Advisors Group, United Planners Financial Services of America,
Inc., The Legend Group, and Rosewood Retirement Advisory Services, LLC. 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.
CLASS A SHARES
If you buy Class A shares of any Fund described in this prospectus, other than
the Short-Term Municipal Bond Fund, this table shows the amount of sales charge
you pay and the commissions paid to Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
If you 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 AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.70%
$100,000-$249,999 2.50% 2.56% 2.18%
$250,000-$499,999 2.00% 2.04% 1.64%
$500,000-$999,999 1.50% 1.52% 1.20%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you 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 any Fund, other than the Short-Term Municipal
Bond Fund, 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>
<PAGE> 169
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:
<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 all
Funds except for the Short-Term Municipal Bond Fund. Shareholder Servicing
Agents receive a commission of 2.75% of the price purchase 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.
- - A sales charge is not imposed on increases in NAV above the initial purchase
price, nor is a sales charge assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
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 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 and .90% of the average daily net assets of
Class B and Class C 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.
<PAGE> 170
38
SALES CHARGE
REDUCTIONS
AND WAIVERS
- ----------------------------------------------------
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A, Class B
or Class C shares of a Fund (except a money market fund) that you (and your
spouse and minor children) already own of any One Group Fund (except a money
market fund) to the amount of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also may take advantage of this
option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more Funds over the next 13 months and pay the same
sales charge that you would have paid if all shares were purchased at once. A
percentage of your investment will be held in escrow until the full amount
covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and their
spouses and immediate family members) of:
- 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 One Group Fund and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANK ONE CORPORATION and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
custodial or similar capacity.
- Accounts as to which a bank or broker-dealer charges an asset allocation
fee, provided the bank or broker-dealer has an agreement with The One Group
Services Company.
- Accounts which participate in select affinity programs with BANK ONE
CORPORATION and its affiliates and subsidiaries.
- 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 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 acquisi-
<PAGE> 171
39
tions and exchange offers to which a Fund is a party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of account
that you have, is waiving its commissions.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
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 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 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.
<PAGE> 172
40
- - You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- - You will pay a sales charge if you own Class I shares of a Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
- - If you exchange Class B or Class C shares of a Fund, you will not pay a sales
charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable.
- - An exchange between Funds is considered a sale and generally results in a
capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, 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 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
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
<PAGE> 173
41
- - 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 Services 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, measured from the date the
redemption request is received.
3. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and 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. 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.
<PAGE> 174
shareholder information
42
Voting Rights
- ----------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally. BANK ONE CORPORATION (One First National Plaza,
Chicago, Illinois, 60670), through its affiliates, may be deemed for purposes of
the Investment Company Act of 1940 to control the Funds. This is because as of
December 1, 1998, BANK ONE CORPORATION or its affiliates possessed the power to
vote substantially all of the Class I shares of each Fund other than the
Tax-Free Bond Fund, the Short-Term Municipal Bond Fund, and the Michigan
Municipal Bond Fund.
On that same date, no shareholders beneficially owned more than 25% of Class A,
Class B or Class C shares of the Funds.
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends daily. Dividends are distributed on the
first business day of each month. Capital gains, if any, for all Funds are
distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no Federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
FEDERAL TAXATION OF DISTRIBUTIONS
EXEMPT-INTEREST DIVIDENDS. If, at the close of each quarter of its taxable
year, at least 50% of the value of a Fund's assets consists of obligations the
interest on which is excludable from gross income, the Fund may pay
"exempt-interest dividends" to you. Generally, exempt-interest dividends are
excludable from gross income. However:
1. If you receive Social Security or Railroad Retirement benefits, you may be
taxed on a portion of such benefits if you receive exempt-interest dividends
from the Funds.
2. Receipt of exempt-interest dividends may result in liability for Federal
alternative minimum tax and for foreign state and local taxes, both for
individual and corporate shareholders.
<PAGE> 175
43
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 alternative
minimum tax. Additionally, corporate shareholders will be required to take the
interest on [all] 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 in the previous year.
STATE AND LOCAL TAXATION OF DISTRIBUTIONS: Dividends that are derived from the
Funds' investments in U.S. government obligations may not be entitled to the
exemptions from state and local taxes that would be available if you purchased
U.S. government obligations directly.
The funds will notify you annually of the percentage of income and distributions
derived from U.S. government obligations. Unless otherwise discussed below,
investment income and capital gains dividends may be subject to state and local
taxes.
LOUISIANA TAXES: Distributions from the Louisiana Municipal Bond Fund, which
are derived from interest on tax-exempt obligations of the State of Louisiana or
its political subdivisions and certain obligations of the United States or its
territories, are exempt from Louisiana income tax.
ARIZONA TAXES: Exempt-interest dividends from the Arizona Municipal Bond Fund,
which are derived from interest on tax-exempt obligations of the State of
Arizona and its political subdivisions and certain obligations of the United
States or its territories are exempt from Arizona income tax. Other
distributions from the Fund, including those related to long-term and short-term
capital gains, will be subject to Arizona income tax. Arizona law does not
permit a deduction for interest paid or accrued on indebtedness incurred or
continued to purchase or carry obligations, the interest on which is exempt from
Arizona income tax.
WEST VIRGINIA TAXES: Distributions from the West Virginia Municipal Bond Fund
which are derived from interest or dividends on obligations or securities of a
West Virginia state or local municipal governmental body generally are exempt
from West Virginia income tax. In addition, you will not pay that tax on the
portion of your income from the Fund which represents interest or dividends
received on obligations or securities of the United States and some of its
authorities, commissions or instrumentalities.
KENTUCKY TAXES: Dividends received from the Kentucky Municipal Bond Fund which
are derived from interest on Kentucky Municipal Securities are exempt from the
Kentucky individual income tax. Dividends paid from interest earned on
securities that are merely guaranteed by the Federal government, repurchase
agreements collateralized by U.S. government obligations, or from interest
earned on obligations of other states are not exempt from Kentucky individual
income tax. Any distributions of net short-term and net long-term capital gain
earned by the Fund are includable in each shareholder's Kentucky adjusted gross
income as dividend income and long-term capital gain, respectively, and are both
taxed at ordinary income tax rates.
OHIO TAXES: Dividends received from the Ohio Municipal Bond Fund which are
derived from interest on Ohio Municipal Securities are exempt from the Ohio
personal income tax. In addition, gain from the sale or transfer of certain Ohio
<PAGE> 176
44
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 and excluded from the taxable
income base of the Michigan intangibles 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, intangibles 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 is based on the current law as well as
current policies of the various state Departments of Taxation, all of which may
change.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In September and March you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 177
organization and management of the funds
fund name
45
THE FUNDS
Each Fund is a series of One Group Mutual Funds, an open-end management
investment company. One Group currently offers 49 separate Funds. Ten of the
Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Four of the Funds described in this prospectus are
diversified, and six of the Funds described in this prospectus are
non-diversified. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees at the following rates:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
One Group(R) Intermediate Tax-Free Bond
Fund .39%
One Group(R) Municipal Income Fund .35%
One Group(R) Short-Term Municipal Bond
Fund .31%*
One Group(R) Tax-Free Bond Fund .40%*
One Group(R) Arizona Municipal Bond Fund .39%
One Group(R) West Virginia Municipal Bond
Fund .35%
One Group(R) Louisiana Municipal Bond
Fund .37%
One Group(R) Ohio Municipal Bond Fund .31%
One Group(R) Kentucky Municipal Bond Fund .36%
One Group(R) Michigan Municipal Bond Fund .39%*
</TABLE>
* The predecessor to these Funds had a December 31 year end. The advisory fees
shown are as of December 31, 1998.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory reporting and
compliance. For these services, The One Group Services Company receives a fee
based on the total assets of One Group. For the first $1.5 billion in One Group
assets, The One Group Services Company receives an annual fee of .20% of each
Fund's average daily net assets. The annual rate declines to .18% on assets up
to $2 billion, and to .16% when assets exceed $2 billion. The fee is calculated
daily and paid monthly. Some Funds are not included in the calculations. Banc
One Investment Advisors, the Sub-Administrator, provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528 or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending
<PAGE> 178
46
activities under an agreement with State Street Bank and Trust Company and Bank
One Trust Company, N.A. Bank One Trust Company, N.A. is paid a fee by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for all systems and interfaces. Neither One Group nor its shareholders will bear
any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 179
details about the funds' investment practices and policies
fund name
47
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
fund code
<S> <C> <C> <C>
One Group(R) Intermediate Tax-Free Bond Fund 1
One Group(R) Municipal Income Fund 2
One Group(R) Tax-Free Bond Fund 3
One Group(R) Short-Term Municipal Bond Fund 4
One Group(R) Arizona Municipal Bond Fund 5
One Group(R) West Virginia Municipal Bond Fund 6
One Group(R) Louisiana Municipal Bond Fund 7
One Group(R) Ohio Municipal Bond Fund 8
One Group(R) Kentucky Municipal Bond Fund 9
One Group(R) Michigan Municipal Bond Fund 10
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-10 Market
CUBES.
TREASURY RECEIPTS: TRs, TIGRS, and CATS. 1-10 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-10 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-10 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1-10 Liquidity
exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the 1-10 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-10 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of a Fund's 1-10 Credit
total assets. In return the Fund will receive cash, other Market
securities, and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-10 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1-10 Market
including One Group money market funds and shares of other
investment companies for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing
in funds for which it serves as investment advisor.
CALL AND PUT OPTIONS: A call option gives the buyer the 1-10 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell only covered call and secured put options
FUTURES AND RELATED OPTIONS: A contract providing for the 1-10 Management Market
future sale and purchase of a specified amount of a Credit
specified security, class of securities, or an index at a Liquidity
specified time in the future and at a specified price. Leverage
</TABLE>
<PAGE> 180
48
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-10 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-10 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
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 Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-10 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
DEMAND FEATURES: Securities that are subject to puts and 1-10 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells 1-10 Pre-payment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-10 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest.
NEW FINANCIAL PRODUCTS: New options and futures contracts 1-10 Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1-10 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 1-10 Credit
political subdivision to obtain funds for various public Political
purposes. Municipal securities include private activity Tax
bonds and industrial development bonds, as well as General Market
Obligation Notes, Anticipation Notes, Bond Tax Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal leases,
participations in pools of municipal securities, and
obligations of municipal housing authorities and single
family revenue bonds.
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class 1-10 Pre-payment
mortgage securities usually structured with two classes of Market
shares that receive different proportions of the interest Credit
and principal from a pool of mortgage backed obligations. Regulatory
These include IOs and POs.
ASSET-BACKED SECURITIES: Securities secured by company 1-10 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
ZERO-COUPON DEBT SECURITIES: Bonds and other debt that pay 1-10 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return
equals the differences between their issue price and their
maturity value.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged variable rate 1-10 Credit
debt instruments with interest rates that reset in the Market
opposite direction from the market rate of interest to which Leverage
the inverse floater is indexed
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 1-10 Market
assignments of municipal securities, including municipal Credit
leases Political
Liquidity
Tax
</TABLE>
<PAGE> 181
49
Investment Risks
- ----------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
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
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, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. Risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments. This
also includes the risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply with
certain
<PAGE> 182
50
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.
Investment Policies
- ----------------------------------------------------
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. In addition to the fundamental
policies mentioned earlier, the following fundamental policies apply to each
Fund as specified. The full text of the fundamental policies can be found in the
Statement of Additional Information.
INVESTMENT POLICIES FOR SPECIFIC FUNDS
The Intermediate Tax-Free Bond Fund, the Municipal Income Fund, the Tax-Free
Bond Fund, and the Short-Term Municipal Bond 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 agreement involving such securities.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include:
- Obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities and repurchase agreements involving such securities;
- Municipal Securities; and
- Ohio Municipal Securities, Kentucky Municipal Securities, Arizona Municipal
Securities, West Virginia Municipal Securities, Louisiana Municipal
Securities, and Michigan Municipal Securities or governmental guarantees of
such securities. With respect to the Arizona Municipal Bond Fund and the
West Virginia Municipal Bond Fund, private activity bonds that are backed
only by the assets and revenues of a non-governmental issuer are not Arizona
Municipal Securities or West Virginia Municipal Securities for purposes of
this restriction.
INVESTMENT POLICIES FOR ALL FUNDS
None of the Funds may make loans, except that a Fund may (i) purchase or hold
debt instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
Additional investment policies are set forth in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, each Fund may invest up to 100% of its assets
in money market instruments and may hold a portion of its assets in cash for
liquidity purposes.
The Arizona Municipal Bond Fund, the West Virginia Municipal Bond Fund, the
Louisiana Municipal Bond Fund, the Ohio Municipal Bond Fund and the Michigan
Municipal Bond Fund also may invest up to 20% of their total assets in
securities other than Arizona, West Virginia, Louisiana, Ohio and Michigan
Municipal Securities, respectively. The Kentucky Municipal Bond Fund may invest
up to 35% of its total assets in securities other than Kentucky Municipal
Securities.
<PAGE> 183
51
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Funds and may result in additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights, other than for the Tax-Free Bond Fund, the Short-Term
Municipal Bond Fund and the Michigan Municipal Bond Fund. The portfolio turnover
for those Funds is for the fiscal year ended December 31, 1998. To the extent
portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates.
<PAGE> 184
appendix
52
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH IBCA, INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
<PAGE> 185
53
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
AAA Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
AA These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF MUNICIPAL BOND RATINGS (Including Mortgage and Asset-Backed
Securities)
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity to
meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligations is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
Non-Investment Grade
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet their 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.
<PAGE> 186
54
MOODY'S
Investment Grade
AAA Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
AA High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
BAA These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
BA These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
CAA Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
CA Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 &
VMIG1
Short-term municipal securities rated MIG1 or VMIG1 are of the best quality.
They have strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG2 &
VMIG2
These Short-term municipal securities rated MIG2 or VMIG2 are of high quality.
Margins of protection are ample although not so large as in the
preceding group.
MIG3 &
VMIG3
Favorable quality. All security elements are accounted for, but the undeniable
strength of the preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for refinancing is
likely to be less well established.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
<PAGE> 187
55
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
AAA Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
AA High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
A Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 188
(This page intentionally left blank)
<PAGE> 189
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THE
FUNDS. THE CURRENT STATEMENT OF ADDITIONAL
INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE
WITHOUT CHARGE BY CALLING 1-800-480-4111 OR BY
WRITING TO THE ONE GROUP SERVICES COMPANY AT
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
THE SEC MAINTAINS A WEB SITE (www.sec.gov)
THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIALS INCORPORATED BY
REFERENCE AND OTHER INFORMATION REGARDING ONE
GROUP(R).
TOG-F-121
<PAGE> 190
ONE GROUP(R) MUTUAL FUNDS
-------------------
MONEY MARKET FUNDS
COMBINED PROSPECTUS
March 18, 1999
-------------------
One Group(R) Prime Money Market Fund
One Group(R) Municipal Money Market Fund
One Group(R) Ohio Municipal Money Market Fund
One Group(R) Treasury Securities Money Market Fund
One Group(R) Michigan-Municipal Money Market Fund
===============================================================================
This prospectus describes five money market mutual funds with a
variety of investment objectives, including current income, interest
income exempt from Federal Income Tax, and interest income exempt from
Federal Income Tax and Ohio and Michigan Personal Income Tax. The information
in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
Please remember that shares of the Funds: - Are not deposits or obligations
of, or guaranteed by BANK ONE CORPORATION or its affiliates; - Are not
insured or guaranteed by the Federal Deposit Insurance Corporation or by
any federal or state governmental agency; - Involve investment risk,
including the possible loss of the principal amount invested.
One Group Ohio Municipal Money Market Fund and One Group Michigan Municipal
Money Market Fund may invest a significant portion of their assets in the
securities of a single issuer. As a result, an investment in the Fund may
entail more risks than an investment in another type of money market fund.
There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on
a continuous basis.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy
or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE> 191
table of contents
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Prime Money Market Fund..................... 2
One Group(R) Municipal Money Market Fund................. 5
One Group(R) Ohio Municipal Money Market Fund............ 7
One Group(R) U.S. Treasury Securities Money Market
Fund................................................... 9
One Group(R) Michigan Municipal Money Market Fund........ 12
MORE ABOUT THE FUNDS........................................ 14
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 16
Purchasing Fund Shares................................... 16
Sales Charges............................................ 19
Sales Charge Reductions and Waivers...................... 20
Exchanging Fund Shares................................... 21
Redeeming Fund Shares.................................... 22
SHAREHOLDER INFORMATION..................................... 24
Voting Rights............................................ 24
Dividend Policies........................................ 24
Tax Treatment of the Funds............................... 24
Tax Treatment of Shareholders............................ 24
Shareholder Inquiries.................................... 26
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 27
The Funds................................................ 27
The Board of Trustees.................................... 27
The Advisor.............................................. 27
The Distributor.......................................... 27
The Administrator and Sub-Administrator.................. 27
The Transfer Agent, Custodian and Sub-Custodian.......... 27
Year 2000................................................ 27
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 29
Investment Practices..................................... 29
Investment Risks......................................... 31
Investment Policies...................................... 31
APPENDIX: DESCRIPTION OF RATINGS............................ 33
</TABLE>
<PAGE> 192
1
a brief preview of the funds
WHAT ARE THE GOALS OF ONE GROUP MONEY MARKET FUNDS?
The Funds are designed for a variety of investment objectives,
including current income, interest income exempt from Federal
Income Tax, and interest income exempt from Federal Income Tax
and Ohio and Michigan Personal Income Tax. Each Fund pursues a
different objective and involves different risks. All of the
Funds will use their best efforts to maintain a constant net
asset value of $1.00 per share, although there is no guarantee
that the Funds will be able to do so. Please read about each
Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a dollar-
weighted basis of 90 days or less, and will acquire only
"eligible securities" that present minimal credit risks and
have a maturity of 397 days or less. The Funds intend to
comply with Rule 2a-7 under the Investment Company Act of
1940.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in securities that are backed by "credit
enhancements" such as letters of credit. The value of
investments in the Funds could decrease if the credit quality
of the credit enhancement provider declines. The Prime Money
Market Fund invests in mortgage-related securities which have
significantly greater price and yield volatility than
traditional fixed income securities. In addition, the Prime
Money Market Fund invests in U.S. dollar denominated foreign
securities which may expose the Fund to risks that are
different from investments in U.S. Securities. The Ohio
Municipal Money Market Fund and the Michigan Municipal Money
Market Fund are non-diversified funds which expose investors
to special risks. An investment in the Funds is not a deposit
of BANK ONE CORPORATION or its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
Each Fund currently offers Class A, Class C, Class I and
Service Class shares. Class A and Class C shares are offered
to the general public. Class I shares are offered to
institutional investors, including affiliates of BANK ONE
CORPORATION and any bank, depository institution, insurance
company, pension plan or other organization authorized to act
in fiduciary, advisory, agency, custodial or similar
capacities. Class I shares are not available to Individual
Retirement Accounts ("IRA"). Service Class shares are offered
to entities purchasing such shares on behalf of investors
requiring additional administrative or accounting services
such as sweep processing.
The Prime Money Market Fund and the U.S. Treasury Securities
Money Market Fund also offer Class B shares. Class B shares
are offered to the general public. The section called "How To
Do Business With One Group Mutual Funds" will provide more
information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Class C Shares are not available
for purchase in all of the Funds. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are
distributed monthly. Any capital gains are distributed at
least annually. Distributions are paid in additional shares of
the same class unless you elect to take the payment in cash.
For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under
the headings "The Advisor" and "Shareholder Expenses."
<PAGE> 193
2
One Group(R)
Prime Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified money
market fund that seeks current
income with liquidity and stability
of principal.
LOGO PORTFOLIO SECURITIES
The Fund invests exclusively in high
quality money market instruments.
These instruments include U.S.
Treasury obligations, obligations
issued or guaranteed by U.S.
government agencies or
instrumentalities, mortgage-backed
securities, commercial paper, bank
obligations and deposit notes. The
Fund also may invest in commercial
paper issued by foreign issuers. The
Fund may invest up to 10% of its net
assets in illiquid investments such
as certain restricted securities and
private placements. The Fund also
may engage in securities lending.
For a list of all of the securities
in which the Fund may invest, please
read "Investment Policies."
LOGO RISK CONSIDERATIONS
The Fund invests in securities that
are backed by "credit enhancements"
such as letters of credit. The value
of your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. The Fund also
invests in U.S. dollar denominated
foreign investments which involve
risks that are different from
investments in U.S. companies. In
addition, the Fund invests in
mortgage-related securities which
have significantly greater price and
yield volatility than traditional
fixed income securities. Before you
invest, please read "More About the
Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER
TRANSACTION SERVICE
EXPENSES (1) CLASS A CLASS B CLASS C CLASS CLASS I
<S> <C> <C> <C> <C> <C>
Maximum Sales
Charge Imposed
on Purchases
(as a
percentage of
offering price) none none none none none
Maximum
Contingent
Deferred Sales
Charge (as a
percentage of
original
purchase price
or redemption
proceeds, as
applicable) none 5.00% 1.00% none none
Redemption Fees none none none none none
Exchange Fees none none none none none
ANNUAL OPERATING
EXPENSES (2)
(as a
percentage of
average daily
net assets)
Investment
Advisory
Fees (3) .32% .32% .32% .32% .32%
12b-1 Fees (after
fee waiver) (4) .25% 1.00% 1.00% .55% none
Other Expenses
(after
reimbursements) (5) .20% .20% .20% .20% .20%
Total Fund
Operating
Expenses (after
fee
waivers) (6) .77% 1.52% 1.52% 1.07% .52%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, a $10.00 sub-minimum account fee may be applicable and a $7.00
charge will be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Without the fee waiver, Investment Advisory fees would be .35% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B, Class C and Service Class
shareholders may pay more than the equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers. Without the voluntary waiver of fees, 12b-1 fees would
be .75% for Service Class shares.
(5) Without expense reimbursements, Other Expenses would be .22% for all
classes of shares.
(6) Without a voluntary reduction of Investment Advisory and 12b-1 fees and
reimbursement of Other Expenses, Total Operating Expenses would be .82% for
Class A shares, 1.57% for Class B shares, 1.57% for Class C shares, .57%
for Class I shares and 1.32% for Service Class shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum
sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 25 $ 43 $ 95
Class A
(without fee
waiver) $ 8 $ 26 $ 46 $101
Class B $ 65 $ 78 $103 $161
Class B
(without fee
waiver) $ 66 $ 80 $106 $167
Class C $ 25 $ 48 $ 83 $181
Class C
(without fee
waiver) $ 26 $ 50 $ 86 $187
Class I $ 5 $ 17 $ 29 $ 65
Class I
(without fee
waiver) $ 6 $ 18 $ 32 $ 71
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 25 $ 43 $ 95
Class A
(without fee
waiver) $ 8 $ 26 $ 46 $101
Class B $ 15 $ 48 $ 83 $161
Class B
(without fee
waiver) $ 16 $ 50 $ 86 $167
Class C $ 15 $ 48 $ 83 $181
Class C
(without fee
waiver) $ 16 $ 50 $ 86 $187
Class I $ 5 $ 17 $ 29 $ 65
Class I
(without fee
waiver) $ 6 $ 18 $ 32 $ 71
</TABLE>
Class B shares automatically convert to Class A shares after eight years.
Therefore, the "10 years" examples above
reflect this conversion.
Because of the nature of the shares, shareholders are not expected to remain in
Service Class shares for more than a very
limited period of time. However, a
shareholder investing in the Service Class
shares on a continual basis for a period of
one month would pay $1, three months would
pay $3, one year would pay $11. Without the
voluntary fee reduction, that shareholder
would pay $1 after one month, $3 after three
months, and $13 after one year.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
<PAGE> 194
3
One Group(R) Prime Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.053 0.051 0.054 0.052 0.031 0.030 0.045
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.053) (0.051) (0.054) (0.052) (0.031) (0.030) (0.045)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Total Return 5.39% 5.20% 5.49% 5.34% 3.19% 3.09% 4.64%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $2,616,698 $2,563,768 $2,186,562 $1,965,416 $1,600,876 $979,275 $946,504
Ratio of expenses to
average net assets 0.51% 0.48% 0.44% 0.41% 0.40% 0.44% 0.59%
Ratio of net investment
income to average net
assets 5.26% 5.08% 5.34% 5.27% 3.18% 3.05% 4.49%
Ratio of expenses to
average net assets* 0.58% 0.56% 0.55% 0.57% 0.59% 0.62% 0.76%
Ratio of net investment
income average net
assets* 5.19% 5.00% 5.23% 5.12% 2.99% 2.87% 4.32%
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------
CLASS I 1991 1990 1989
- --------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------
Investment Activities:
Net investment income 0.069 0.080 0.084
- --------------------------------------------------------------
Less Distributions:
Net investment income (0.069) (0.080) (0.084)
- --------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------
Total Return 7.12% 8.33% 8.69%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $760,726 $562,680 $350,280
Ratio of expenses to
average net assets 0.68% 0.64% 0.49%
Ratio of net investment
income to average net
assets 6.86% 8.02% 8.36%
Ratio of expenses to
average net assets* 0.83% 0.79% 0.64%
Ratio of net investment
income average net
assets* 6.71% 7.87% 8.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.050 0.048 0.051 0.050 0.027 0.030 0.013
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.050) (0.048) (0.051) (0.050) (0.027) (0.030) (0.013)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.13% 4.94% 5.22% 5.08% 2.93% 2.83% 3.51%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $605,291 $332,646 $315,374 $201,968 $74,759 $61,106 $ 511
Ratio of expenses to average net assets 0.76% 0.73% 0.69% 0.67% 0.65% 0.65% 0.79%(b)
Ratio of net investment income to average
net assets 5.01% 4.83% 5.09% 5.02% 2.92% 2.67% 3.40%(b)
Ratio of expenses to average net assets* 0.83% 0.91% 0.90% 0.92% 0.90% 0.99% 0.94%(b)
Ratio of net investment income to average
net assets* 4.94% 4.65% 4.88% 4.77% 2.67% 2.33% 3.25%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
<PAGE> 195
4
One Group(R) Prime Money Market Fund Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED 1996 TO
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $1.000
- --------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.043 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.
<PAGE> 196
5
One Group(R)
Municipal Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that
seeks as high a level of current
interest income exempt from Federal
income tax as is consistent with
capital preservation and stability
of principal.
LOGO PORTFOLIO SECURITIES
As a matter of fundamental policy,
the Fund will invest at least 80% of
its total assets in municipal
securities. These are securities
issued by or on behalf of the
states, territories and possessions
of the United States, including the
District of Columbia, and their
political subdivisions, agencies,
instrumentalities and authorities.
These municipal securities produce
interest that, in the opinion of
bond counsel for the issuer, is
exempt from Federal income tax.
However, the Fund may invest as much
as 100% of its assets in municipal
securities that produce income that
is subject to the Federal
alternative minimum tax. If you are
subject to the Federal alternative
minimum tax, please read the section
of this prospectus entitled "Tax
Treatment of Shareholders" before
you invest. The Fund also may invest
up to 20% of its total assets in
other types of securities, such as
taxable money market instruments,
including repurchase agreements. For
a list of all the securities in
which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in securities that
are backed by "credit enhancements"
such as letters of credit. The value
of your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. In addition,
the Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed income
securities. Before you invest,
please read "More Information about
the Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SERVICE
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS C CLASS CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none 1.00% none none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (2) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .27% .27% .27% .27%
12b-1 Fees (4) .25% 1.00% .55% none
Other Expenses (after
reimbursements) (5) .18% .18% .18% .18%
Total Fund Operating Expenses (after
fee waiver) (6) .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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Without a fee waiver, Investment Advisory Fees would be .35% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class C and Service Class
shareholders may pay more than the equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers. Without the voluntary waiver, 12b-1 fees would be
.75% for Service Class shares.
(5) Without expense reimbursements, Other Expenses would be .22% for all
classes of shares.
(6) Without a voluntary reduction of Investment Advisory and 12b-1 fees and
reimbursement of Other Expenses, Total Operating Expenses would be .82%
for Class A shares, 1.57% for Class C shares, 1.32% for Service Class
shares and .57% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 39 $ 87
Class A
(without fee
waiver) $ 8 $ 26 $ 46 $101
Class C $ 25 $ 46 $ 79 $174
Class C
(without fee
waiver) $ 26 $ 50 $ 86 $187
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waiver) $ 6 $ 18 $ 32 $ 71
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 39 $ 87
Class A
(without fee
waiver) $ 8 $ 26 $ 46 $101
Class C $ 15 $ 46 $ 79 $174
Class C
(without fee
waiver) $ 16 $ 50 $ 86 $187
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waiver) $ 6 $ 18 $ 32 $ 71
</TABLE>
Because of the nature of the shares, shareholders are not expected to remain
in Service Class shares for more than a
very limited period of time. However, a
shareholder investing in the Service
Class shares on a continual basis for a
period of one month would pay $1, three
months would pay $3, and one year would
pay $10. Without the voluntary fee
reduction, that shareholder would pay $1
after one month, $3 after three months,
and $13 after one year.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 197
6
One Group(R) Municipal Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.032 0.031 0.033 0.032 0.021 0.021 0.034
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.032) (0.031) (0.033) (0.032) (0.021) (0.021) (0.034)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 3.27% 3.19% 3.34% 3.28% 2.16% 2.15% 3.47%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $498,127 $467,420 $459,807 $437,743 $352,702 $175,277 $170,961
Ratio of expenses to average net assets 0.45% 0.43% 0.41% 0.41% 0.40% 0.46% 0.43%
Ratio of net investment income to average net
assets 3.22% 3.16% 3.29% 3.26% 2.13% 2.12% 3.41%
Ratio of expenses to average net assets* 0.56% 0.55% 0.59% 0.59% 0.60% 0.66% 0.80%
Ratio of net investment income to average net
assets* 3.11% 3.04% 3.11% 3.08% 1.93% 1.92% 3.04%
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
CLASS I 1991 1990 1989
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.050 0.057 0.057
- -----------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.050) (0.057) (0.057)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------
Total Return 5.17% 5.82% 5.90%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $166,200 $145,712 $49,966
Ratio of expenses to average net assets 0.32% 0.36% 0.39%
Ratio of net investment income to average net
assets 5.04% 5.66% 5.75%
Ratio of expenses to average net assets* 0.67% 0.76% 0.79%
Ratio of net investment income to average net
assets* 4.69% 5.26% 5.35%
</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 1998 1997 1996 1995 1994 1993 1992(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.029 0.030 0.030 0.021 0.019 0.009
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.030) (0.029) (0.030) (0.030) (0.021) (0.019) (0.009)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.01% 2.97% 3.08% 3.02% 1.96% 1.89% 2.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $104,809 $48,185 $50,720 $56,518 $41,595 $18,932 $122
Ratio of expenses to average net assets 0.70% 0.68% 0.66% 0.66% 0.65% 0.66% 0.84%(b)
Ratio of net investment income to average
net assets 2.97% 2.91% 3.04% 3.01% 1.92% 1.82% 2.44%(b)
Ratio of expenses to average net assets* 0.81% 0.90% 0.94% 0.94% 0.91% 1.01% 0.99%(b)
Ratio of net investment income to average
net assets* 2.86% 2.69% 2.76% 2.73% 1.66% 1.47% 2.29%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Class A shares commenced offering on February 18, 1992. (b) Annualized.
<PAGE> 198
7
One Group(R)
Ohio Municipal Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified money
market fund that seeks as high a
level of current interest income
exempt from Federal income tax and
Ohio personal income tax as is
consistent with capital preservation
and stability of principal.
LOGO PORTFOLIO SECURITIES
The Fund will invest at least 80% of
its total assets in Ohio municipal
securities. These are securities
issued by or on behalf of the State
of Ohio and its political
subdivisions, agencies,
instrumentalities and authorities.
Ohio municipal securities produce
interest that, in the opinion of
bond counsel for the issuer, is
exempt from both Federal income tax
and Ohio personal income tax. The
Fund also may invest up to 20% of
its total assets in non-Ohio
municipal securities, i.e.,
municipal securities issued by
states, territories and possessions
of the United States, including the
District of Columbia, other than
Ohio, as well as their political
subdivisions, agencies,
instrumentalities and authorities
that produce interest exempt from
Federal income tax. The Fund has the
ability, 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. Finally, the Fund also
may invest up to 20% of its total
assets in other types of securities,
such as taxable money market
instruments, including repurchase
agreements. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Because of the relatively small
number of issuers of Ohio municipal
securities, the Fund's performance
is affected to a greater extent by
the success of one or a few issuers
than is the performance of a
diversified fund. In addition, the
Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed income
securities. Finally, the Fund
invests in securities that are
backed by "credit enhancements" such
as letters of credit. The value of
your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. Before you
invest, please read "More About the
Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION SERVICE
EXPENSES (1) CLASS A CLASS C CLASS CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) none none none none
Maximum Contingent
Deferred Sales Charge
(as a percentage of
original purchase
price or redemption
proceeds, as
applicable) none 1.00% none none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING
EXPENSES (2) (as a
percentage of average
daily net assets)
Investment Advisory
Fees (after fee
waiver) (3) .27% .27% .27% .27%
12b-1 Fees (4) .25% 1.00% .55% none
Other Expenses (after
reimbursements) (5) .18% .18% .18% .18%
Total Fund Operating
Expenses (after fee
waivers) (6) .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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Without a fee waiver, Investment Advisory Fees would be .30% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class C and Service Class
shareholders may pay more than the equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers. Without the voluntary waiver, 12b-1 fees would be
.75% for Service Class shares.
(5) Without expense reimbursements, Other Expenses would be .25% for all
classes of shares.
(6) Without a voluntary reduction of Investment Advisory Fees or 12b-1 fee
and reimbursement of Other Expenses, Total Operating Expenses would be
.80% for Class A shares, 1.55% for Class C shares, .55% for Class I
shares, and 1.30% for Service Class shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 39 $ 87
Class A
(without fee
waivers) $ 8 $ 26 $ 44 $ 99
Class C $ 25 $ 46 $ 79 $174
Class C
(without fee
waivers) $ 26 $ 49 $ 84 $185
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waivers) $ 6 $ 18 $ 31 $ 69
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 39 $ 87
Class A
(without fee
waivers) $ 8 $ 26 $ 44 $ 99
Class C $ 15 $ 46 $ 79 $174
Class C
(without fee
waiver) $ 16 $ 49 $ 84 $185
Class I $ 5 $ 14 $ 25 $ 57
Class I
(without fee
waivers) $ 6 $ 18 $ 31 $ 69
</TABLE>
Because of the nature of the shares, shareholders are not expected to remain
in Service Class shares for more than a
very limited period of time. However, a
shareholder investing in the Service
Class shares on a continual basis for a
period of one month would pay $1, three
months would pay $2, and one year would
pay $10. Without the voluntary fee
reduction, that shareholder would pay $1
after one month, $3 after three months,
and $13 after one year.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 199
8
One Group(R) Ohio Municipal Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JUNE 9,
YEAR ENDED JUNE 30, 1993 TO
------------------------------------------------------------------------ JUNE 30,
CLASS I 1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.033 0.032 0.033 0.032 0.022 0.013
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.033) (0.032) (0.032) (0.032) (0.022) (0.013)
In excess of net investment income -- -- (0.001) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.033) (0.032) (0.033) (0.032) (0.022) (0.013)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.31% 3.22% 3.34% 3.20% 2.25% 2.14%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 77,224 $ 56,442 $ 55,915 $ 51,806 $ 55,375 $ 3,500
Ratio of expenses to average net
assets 0.40% 0.40% 0.41% 0.41% 0.34% 0.08%(b)
Ratio of net investment income to
average net assets 3.27% 3.17% 3.19% 3.13% 2.29% 2.07%(b)
Ratio of expenses to average net
assets* 0.53% 0.53% 0.71% 0.60% 0.57% 0.51%(b)
Ratio of net investment income to
average net assets* 3.14% 3.04% 2.89% 2.94% 2.06% 1.64%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Annualized.
<TABLE>
<CAPTION>
JANUARY 26,
YEAR ENDED JUNE 30, 1993 TO
------------------------------------------------------------------------ JUNE 30,
CLASS A 1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.029 0.030 0.029 0.021 0.009
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.030) (0.029) (0.029) (0.029) (0.021) (0.009)
In excess of net investment income -- -- (0.001) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.030) (0.029) (0.030) (0.029) (0.021) (0.009)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.06% 2.96% 3.08% 2.98% 2.09% 2.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 39,100 $ 30,479 $ 41,132 $ 35,790 $ 37,356 $ 25,125
Ratio of expenses to average net
assets 0.65% 0.65% 0.66% 0.63% 0.44% 0.26%(b)
Ratio of net investment income to
average net assets 2.98% 2.90% 2.94% 2.91% 2.05% 2.03%(b)
Ratio of expenses to average net
assets* 0.78% 0.88% 1.06% 0.95% 0.94% 0.92%(b)
Ratio of net investment income to
average net assets* 2.85% 2.67% 2.54% 2.59% 1.55% 1.37%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Annualized.
<PAGE> 200
9
One Group(R)
U.S. Treasury Securities Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified money
market fund that seeks current
income with liquidity and stability
of principal.
LOGO PORTFOLIO SECURITIES
The Fund will invest exclusively in
short-term U.S. Treasury obligations
including repurchase agreements
collateralized by such Treasury
obligations and when-issued
securities. The Fund also may engage
in securities lending. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SERVICE
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS CLASS I
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none 5.00% 1.00% none none
Redemption Fees none none none none none
Exchange Fees none none none none none
ANNUAL OPERATING EXPENSES (2)
(as a percentage of average daily
net assets)
Investment Advisory Fees (after fee
waiver) (3) .32% .32% .32% .32% .32%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% .55% none
Other Expenses .18% .18% .18% .18% .18%
Total Fund Operating Expenses (after
fee waivers) (5) .75% 1.50% 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, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Without a fee waiver, Investment Advisory fees would be .35% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B, Class C and Service Class
shareholders may pay more than the equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers. Without the voluntary waiver of fees, 12b-1 fees
would be .75% for Service Class shares.
(5) Without a voluntary reduction of Investment Advisory and 12b-1 fees,
Total Fund Operating Expenses would be .78% for Class A shares, 1.53%
for Class B shares, 1.53% for Class C shares, 1.28% for Service Class
shares and .53% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 24 $ 42 $ 93
Class A
(without fee
waiver) $ 8 $ 25 $ 43 $ 97
Class B $ 65 $ 77 $102 $159
Class B
(without fee
waiver) $ 66 $ 78 $103 $162
Class C $ 25 $ 47 $ 82 $179
Class C
(without fee
waiver) $ 26 $ 48 $ 83 $182
Class I $ 5 $ 16 $ 28 $ 63
Class I
(without fee
waiver) $ 5 $ 17 $ 30 $ 66
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 24 $ 42 $ 93
Class A
(without fee
waiver) $ 8 $ 25 $ 43 $ 97
Class B $ 15 $ 47 $ 82 $159
Class B
(without fee
waiver) $ 16 $ 48 $ 83 $162
Class C $ 15 $ 47 $ 82 $179
Class C
(without fee
waiver) $ 16 $ 48 $ 83 $182
Class I $ 5 $ 16 $ 28 $ 63
Class I
(without fee
waiver) $ 5 $ 17 $ 30 $ 66
</TABLE>
Because of the nature of the shares, shareholders are not expected to remain
in Service Class shares for more than a
very limited period of time. However, a
shareholder investing in the Service
Class shares on a continual basis for a
period of one month would pay $1, three
months would pay $3, and one year would
pay $11. Without the voluntary fee
reduction, that shareholder would pay $1
after one month, $3 after three months,
and $13 after one year.
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 201
10
One Group(R) U.S. Treasury Securities Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.050 0.052 0.050 0.030 0.029 0.043
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.051) (0.050)(a) (0.052) (0.050) (0.030) (0.029) (0.043)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 5.19% 5.07% 5.34% 5.07% 3.01% 2.89% 4.40%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period at (000) $3,025,608 $2,243,376 $1,844,590 $1,178,091 $ 969,326 $492,862 $410,146
Ratio of expenses to average net assets .52% 0.46% 0.42% 0.41% 0.40% 0.45% 0.55%
Ratio of net investment income to average
net assets 5.07% 4.95% 5.17% 4.96% 3.02% 2.85% 4.25%
Ratio of expenses to average net assets* 0.60% 0.57% 0.56% 0.59% 0.58% 0.67% 0.77%
Ratio of net investment income to average
net assets* 4.99% 4.84% 5.03% 4.78% 2.84% 2.63% 4.04%
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
CLASS I 1991 1990 1989
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.062 0.078 0.080
- ----------------------------------------------------------------------------
Less Distributions:
Net investment income (0.062) (0.078) (0.080)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------
Total Return 6.63% 8.10% 8.31%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period at (000) $339,987 $119,544 $92,711
Ratio of expenses to average net assets 0.60% 0.59% 0.51%
Ratio of net investment income to average
net assets 6.20% 7.82% 8.01%
Ratio of expenses to average net assets* 0.80% 0.79% 0.71%
Ratio of net investment income to average
net assets* 6.00% 7.62% 7.81%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Includes $.000002 short term capital gain.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.048 0.047 0.050 0.047 0.027 0.026 0.012
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.048) (0.047)(a) (0.050) (0.047) (0.027) (0.026) (0.012)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 4.92% 4.81% 5.08% 4.81% 2.76% 2.63% 3.38%(c)
RATIOS/SUPPLEMENTARY DATA
Net Assets at end of period (000) $861,350 $530,164 $110,864 $98,723 $53,423 $30,759 $ 6
Ratio of expenses to average net assets 0.77% 0.72% 0.67% 0.66% 0.63% 0.65% 0.59%(c)
Ratio of net investment income to average net
assets 4.82% 4.71% 4.92% 4.71% 2.81% 2.52% 2.51%(c)
Ratio of expenses to average net assets* 0.86% 0.93% 0.91% 0.94% 0.87% 1.02% 0.71%(c)
Ratio of net investment income to average net
assets* 4.73% 4.50% 4.68% 4.43% 2.57% 2.15% 2.39%(c)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a)
Includes $.000002 short term capital gain. (b) Class A Shares commenced
offering on February 18, 1992. (c) Annualized.
<PAGE> 202
11
One Group(R) U.S. Treasury Securities Money Market Fund Financial Highlights
<TABLE>
<CAPTION>
NOVEMBER 21, 1996
YEAR ENDED TO
CLASS B JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 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.
<PAGE> 203
12
One Group(R)
Michigan Municipal Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a non-diversified money
market fund that seeks as high a
level of current interest income
exempt from Federal income tax and
Michigan personal income tax as is
consistent with capital preservation
and stability of principal.
LOGO PORTFOLIO SECURITIES
The Fund will invest at least 80% of
its total assets in Michigan
municipal securities. These are
securities issued by or on behalf of
the State of Michigan and its
political subdivisions, agencies,
instrumentalities and authorities.
Michigan municipal securities
produce interest that, in the
opinion of bond counsel for the
issuer, is exempt from both Federal
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
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-Michigan
municipal securities that produce
income that is subject to the
Federal alternative minimum tax. If
you are subject to the Federal
alternative minimum tax, please read
the section of this prospectus
entitled "Tax Treatment of
Shareholders" before you invest.
Finally, the Fund also may invest up
to 20% of its total assets in other
types of securities, such as taxable
money market instruments, including
repurchase agreements. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Because of the relatively small
number of issuers of 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 diversified fund. In addition,
the Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed income
securities. Finally, the Fund
invests in securities that are
backed by "credit enhancements" such
as letters of credit. The value of
your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. Before you
invest, please read "More About the
Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION SERVICE
EXPENSES (1) CLASS A CLASS C CLASS CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) none none none none
Maximum Contingent
Deferred Sales Charge
(as a percentage of
original purchase
price or redemption
proceeds, as
applicable) none 1.00% none none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING
EXPENSES (as a
percentage of average
daily net assets)
Investment Advisory
Fees (after fee
waiver) (2) .27% .27% .27% .27%
12b-1 Fees (after fee
waiver) (3) .25% 1.00% .55% none
Other Expenses (after
reimbursements) (4) .22% .22% .22% .22%
Total Fund Operating
Expenses (after fee
waivers) (5) .74% 1.49% 1.04% .49%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Without a fee waiver, Investment Advisory Fees would be .35% for all
classes of shares.
(3) Due to 12b-1 fees, long-term Class A, Class C and Service Class
shareholders may pay more than the equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers. Without the voluntary waiver, 12b-1 Fees would be
.75% for Service Class shares.
(4) Without expense reimbursements, Other Expenses would be .24% for all
classes of shares.
(5) Without a voluntary reduction of Investment Advisory and 12b-1 fees and
reimbursement of Other Expenses, Total Operating Expenses would be .84%
for Class A shares, 1.59% for Class C shares, .59% for Class I shares,
and 1.34% for Service Class shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 24 $ 41 $ 92
Class A
(without fee
waivers) $ 9 $ 27 $ 47 $104
Class C $ 25 $ 47 $ 81 $178
Class C
(without fee
waivers) $ 26 $ 50 $ 87 $189
Class I $ 5 $ 16 $ 27 $ 62
Class I
(without fee
waivers) $ 6 $ 19 $ 33 $ 74
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 8 $ 24 $ 41 $ 92
Class A
(without fee
waivers) $ 9 $ 27 $ 47 $104
Class C $ 15 $ 47 $ 81 $178
Class C
(without fee
waiver) $ 16 $ 50 $ 87 $189
Class I $ 5 $ 16 $ 27 $ 62
Class I
(without fee
waivers) $ 6 $ 19 $ 33 $ 74
</TABLE>
Because of the nature of the shares, shareholders are not expected to remain
in Service Class shares for more than a
very limited period of time. However, a
shareholder investing in the Service
Class shares on a continual basis for a
period of one month would pay $1, three
months would pay $3, and one year would
pay $11. Without the voluntary fee
reduction, that shareholder would pay $1
after one month, $3 after three months,
and $14 after one year.
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 204
13
One Group(R) Michigan Municipal Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
CLASS I 1998 1997 1996(a)
- ------------------------------------------------------------------------------------------------
<S> <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* 0.53% 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 1998 1997 1996 1995 1994 1993 1992 1991(a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.0273 0.0296 0.0289 0.0329 0.0235 0.0181 0.237 0.0353
Net realized and unrealized gains
(losses) from investments and
futures -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.0273 0.0296 0.0289 0.0329 0.0235 0.0181 0.0237 0.0353
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.0273) (0.0296) (0.0289) (0.0329) (0.0235) (0.0181) (0.0237) (0.0353)
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.0273) (0.0296) (0.0289) (0.0329) (0.0235) (0.0181) (0.0237) (0.0353)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 2.76% 3.00% 2.93% 3.32% 2.38% 1.83% 2.40% 3.83%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $64,283 $29,202 $72,089 $122,057 $78,640 $52,557 $52,960 $38,885
Ratio of expenses to average net
assets 0.75% 0.75% 0.74% 0.69% 0.67% .65% .64% .65%(b)
Ratio of net investment income to
average net assets 2.72% 2.95% 2.87% 3.30% 2.35% 1.81% 2.37% 3.77%(b)
Ratio of expenses to average net
assets* 0.78% 0.79% 0.77% 0.76% 0.75% -- -- --
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (a) For
the period January 23, 1991 (commencement of operations) through December 31,
1991. (b) Annualized.
<PAGE> 205
more about the funds
14
Portfolio Quality
- ----------------------------------------------------
Securities will be purchased by the Funds only if Banc One Investment Advisors
determine that they present minimal credit risk under guidelines adopted by the
One Group Board of Trustees. In addition, unless a more specific rating is
specified, all investments of the Funds must be rated in one of the three
highest rating categories described in "Description of Ratings" in the Appendix.
If an investment is unrated, Banc One Investment Advisors must determine that it
is of comparable quality to a rated security. Banc One Investment Advisors will
look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the Board of Trustees in determining whether an investment
is illiquid.
Special Risk Considerations
- ----------------------------------------------------
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
NON-DIVERSIFIED FUNDS: The Ohio Municipal Money Market Fund and the Michigan
Municipal Money Market Fund are "non-diversified" funds. "Non-diversified" means
that each 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 effects 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 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 your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
DERIVATIVES: Some of the Funds invest in securities that are considered to be
derivatives. Derivatives are securities or contracts that derive their value
from the performance of underlying assets or securities. These securities may be
more volatile than other securities. These include mortgage-backed securities,
including collateralized mortgage obligations and Real Estate Mortgage
Investment Conduits (CMOs and REMICs) and asset-backed securities. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
FOREIGN SECURITIES: Investments in foreign securities involve risks different
from investments in U.S.
<PAGE> 206
15
securities. For more details, see "Investment Practices" and "Investment Risks."
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 government securities issued by participating nations will be in
euros, and outstanding government securities will be 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 a Fund.
<PAGE> 207
how to do business with One Group Mutual Funds
16
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and
Christmas.
- - Purchase requests will be effective on the day received by The One Group
Services Company and you will be eligible to receive dividends declared the
same day, if such purchase orders are received by The One Group Services
Company:
(i) before 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;
(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 Fund's custodian, State Street Bank and Trust Company, must
receive "federal funds" before 4:00 p.m., ET on such day. If State Street
Bank and Trust Company does not receive federal funds by the cut-off time,
the purchase order will not be effective until the next business day on which
federal funds are timely received by State Street Bank and Trust Company.
- - On occasion, the NYSE will close before 4 p.m. ET. When that happens, purchase
requests received after the NYSE closes will be effective the following
business day.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any organization
authorized to act in a fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- - Service Class shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional administrative or accounting services
such as sweep processing.
- - If you intend to hold your shares six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
One Group Fund Direct IRA. One Group offers a 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").
- - 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, Ohio Municipal Money Market Fund and the
Michigan 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 that happens, NAV will be
calculated as of the time the NYSE closes.
<PAGE> 208
17
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
is $250.
- Subsequent investments must be at least $100 ($25 for employees of BANK ONE
CORPORATION and its affiliates).
- The One Group Services Company may waive these minimums.
3.Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork later.
4.Send the completed application and a personal check (unless you choose to pay
by wire or bank transfer) payable to "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)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10) calendar
days if purchases are made by check or under the Systematic Investment Plan
(see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check payable to "One Group" to State Street Bank and Trust
Company (see address above), authorize a bank transfer or initiate a wire
transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO 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, 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
<PAGE> 209
18
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.
- - You must wait ten (10) calendar days before you can write a check against
shares purchased by a check.
TO SELECT THIS OPTION:
- - Select the "Check Writing" option on the Account Application Form.
- - Complete, sign and return a signature card and other forms sent to you by
State Street Bank and Trust Company. You will receive a supply of checks that
will be drawn on State Street Bank and Trust Company.
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of shares,
nor will you be subject to any tax.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
<PAGE> 210
19
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. Occasionally,
The One Group Services Company, at its own expense, also will provide cash
incentives to select Shareholder Servicing Agents. Those Shareholder Servicing
Agents who may receive special incentives include Banc One Securities
Corporation, The Advisors Group, United Planners Financial Services of America,
Inc., The Legend Group, and Rosewood Retirement Advisory Services, LLC.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C> <C>
0-1 1.00%
After first year none
</TABLE>
The One Group Services Company pays a commission of 1.00% of the original
purchase price to Shareholder Servicing Agents who sell Class C shares.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the net amount redeemed.
- - A sales charge is not assessed on shares acquired through reinvestment of
dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A Shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of 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
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 brokers and other Shareholder
Servicing Agents that sell shares of One Group.
<PAGE> 211
20
- - 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.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and to
Banc One Investment Advisors and its affiliates (or any sub-advisor) for
brokerage and other agency transactions.
Sales Charge Reductions and Waivers
- ----------------------------------------------------
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distributions from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distributions from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
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.
<PAGE> 212
21
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 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 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 may change the terms and conditions of your exchange privileges upon
60 days written notice. One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by:
(i) 12:00 noon ET, for the Municipal Money Market Fund, The Ohio Municipal
Money Market Fund and the Michigan Municipal Money Market Fund.
(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 into 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.
<PAGE> 213
22
- - 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:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services Company at
1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a domestic
stock exchange, or a member of the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
- - On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing Agent.
- - State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
- - Your redemption proceeds will ordinarily be paid the next business day 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:
(i) 12:00 noon ET, for the Municipal Money Market Fund, the Ohio Municipal
Money Market Fund and the Michigan Municipal Money Market Fund.
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and the U.S. Treasury
Securities Money Market Fund.
- - The Funds also will attempt to honor requests for payments in two business
days, if the redemption request is received after the times listed above.
WHAT WILL MY SHARES BE WORTH?
- - The NAV of shares of the Funds 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 B or Class C shares, you will receive the NAV calculated
after your redemption request is received, minus the amount of any applicable
CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or The One Group Services 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.
<PAGE> 214
23
- - 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. If you own Class B or Class C shares, you or your designated payee may
receive systematic payments provided the payments are limited to no more
than 10% of your account value annually, measured from the date the
redemption request is received.
2. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan. You also may elect to receive payments
of less than $100 each.
3. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash. The redemption price of shares is expected
to remain constant at $1.00 per share, although there is no assurance that
this will always be the case.
- - If you redeem shares for which you paid by check, and 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. 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.
<PAGE> 215
shareholder information
24
Voting Rights
- ----------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANK ONE CORPORATION (One First National Plaza, Chicago, Illinois 60670),
through its affiliates, may be deemed for purposes of The Investment Company Act
of 1940, to control the Prime Money Market and the Municipal Money Market Funds.
This is because as of December 1, 1998, BANK ONE CORPORATION or its affiliates
possessed the power to vote substantially all of the Class I shares of the
Funds. On the same date, no shareholders owned more than 25% of either Class A
or Class B shares of the Funds.
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B, Class C and Service Class
shares have higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares 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
(including, for this purpose, the excess, if any, of net short-term capital
gains over net long-term capital losses) and, if any, net capital gains (i.e.,
the excess, if any, of net long-term capital gains over net short-term capital
losses) to investors on at least an annual basis. Dividends you receive from a
Fund, whether reinvested or received in cash, will be taxable to you. Dividends
from a Fund's net investment income will be taxable as ordinary income and
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.
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.
<PAGE> 216
25
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
(including, for this purpose, the excess, if any, of net short-term capital
gains over net long-term capital losses) and, if any, net capital gains (i.e.,
the excess, if any, of net long-term capital gains over net short-term capital
losses) to investors on at least an annual basis. These Funds may pay
"exempt-interest dividends" if at least 50% of the value of Fund assets at the
end of each quarter of the Fund's taxable year consists of obligations the
interest on which is excludable from gross income. Exempt-interest dividends are
generally excludable from an investor's gross income for regular Federal income
tax purposes. However, the receipt of exempt-interest dividends may cause
recipients of Social Security or Railroad Retirement benefits to be taxed on a
portion of such benefits. In addition, the receipt of exempt-interest dividends
may result in liability for Federal alternative minimum tax and for 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, Michigan intangibles 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 will be subject to Michigan income tax, Michigan
intangibles 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 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.
<PAGE> 217
26
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In September and March you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 218
organization and management of the funds
fund name
27
THE FUNDS
Each Fund is a series of One Group Mutual Funds, an open-end management
investment company. One Group currently offers 49 separate Funds. Five of the
Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid investment advisory fees
at the following rate:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
One Group(R) Prime Money Market Fund .30%
One Group(R) Municipal Money Market Fund .25%
One Group(R) Ohio Municipal Money Market Fund .24%
One Group(R) U.S. Treasury Securities Money
Market Fund .28%
One Group(R) Michigan Municipal Money Market
Fund .27%*
</TABLE>
* The predecessor of this Fund had a December 31 year end. The advisory fees
shown are as of December 31, 1998.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of One Group. For the first $1.5 billion in One Group
assets, The One Group Services Company receives an annual fee of .20% of each
Fund's average daily net assets. The annual rate declines to .18% on assets up
to $2 billion, and to .16% when assets exceed $2 billion. The fee is calculated
daily and paid monthly. Some Funds are not included in the calculations. Banc
One Investment Advisors, the Sub-Administrator, provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND THE
SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528 or
your Shareholder Servicing Agent, if appropriate, handles shareholder record
keeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile
<PAGE> 219
28
machines, and should have no significant impact on the delivery of services to
One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for all systems and interfaces. Neither One Group nor its shareholders will bear
any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 220
details about the funds' investment practices and policies
fund name
29
Investment Practices
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
fund code
<S> <C> <C> <C>
One Group(R) Prime Money Market Fund 1
One Group(R) Municipal Money Market Fund 2
One Group(R) Ohio Municipal Money Market Fund 3
One Group(R) U.S. Treasury Securities Money Market
Fund 4
One Group(R) Michigan Municipal Money Market Fund 5
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-5 Market
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 by 1-3, 5 Market
agencies and instrumentalities of the U.S. Government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-3, 5 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1-3, 5 Liquidity
exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the 1-5 Credit
simultaneous commitment to return the security to the Market
seller at an agreed upon price on an agreed upon date. This Liquidity
is treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and 1, 4 Market
the simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated
as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-5 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-5 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other mutual 1-3, 5 Market
funds, including One Group money market funds and shares of
other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment
advisor.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes which 1-3, 5 Market
normally mature within a short period of time (e.g., 1 Credit
month) but which may be extended by the issuer for a Liquidity
maximum maturity of thirteen months.
BANKERS' ACCEPTANCES: Bills of exchange or time drafts 1-3, 5 Credit
drawn on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-3, 5 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
</TABLE>
<PAGE> 221
30
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
FOREIGN SECURITIES: Commercial paper of foreign issuers and 1-3, 5 Market
obligations of foreign banks, overseas branches of U.S. Political
banks and supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the 1-3, 5 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1-3, 5 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by 1-3, 5 Pre-payment
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 and 1-3, 5 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state or 2, 3, 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 General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
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 banks 1 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Contracts Liquidity
("BICs").
PARTICIPATION INTERESTS: Interests in municipal securities, 2, 3, 5 Credit
including municipal leases, from financial institutions Tax
such as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect
ownership that allows the Funds to treat the income from
the investment as exempt from Federal Income Tax.
ASSET-BACKED SECURITIES: Securities secured by company 1-3, 5 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
</TABLE>
<PAGE> 222
31
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.
Investment Policies
- ----------------------------------------------------
Each Fund's investment objective and the following investment policies
summarized below are fundamental. This means that they cannot be changed without
the consent of a majority of the outstanding shares of the Funds. In addition to
the fundamental policies mentioned earlier, the following fundamental policies
apply to each Fund as specified. The full text of the fundamental policies can
be found in the Statement of Additional Information.
<PAGE> 223
32
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00 per
share, although there is no guarantee that the Funds will be able to do so.
2. Will not make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Prime Money Market Fund:
1. Will not concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities, domestic bank
certificates of deposit or bankers' acceptances, and repurchase agreements
involving such securities, municipal securities or governmental guarantees of
municipal securities. In addition, private activity bonds backed only by the
revenues and assets of a non-governmental user will not be deemed to be
municipal securities.
The Prime Money Market Fund, the Municipal Money Market Fund and the U.S.
Treasury Securities Money Market Fund:
1. Will not purchase an issuer's securities if as a result more than 5% of a
Fund's total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of a
Fund's total assets. The Funds may invest the remaining 25% of their total
assets without 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.
TEMPORARY DEFENSIVE POSITION
Sometimes the Ohio Municipal Money Market Fund, the Michigan Municipal Money
Market Fund, and the Municipal Money Market Fund may temporarily invest up to
100% of their total assets in securities that are not municipal securities, such
as taxable money market instruments (including repurchase agreements) and may
hold uninvested cash pending investment. While the Funds are engaged in a
temporary defensive position, they will not be pursuing their investment
objectives. Therefore, the Funds will pursue a temporary defensive position only
when market conditions warrant.
<PAGE> 224
appendix
33
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH'S IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
Aaa The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
Aa The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
<PAGE> 225
34
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/
MUNICIPAL BOND RATINGS
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligations is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
Non-Investment Grade
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions will likely impair the capacity to
meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
Investment Grade
AAA Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
AA High quality by all standards. Margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be
greater, or there may be other elements present that make the
<PAGE> 226
35
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & Short-term municipal securities rated MIG1 or are of the best VMIG1
VMIG1 quality. They have strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG2 & These Short-term municipal securities are of high quality. Margins of
VMIG2 protection are ample although not so large as in the preceding group.
MIG3 & All security elements are accounted for, but the undeniable strength of
VMIG3 the preceding grades is lacking. Liquidity and cash flow protection may
be narrow and marketing access for refinancing is likely to be less
well established.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 227
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<PAGE> 228
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Distributor and Administrator
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 434215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION
ABOUT THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING ONE GROUP(R).
TOG-F-123
<PAGE> 229
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) INVESTOR FUNDS
COMBINED PROSPECTUS
MARCH 18, 1999
ONE GROUP(R) INVESTOR GROWTH FUND
ONE GROUP(R) INVESTOR GROWTH & INCOME FUND
ONE GROUP(R) INVESTOR BALANCED FUND
ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
This prospectus describes four mutual funds that invest in other mutual funds.
The Funds in this prospectus pursue a variety of investment objectives,
including growth, total return, capital appreciation, and current income.
The information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK ONE CORPORATION OR ITS AFFILIATES; - ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY FEDERAL OR
STATE GOVERNMENTAL AGENCY; - INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 230
table of contents
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Investor Growth Fund........................ 2
One Group(R) Investor Growth & Income Fund............... 5
One Group(R) Investor Balanced Fund...................... 8
One Group(R) Investor Conservative Growth Fund........... 11
MORE ABOUT THE FUNDS........................................ 14
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 16
Purchasing Fund Shares................................... 16
Sales Charges............................................ 18
Sales Charge Reductions and Waivers...................... 19
Exchanging Fund Shares................................... 21
Redeeming Fund Shares.................................... 22
SHAREHOLDER INFORMATION..................................... 24
Voting Rights............................................ 24
Dividend Policies........................................ 24
Tax Treatment of the Funds............................... 24
Tax Treatment of Shareholders............................ 24
Shareholder Inquiries.................................... 25
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 26
The Funds................................................ 26
The Board of Trustees.................................... 26
The Advisor.............................................. 26
The Distributor.......................................... 26
The Administrator and Sub-Administrator.................. 26
The Transfer Agent, Custodian and Sub-Custodian.......... 26
Year 2000................................................ 26
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 28
Investment Practices..................................... 28
Investment Policies...................................... 32
APPENDIX A: DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT
PRACTICES AND POLICIES.................................... 33
APPENDIX B: DESCRIPTION OF RATINGS.......................... 39
</TABLE>
<PAGE> 231
1
a brief preview of the funds
WHAT ARE THE GOALS OF ONE GROUP INVESTOR FUNDS?
The Funds are designed for a variety of investment objectives,
including total return, capital appreciation, current income,
and long-term capital growth. Each Fund pursues a different
objective and involves different risks. Please read about each
Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds normally will invest in a diversified group of One
Group mutual funds, which invest primarily in equity, fixed
income and money market instruments. Shares are available for
long-term investors, including tax-advantaged retirement
accounts; the Funds should not be used for short-term trading
purposes. Each 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. The underlying mutual funds in
which the Funds will invest have the following
characteristics:
<TABLE>
<S> <C> <C>
One Group(R) Prime Money Market Fund........................ Money Market
One Group(R) Short-Term Bond Fund........................... Fixed Income
One Group(R) Intermediate Bond Fund......................... Fixed Income
One Group(R) Income Bond Fund............................... Fixed Income
One Group(R) Bond Fund...................................... Fixed Income
One Group(R) Government Bond Fund........................... Fixed Income
One Group(R) Ultra Short-Term Bond Fund..................... Fixed Income
One Group(R) High Yield Bond Fund........................... Fixed Income
One Group(R) Mid Cap Value Fund............................. Equity
One Group(R) International Equity Index Fund................ Equity
One Group(R) Diversified International Fund................. Equity
One Group(R) Large Cap Growth Fund.......................... Equity
One Group(R) Large Cap Value Fund........................... Equity
One Group(R) Mid Cap Growth Fund............................ Equity
One Group(R) Diversified Mid Cap Fund....................... Equity
One Group(R) Diversified Equity Fund........................ Equity
One Group(R) Small Cap Growth Fund.......................... Equity
One Group(R) Small Cap Value Fund........................... Equity
One Group(R) Equity Income Fund............................. Equity
One Group(R) Equity Index Fund.............................. Equity
</TABLE>
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The investments of each Fund are concentrated in the
underlying funds, so each Fund's investment performance is
directly related to the performance of the underlying funds.
Each Fund's net asset value will fluctuate with changes in the
equity and bond markets and the value of the mutual funds in
which it invests. In addition, as a matter of fundamental
policy, each Fund must allocate its investments among the
underlying funds. As a result, the Funds do not have the same
flexibility to invest as a mutual fund without such
constraints. An investment in the Funds is not a deposit of
BANK ONE CORPORATION or its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A,
Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I shares are
offered to institutional investors, including affiliates of
BANK ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization
authorized to act in fiduciary, advisory, agency, custodial or
similar capacities. The section called "How To Do Business
With One Group Mutual Funds" will provide more information.
Class I shares are not available to Individual Retirement
Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared monthly and distributed on
the first business day of each month. Any capital gains are
distributed at least annually. Distributions are paid in
additional shares of the same class unless you elect to take
the payment in cash. For a more detailed discussion of
dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. Banc One Investment
Advisors also serves as the advisor to the underlying mutual
funds, for which it receives a fee.
<PAGE> 232
2
One Group(R)
Investor Growth Fund
LOGO INVESTMENT OBJECTIVE
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.
LOGO INVESTMENT STRATEGY
The Fund invests 80% to 100% of its
total assets in twelve One Group
mutual funds of which invest
primarily in equity securities, up
to 20% of its total assets in seven
One Group mutual funds that invest
primarily in fixed income
securities, and up to 10% of its
total assets in one One Group money
market fund. The Fund also may hold
cash and cash equivalents.
LOGO PORTFOLIO SECURITIES
The Fund will invest in the
underlying mutual funds within the
following range:
<TABLE>
<S> <C>
One Group(R) Prime Money Market Fund 0-10%
One Group(R) Short-Term Bond Fund 0-20%
One Group(R) Intermediate Bond Fund 0-20%
One Group(R) Income Bond Fund 0-20%
One Group(R) Bond Fund 0-20%
One Group(R) High Yield Bond Fund 0-20%
One Group(R) Government Bond Fund 0-20%
One Group(R) Ultra Short-Term Bond Fund 0-20%
One Group(R) Mid Cap Value Fund 0-40%
One Group(R) International Equity Index Fund 0-40%
One Group(R) Diversified International Fund 0-40%
One Group(R) Large Cap Growth Fund 0-48%
One Group(R) Large Cap Value Fund 0-55%
One Group(R) Mid Cap Growth Fund 0-40%
One Group(R) Diversified Mid Cap Fund 0-40%
One Group(R) Diversified Equity Fund 0-50%
One Group(R) Small Cap Growth Fund 0-40%
One Group(R) Small Cap Value Fund 0-40%
One Group(R) Equity Income Fund 0-50%
One Group(R) Equity Index Fund 0-50%
</TABLE>
LOGO RISK CONSIDERATIONS
The Fund's investments are
concentrated in other mutual funds,
so the Fund's investment performance
is directly related to the
performance of those mutual funds.
In addition, as a matter of
fundamental policy, the Fund must
allocate its investments primarily
among the mutual funds. As a result,
the Fund's investment flexibility is
limited. The Fund may invest in a
mutual fund which invests in medium
or lower grade bonds, which can be
volatile. Medium and lower grade
bonds are speculative. See "Special
Risk Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Sales Charge Imposed on
Purchases
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets) (3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Fund Operating Expenses (after
fee waivers) (5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart
provides the expense ratio for each
underlying fund in which the Fund invests
(based on the current fund prospectus).
Some of these expense ratios may include
a voluntary reduction of investment
advisory fees.
<TABLE>
<CAPTION>
NAME OF EXPENSE NAME OF EXPENSE
UNDERLYING FUND RATIO UNDERLYING FUND RATIO
<S> <C> <C> <C>
One Group(R) Prime Money One Group(R) Diversified
Market Fund .52% International Fund 1.02%
One Group(R) Short-Term Bond One Group(R) Large Cap
Fund .53% Growth Fund .92%
One Group(R) Intermediate One Group(R) Large Cap
Bond Fund .58% Value Fund 1.00%
One Group(R) Income Bond One Group(R) Mid Cap
Fund .62% Growth Fund 1.00%
One Group(R) Bond Fund .60% One Group(R) Diversified
Mid Cap Fund .86%
One Group(R) High Yield Bond One Group(R) Divesified
Fund .87% Equity Fund .96%
One Group(R) Government Bond One Group(R) Small Cap
Fund .69% Growth Fund 1.05%
One Group(R) Ultra One Group(R) Small Cap
Short-Term Bond Fund .55% Value Fund .91%
One Group(R) Mid Cap Value One Group(R) Equity
Fund .94% Income Fund .80%
One Group(R) International One Group(R) Equity
Equity Index Fund .95% Index Fund .36%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average
weighted expense ratio for Class A shares
is 1.28%, for Class B shares is 2.03%,
for Class C shares is 2.03%, and for
Class I shares is 1.03%. The following
examples were calculated using the
combined total operating expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 91 $119 $199
Class A (without
fee waiver) $ 67 $ 96 $128 $218
Class B $ 71 $ 94 $129 $217
Class B (without
fee waiver) $ 71 $ 96 $133 $228
Class C $ 31 $ 64 $109 $236
Class C (without
fee waiver) $ 31 $ 66 $113 $244
Class I $ 11 $ 33 $ 57 $126
Class I (without
fee waiver) $ 11 $ 35 $ 61 $135
</TABLE>
Assuming no redemption the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 91 $119 $199
Class A (without
fee waiver) $ 67 $ 96 $128 $218
Class B $ 21 $ 64 $109 $217
Class B (without
fee waiver) $ 21 $ 66 $113 $228
Class C $ 21 $ 64 $109 $236
Class C (without
fee waiver) $ 21 $ 66 $113 $244
Class I $ 11 $ 33 $ 57 $126
Class I (without
fee waiver) $ 11 $ 35 $ 61 $135
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 years" examples
above reflect this conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 233
3
One Group(R) Investor Growth Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25 $10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.12 0.09
Net realized and unrealized gains (losses) from investments 2.49 1.25
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 2.61 1.34
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.12) (0.09)
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.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.21 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.07
Net realized and unrealized gains (losses) from investments 2.47 1.21
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 2.57 1.28
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.10) (0.07)
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.
<PAGE> 234
4
One Group(R) Investor Growth Fund Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.02 0.04
Net realized and unrealized gains (losses) from investments 2.48 1.34
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 2.50 1.38
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.04)
Net realized gains (0.35) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.04)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.47 $ 11.34
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.52% 13.88%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $70,515 $ 7,651
Ratio of expenses to average net assets 1.20% 1.20%(c)
Ratio of net investment income to average net assets 0.04% 0.97%(c)
Ratio of expenses to average net assets* 1.35% 2.18%(c)
Ratio of net investment income to average net assets* (0.11)% (0.01)%(c)
Portfolio turnover (d) 4.05% 18.49%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED
CLASS C June 30, 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.
<PAGE> 235
5
One Group(R)
Investor Growth & Income Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks long-term capital
appreciation and growth of income by
investing primarily in a diversified
group of One Group mutual funds
which invest primarily in equity
securities.
LOGO INVESTMENT STRATEGY
The Fund invests 60% to 80% of its
total assets in twelve One Group
mutual funds of which invest
primarily in equity securities, 20%
to 40% of its total assets in seven
One Group mutual funds that invest
primarily in fixed income
securities, and up to 10% of its
total assets in one One Group money
market fund. The Fund also may hold
cash and cash equivalents.
LOGO PORTFOLIO SECURITIES
The Fund will invest in the
underlying mutual funds within the
following ranges:
<TABLE>
<S> <C>
One Group(R) Prime Money Market Fund 0-10%
One Group(R) Short-Term Bond Fund 0-30%
One Group(R) Intermediate Bond Fund 0-30%
One Group(R) Income Bond Fund 0-30%
One Group(R) Bond Fund 0-30%
One Group(R) High Yield Bond Fund 0-30%
One Group(R) Government Bond Fund 0-30%
One Group(R) Ultra Short-Term Bond Fund 0-30%
One Group(R) Mid Cap Value Fund 0-40%
One Group(R) International Equity Index Fund 0-40%
One Group(R) Diversified International Fund 0-40%
One Group(R) Large Cap Growth Fund 0-50%
One Group(R) Large Cap Value Fund 0-60%
One Group(R) Mid Cap Growth Fund 0-40%
One Group(R) Diversified Mid Cap Fund 0-40%
One Group(R) Diversified Equity Fund 0-60%
One Group(R) Small Cap Growth Fund 0-40%
One Group(R) Small Cap Value Fund 0-40%
One Group(R) Equity Income Fund 0-60%
One Group(R) Equity Index Fund 0-60%
</TABLE>
LOGO RISK CONSIDERATIONS
The Fund's investments are
concentrated in other mutual funds,
so the Fund's investment performance
is directly related to the
performance of those mutual funds.
In addition, as a matter of
fundamental policy, the Fund must
allocate its investments primarily
among the mutual funds. As a result,
the Fund's investment flexibility is
limited. The Fund may invest in a
mutual fund which invests in medium
or lower grade bonds, which can be
volatile. Medium and lower grade
bonds are speculative. See "Special
Risk Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets) (3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee
waivers) (5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart
provides the expense ratio for each
underlying fund (based on the current
fund prospectus). Some of these expense
ratios may include a voluntary reduction
of investment advisory fees.
<TABLE>
<CAPTION>
NAME OF EXPENSE NAME OF EXPENSE
UNDERLYING FUND RATIO UNDERLYING FUND RATIO
<S> <C> <C> <C>
One Group(R) Prime Money One Group(R) Diversified
Market Fund .52% International Fund 1.02%
One Group(R) Short-Term Bond One Group(R) Large Cap
Fund .53% Growth Fund .92%
One Group(R) Intermediate One Group(R) Large Cap
Bond Fund .58% Value Fund 1.00%
One Group(R) Income Bond One Group(R) Mid Cap
Fund .62% Growth Fund 1.00%
One Group(R) Bond Fund .60% One Group(R) Diversified
Mid Cap Fund .86%
One Group(R) High Yield Bond One Group(R) Diversified
Fund .87% Equity Fund .96%
One Group(R) Government Bond One Group(R) Small Cap
Fund .69% Growth Fund 1.05%
One Group(R) Ultra One Group(R) Small Cap
Short-Term Bond Fund .55% Value Fund .91%
One Group(R) Mid Cap Value One Group(R) Equity
Fund .94% Income Fund .80%
One Group(R) International One Group(R) Equity
Equity Index Fund .95% Index Fund .36%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average
weighted expense ratios for Class A
shares is 1.26%, for Class B shares is
2.01%, for Class C shares is 2.01%, and
for Class I shares is 1.01%. The
following examples were calculated using
combined total operating expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $197
Class A (without
fee waiver) $ 66 $ 96 $128 $217
Class B $ 70 $ 93 $128 $214
Class B (without
fee waiver) $ 71 $ 96 $133 $227
Class C $ 30 $ 63 $108 $234
Class C (without
fee waiver) $ 31 $ 66 $113 $243
Class I $ 10 $ 32 $ 56 $124
Class I (without
fee waiver) $ 11 $ 35 $ 61 $134
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 65 $ 90 $118 $197
Class A (without
fee waiver) $ 66 $ 96 $128 $217
Class B $ 20 $ 63 $108 $214
Class B (without
fee waiver) $ 21 $ 66 $113 $227
Class C $ 20 $ 63 $108 $234
Class C (without
fee waiver) $ 21 $ 66 $113 $243
Class I $ 10 $ 32 $ 56 $124
Class I (without
fee waiver) $ 11 $ 35 $ 61 $134
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 Years" examples
above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 236
6
One Group(R) Investor Growth & Income Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.25 0.15
Net realized and unrealized gains from investments 1.92 0.93
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 2.17 1.08
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.25) (0.15)
Net realized gain (0.28) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.15)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.57 $ 10.93
- ----------------------------------------------------------------------------------------------------
Total Return 20.34% 10.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $98,060 $43,660
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 2.17% 2.78%(c)
Ratio of expenses to average net assets* 0.34% 0.66%(c)
Ratio of net investment income to average net assets* 2.03% 2.32%(c)
Portfolio turnover (d) 11.38% 18.07%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.02 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.22 0.12
Net realized and unrealized gains from investments 1.95 1.02
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 2.17 1.14
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.22) (0.12)
Net realized gain (0.28) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.12)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.69 $ 11.02
- ----------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.18% 11.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $39,874 $ 4,262
Ratio of expenses to average net assets 0.45% 0.46%(c)
Ratio of net investment income to average net assets 1.91% 2.67%(c)
Ratio of expenses to average net assets* 0.67% 1.26%(c)
Ratio of net investment income to average net assets* 1.69% 1.87%(c)
Portfolio turnover (d) 11.38% 18.07%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<PAGE> 237
7
One Group(R) Investor Growth & Income Fund Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.00 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14 0.09
Net realized and unrealized gains from investments 1.92 1.00
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 2.06 1.09
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.14) (0.09)
Net realized gain (0.28) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.09)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.64 $ 11.00
- ----------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.13% 11.02%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $85,468 $ 8,896
Ratio of expenses to average net assets 1.20% 1.21%(c)
Ratio of net investment income to average net assets 1.15% 1.94%(c)
Ratio of expenses to average net assets* 1.32% 1.89%(c)
Ratio of net investment income to average net assets* 1.03% 1.26%(c)
Portfolio turnover (d) 11.38% 18.07%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED
CLASS C June 30, 1998(a)
- ------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.93
- ------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14
Net realized and unrealized gains (losses) from
investments 1.90
- ------------------------------------------------------------------------------
Total from Investment Activities 2.04
- ------------------------------------------------------------------------------
Distributions:
Net investment income (0.15)
Net realized gains (0.28)
- ------------------------------------------------------------------------------
Total Distributions (0.43)
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.54
- ------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.08%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $6,429
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 1.14%
Ratio of expenses to average net assets* 1.31%
Ratio of net investment income to average net assets* 1.03%
Portfolio turnover (b) 11.38%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 238
8
One Group(R)
Investor Balanced Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high total return
consistent with the preservation of
capital by investing primarily in a
diversified group of One Group
mutual funds which invest primarily
in equity and fixed income
securities.
LOGO INVESTMENT STRATEGY
The Fund invests 40% to 60% of its
total assets in twelve One Group
mutual funds which invest primarily
in equity securities, 40% to 60% of
its total assets in seven One Group
mutual funds which invest primarily
in fixed income securities, and up
to 10% of its total assets in one
One Group money market fund. The
Fund also may hold cash and cash
equivalents.
LOGO PORTFOLIO SECURITIES
The Fund will invest in the
underlying mutual funds within the
following range:
<TABLE>
<S> <C>
One Group(R) Prime Money Market Fund 0-10%
One Group(R) Short-Term Bond Fund 0-50%
One Group(R) Intermediate Bond Fund 0-50%
One Group(R) Income Bond Fund 0-50%
One Group(R) Bond Fund 0-50%
One Group(R) High Yield Bond Fund 0-30%
One Group(R) Government Bond Fund 0-50%
One Group(R) Ultra Short-Term Bond Fund 0-50%
One Group(R) Mid Cap Value Fund 0-30%
One Group(R) International Equity Index Fund 0-30%
One Group(R) Diversified International Fund 0-30%
One Group(R) Large Cap Growth Fund 0-40%
One Group(R) Large Cap Value Fund 0-50%
One Group(R) Mid Cap Growth Fund 0-30%
One Group(R) Diversified Mid Cap Fund 0-30%
One Group(R) Diversified Equity Fund 0-40%
One Group(R) Small Cap Growth Fund 0-30%
One Group(R) Small Cap Value Fund 0-30%
One Group(R) Equity Income Fund 0-40%
One Group(R) Equity Index Fund 0-40%
</TABLE>
LOGO RISK CONSIDERATIONS
The Fund's investments are
concentrated in other mutual funds,
so the Fund's investment performance
is directly related to the
performance of those mutual funds.
In addition, as a matter of
fundamental policy, the Fund must
allocate its investments primarily
among the mutual funds. As a result,
the Fund's investment flexibility is
limited. The Fund may invest in a
mutual fund which invests in medium
or lower grade bonds, which can be
volatile. See "Special Risk
Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets) (3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee
waivers) (5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for each
underlying fund in which the Fund invests (based on the current fund
prospectus). Some of these expense ratios may include a voluntary reduction of
investment advisory fees.
<TABLE>
<CAPTION>
NAME OF EXPENSE NAME OF EXPENSE
UNDERLYING FUND RATIO UNDERLYING FUND RATIO
<S> <C> <C> <C>
One Group(R) Prime Money One Group(R) Diversified
Market Fund .52% International Fund 1.02%
One Group(R) Short-Term Bond
Fund .53% One Group(R) Large Cap Growth Fund .92%
One Group(R) Intermediate
Bond Fund .58% One Group(R) Large Cap Value Fund 1.00%
One Group(R) Income Bond
Fund .62% One Group(R) Mid Cap Growth Fund 1.00%
One Group(R) Bond Fund .60% One Group(R) Diversified Mid Cap
Fund .86%
One Group(R) High Yield Bond One Group(R) Diversified Equity
Fund .87% Fund .96%
One Group(R) Government Bond One Group(R) Small Cap Growth Fund 1.05%
Fund .69%
One Group(R) Ultra One Group(R) Small Cap Value Fund .91%
Short-Term Bond Fund .55%
One Group(R) Mid Cap Value One Group(R) Equity Income Fund .80%
Fund .94%
One Group(R) International One Group(R) Equity Index Fund .36%
Equity Index Fund .95%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.22%, for Class B shares is 1.97%, for Class C shares is 1.97%, and
for Class I shares is .97%. The following examples were calculated using the
combined total operating expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $116 $192
Class A (without
fee waiver) $ 66 $ 95 $127 $215
Class B $ 70 $ 92 $126 $210
Class B (without
fee waiver) $ 71 $ 95 $132 $224
Class C $ 30 $ 62 $106 $230
Class C (without
fee waiver) $ 31 $ 65 $112 $241
Class I $ 10 $ 31 $ 54 $119
Class I (without
fee waiver) $ 11 $ 34 $ 60 $132
</TABLE>
Assuming no redemption at the end of the time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 89 $116 $192
Class A (without
fee waiver) $ 66 $ 95 $127 $215
Class B $ 20 $ 62 $106 $210
Class B (without
fee waiver) $ 21 $ 65 $112 $224
Class C $ 20 $ 62 $106 $230
Class C (without
fee waiver) $ 21 $ 65 $112 $241
Class I $ 10 $ 31 $ 54 $119
Class I (without
fee waiver) $ 11 $ 34 $ 60 $132
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 Years" examples above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 239
9
One Group(R) Investor Balanced Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.63 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.21
Net realized and unrealized gains from investments 1.39 0.63
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 1.76 0.84
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.21)
Net realized gains (0.22) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.21)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.81 $ 10.63
- ------------------------------------------------------------------------------------------------
Total Return 17.02% 8.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $93,557 $72,155
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 3.31% 3.84%(c)
Ratio of expenses to average net assets* 0.32% 0.56%(c)
Ratio of net investment income to average net assets* 3.19% 3.48%(c)
Portfolio turnover (d) 9.71% 12.20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.66 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.34 0.17
Net realized and unrealized gains from investments 1.39 0.66
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 1.73 0.83
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.34) (0.17)
Net realized gains (0.22) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.17)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 10.66
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.62% 8.41%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $32,605 $2,176
Ratio of expenses to average net assets 0.45% 0.47%(c)
Ratio of net investment income to average net assets 3.01% 3.78%(c)
Ratio of expenses to average net assets* 0.66% 1.12%(c)
Ratio of net investment income to average net assets* 2.80% 3.13%(c)
Portfolio turnover (d) 9.71% 12.20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<PAGE> 240
10
One Group(R) Investor Balanced Fund Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.65 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.16
Net realized and unrealized gains from investments 1.39 0.65
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 1.65 0.81
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.16)
Net realized gains (0.22) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.16)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.82 $ 10.65
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.85% 8.22%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $70,463 $5,672
Ratio of expenses to average net assets 1.20% 1.22%(c)
Ratio of net investment income to average net assets 2.26% 2.93%(c)
Ratio of expenses to average net assets* 1.31% 1.73%(c)
Ratio of net investment income to average net assets* 2.15% 2.42%(c)
Portfolio turnover (d) 9.71% 12.20%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED
CLASS C June 30, 1998(a)
- ---------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.63
- ---------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26
Net realized and unrealized gains (losses) from investments 1.37
- ---------------------------------------------------------------------------------
Total from Investment Activities 1.63
- ---------------------------------------------------------------------------------
Distributions:
Net investment income (0.27)
Net realized gains (0.22)
- ---------------------------------------------------------------------------------
Total Distributions (0.49)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.77
- ---------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.66%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $6,653
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 2.24%
Ratio of expenses to average net assets* 1.30%
Ratio of net investment income to average net assets* 2.14%
Portfolio turnover (b) 9.71%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 241
11
One Group(R)
Investor Conservative Growth Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks income and capital
appreciation by investing primarily
in a diversified group of One Group
mutual funds which invest primarily
in equity and fixed income
securities.
LOGO INVESTMENT STRATEGY
The Fund invests 20% to 40% of its
total assets in twelve One Group
mutual funds which invest primarily
in equity securities, 60% to 80% of
its total assets in seven One Group
mutual funds which invest primarily
in fixed income securities, and up
to 10% of its total assets in one
One Group money market fund. The
Fund also may hold cash and cash
equivalents.
LOGO PORTFOLIO SECURITIES
The Fund will invest in the
underlying mutual funds within the
following range:
<TABLE>
<S> <C>
One Group(R) Prime Money Market Fund 0-10%
One Group(R) Short-Term Bond Fund 0-70%
One Group(R) Intermediate Bond Fund 0-70%
One Group(R) Income Bond Fund 0-70%
One Group(R) Bond Fund 0-70%
One Group(R) High Yield Bond Fund 0-15%
One Group(R) Government Bond Fund 0-70%
One Group(R) Ultra Short-Term Bond Fund 0-70%
One Group(R) Mid Cap Value Fund 0-20%
One Group(R) International Equity Index Fund 0-20%
One Group(R) Diversified International Fund 0-20%
One Group(R) Large Cap Growth Fund 0-20%
One Group(R) Large Cap Value Fund 0-20%
One Group(R) Mid Cap Growth Fund 0-20%
One Group(R) Diversified Mid Cap Fund 0-20%
One Group(R) Diversified Equity Fund 0-20%
One Group(R) Small Cap Growth Fund 0-20%
One Group(R) Small Cap Value Fund 0-20%
One Group(R) Equity Income Fund 0-20%
One Group(R) Equity Index Fund 0-20%
</TABLE>
LOGO RISK CONSIDERATIONS
The Fund's investments are
concentrated in other mutual funds,
so the Fund's investment performance
is directly related to the
performance of those mutual funds.
In addition, as a matter of
fundamental policy, the Fund must
allocate its investments primarily
among the mutual funds. As a result,
the Fund's investment flexibility is
limited. The Fund may invest in a
mutual fund which invests in medium
or lower grade bonds, which can be
volatile. See "Special Risk
Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets) (3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee
waivers) (5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart
provides the expense ratio for each
underlying fund in which the Fund invests
(based on the current fund prospectus).
Some of these expense ratios may include
a voluntary reduction of investment
advisory fees.
<TABLE>
<CAPTION>
NAME OF EXPENSE NAME OF EXPENSE
UNDERLYING FUND RATIO UNDERLYING FUND RATIO
<S> <C> <C> <C>
One Group(R) Prime Money One Group(R) Diversified
Market Fund .52% International Fund 1.02%
One Group(R) Short-Term Bond One Group(R) Large Cap
Fund .53% Growth Fund .92%
One Group(R) Intermediate One Group(R) Large Cap
Bond Fund .58% Value Fund 1.00%
One Group(R) Income Bond One Group(R) Mid Cap
Fund .62% Growth Fund 1.00%
One Group(R) Bond Fund .60% One Group(R) Diversified
Mid Cap Fund .86%
One Group(R) High Yield Bond One Group(R) Diversified
Fund .87% Equity Fund .96%
One Group(R) Government Bond One Group(R) Small Cap
Fund .69% Growth Fund 1.05%
One Group(R) Ultra One Group(R) Small Cap
Short-Term Bond Fund .55% Value Fund .91%
One Group(R) Mid Cap Value One Group(R) Equity
Fund .94% Income Fund .80%
One Group(R) International One Group(R) Equity
Equity Index Fund .95% Index Fund .36%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average
weighted expense ratio for Class A shares
is 1.15%, for Class B shares is 1.90%,
for Class C shares is 1.90%, and for
Class I shares is .90%. The following
examples were calculated using the
combined total operating expenses.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 87 $112 $185
Class A (without
fee waiver) $ 66 $ 94 $125 $212
Class B $ 69 $ 90 $123 $203
Class B (without
fee waiver) $ 71 $ 94 $130 $221
Class C $ 29 $ 60 $103 $222
Class C (without
fee waiver) $ 31 $ 64 $110 $238
Class I $ 9 $ 29 $ 50 $111
Class I (without
fee waiver) $ 11 $ 33 $ 58 $128
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 64 $ 87 $112 $185
Class A (without
fee waiver) $ 66 $ 94 $125 $212
Class B $ 19 $ 60 $103 $203
Class B (without
fee waiver) $ 21 $ 64 $110 $221
Class C $ 19 $ 60 $103 $222
Class C (without
fee waiver) $ 21 $ 64 $110 $238
Class I $ 9 $ 29 $ 50 $111
Class I (without
fee waiver) $ 11 $ 33 $ 58 $128
</TABLE>
Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the "10 Years" examples
above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
<PAGE> 242
12
One Group(R) Investor Conservative Growth Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.26
Net realized and unrealized gains (losses) from
investments 0.82 0.33
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 1.28 0.59
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.45) (0.26)
Net realized gains (0.10) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.26)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.06 $ 10.33
- ----------------------------------------------------------------------------------------------------
Total Return 12.73% 6.00%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $30,352 $15,038
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 4.43% 4.92%(c)
Ratio of expenses to average net assets* 0.56% 1.46%(c)
Ratio of net investment income to average net assets* 4.07% 3.66%(c)
Portfolio turnover (d) 3.22% 28.46%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.32 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.43 0.22
Net realized and unrealized gains (losses) from
investments 0.82 0.32
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 1.25 0.54
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.43) (0.22)
Net realized gains (0.10) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.22)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.32
- ----------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.38% 5.46%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $12,538 $ 1,299
Ratio of expenses to average net assets 0.45% 0.47%(c)
Ratio of net investment income to average net assets 4.12% 4.76%(c)
Ratio of expenses to average net assets* 0.82% 3.05%(c)
Ratio of net investment income to average net assets* 3.75% 2.18%(c)
Portfolio turnover (d) 3.22% 28.46%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<PAGE> 243
13
One Group(R) Investor Conservative Growth Fund Financial Highlights
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 June 30, 1997(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.19
Net realized and unrealized gains (losses) from
investments 0.81 0.33
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 1.18 0.52
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.19)
Net realized gains (0.10) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.19)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.05 $ 10.33
- ----------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.53% 5.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $39,489 $ 2,616
Ratio of expenses to average net assets 1.20% 1.21%(c)
Ratio of net investment income to average net assets 3.37% 4.06%(c)
Ratio of expenses to average net assets* 1.47% 3.52%(c)
Ratio of net investment income to average net assets* 3.10% 1.75%(c)
Portfolio turnover (d) 3.22% 28.46%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<TABLE>
<CAPTION>
YEAR ENDED
CLASS C June 30, 1998(a)
- ------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33
- ------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35
Net realized and unrealized gains (losses) from
investments 0.81
- ------------------------------------------------------------------------------------
Total from Investment Activities 1.16
- ------------------------------------------------------------------------------------
Distributions:
Net investment income (0.36)
Net realized gains (0.10)
- ------------------------------------------------------------------------------------
Total Distributions (0.46)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.03
- ------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.48%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 3,788
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 3.39%
Ratio of expenses to average net assets* 1.47%
Ratio of net investment income to average net assets* 3.12%
Portfolio turnover (b) 3.22%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 244
more about the funds
14
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the One Group Board of Trustees in determining whether an
investment is illiquid.
Temporary Defensive Position
- ----------------------------------------------------
Banc One Investment Advisors may decide that because of market conditions the
Funds should temporarily be invested in instruments other than the underlying
mutual funds. Therefore, the Funds are permitted for temporary defensive
purposes to invest up to 100% of their assets in short-term fixed income
securities. These securities include obligations of the U.S. Government and its
agencies and instrumentalities, commercial paper, bank certificates of deposit,
repurchase agreements, bankers' acceptances, variable amount master demand notes
and bank money market deposit accounts.
To the extent that the Funds are engaged in a temporary defensive position, they
will not be pursuing their investment objective.
Special Risk Considerations
- ----------------------------------------------------
EQUITY FUNDS: Because equity funds invest primarily in equity securities, which
fluctuate in value, the funds' shares will fluctuate in value. In addition,
certain investment management techniques that the funds may use, such as the
purchase and sale of futures, options and forward commitments, could expose the
funds to potentially greater risk of loss than more traditional equity
investments.
FIXED INCOME FUNDS: Investments in fixed income securities (for example, bonds)
will increase or decrease in value based on changes in interest rates. If rates
increase, the value of a Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. The value
of your investment in a Fund will increase and decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
INDEX FUNDS: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuation in the value of your investment.
INTERNATIONAL FUNDS: Funds investing in foreign securities are subject to
special risks. These risks may include future unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits, currency
controls, higher transaction costs, and delayed settlements of transactions.
Securities of some foreign companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies. Additionally, there may
be less public information available about foreign issuers. Since the funds may
invest in securities denominated in foreign currencies, changes in exchange
rates also may affect the value of investments in the funds. 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 will be redenominated in euros. All government
bonds issued by participating nations will be in euros, and outstanding
government bonds will be 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 a Fund.
SMALL CAPITALIZATION FUNDS: Smaller, less seasoned companies may be subject to
greater business risk than larger, established companies. They may be more
vulnerable to changes in economic conditions, specific industry conditions,
market fluctuations and other factors affecting the profitability of other
companies. Therefore, the stock price of smaller capitalization companies may be
subject to greater price fluctuations than that of larger, established
companies. Due to these and
<PAGE> 245
15
other risk factors, the price movement of the securities held by the funds may
be volatile and the net asset value of shares of the funds may fluctuate.
HIGH YIELD BOND FUNDS: High yield securities that are rated below investment
grade or are unrated are commonly known as "junk bonds." These securities are
considered speculative investments by major credit rating agencies. High yield
bonds involve a greater risk of default and price volatility than U.S.
government bonds and other high quality fixed-income securities. These debt
instruments generally offer a higher current yield than that available from
higher grade issuers, but typically involve greater risk. The yields on these
bonds will fluctuate over time. Low rated and unrated securities are especially
subject to adverse changes in general economic conditions and to changes in the
financial condition of their issuers. During periods of economic downturns or
rising interest rates, issuers of these instruments may experience financial
stress that could adversely affect their ability to make payments of principal
and interest and increase the possibility of default.
<PAGE> 246
how to do business with One Group Mutual Funds
16
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4:00 p.m.
Eastern Time ("ET"), will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B and Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any organization
authorized to act in a fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
One Group Fund Direct IRA. One Group offers a retirement plan, and in 1999, may
offer an education plan. These plans allow participants to defer taxes while
their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before
4:00 p.m. ET. When that happens, NAV will be calculated as of the time the
NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANK ONE
CORPORATION and its affiliates). The minimum initial investment for an IRA
is $250.
- Subsequent investments must be at least $100 ($25 for employees of BANK ONE
CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
<PAGE> 247
17
- 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)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10) calendar
days if purchases are made by check or under the Systematic Investment Plan
(see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "One Group" to State Street Bank and
Trust Company (see address above), authorize a bank transfer, or initiate a
wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Investor 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, 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
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.
<PAGE> 248
18
- - 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
payment 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 to select Shareholder Servicing Agents. Those Shareholder Servicing
Agents who may receive special incentives include Banc One Securities
Corporation, The Advisors Group, United Planners Financial Services of America,
Inc., The Legend Group, and Rosewood Retirement Advisory Services, LLC. 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.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C> <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.
<PAGE> 249
19
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C> <C>
0-1 1.00%
After first year None
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial purchase
price, nor is a sales charge assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A Shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of 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
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%, 1.00% and 1.00%
of the average daily net assets of Class A, Class B and Class C shares,
respectively.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and to
Banc One Investment Advisors and its affiliates (or any sub-advisor) for
brokerage and other agency transactions.
Sales Charge
Reductions
and Waivers
- ----------------------------------------------------
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A, Class B
or Class C shares of a Fund (except a money market fund) that you (and your
spouse and minor children) already own to the amount of your next Class A
purchase for purposes of calculating the sales charge. An Intermediary also
may take advantage of this option.
<PAGE> 250
20
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the same
sales charge that you would have paid if all shares were purchased at once. A
percentage of your investment will be held in escrow until the full amount
covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and their
spouses and immediate family members) of:
- 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 One Group Fund and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANK ONE CORPORATION and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory, agency,
custodial or similar capacity.
- Accounts to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with The One Group
Services Company.
- 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 on the books and
record of the broker or 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.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain
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21
retirement plans and you die or become disabled (as defined by the Tax Code),
but only if the redemption is made within one year of such death or
disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of account
that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111, or your Shareholder Servicing Agent.
Exchanging Fund Shares
- ----------------------------------------------------
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another 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
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22
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.
- - 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
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
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23
4:00 p.m. ET (or when the NYSE closes), you will receive that day's NAV.
- - If you own Class B and Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or The One Group Services 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 the
redemption request is received.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and 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. 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.
4. An emergency exists.
The Statement of Additional Information offers more detail about this process.
- - You generally will recognize a gain or loss on a redemption for Federal income
tax purposes. You should talk to your tax advisor before making a redemption.
<PAGE> 254
shareholder information
24
Voting Rights
- ----------------------------------------------------
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANK ONE CORPORATION (One First National Plaza, Chicago, Illinois, 60670),
through its affiliates, may be deemed for purposes of the Investment Company Act
of 1940, to control the Funds. This is because as of December 1, 1998, BANK ONE
CORPORATION or its affiliates possessed the power to vote substantially all of
the Class I shares of the Funds.
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends monthly. Dividends are distributed on the
first Business Day of each month. Capital gains, if any, for all Funds are
distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of shares of the Funds generally will produce
either a taxable gain or a loss. You are responsible for any tax liabilities
generated by your transactions.
TAXATION OF DISTRIBUTIONS
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (including, for
this purpose, the excess of net short-term capital gains over net long-term
capital losses) 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.
Dividends paid in January, but declared in October, November or December of the
previous
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25
year, will be considered to have been paid 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 or call
1-800-480-4111.
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.
<PAGE> 256
organization and management of the funds
26
THE FUNDS
Each Fund is a series of One Group, an open-end management investment company.
One Group currently offers 49 separate Funds. Four of the Funds are described in
this prospectus; the other Funds are described in separate prospectuses. Each
Fund described in this prospectus is diversified. Each Fund is supervised by the
Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees of less than 0.01% of the
average daily net assets of One Group Investor Conservative Growth Fund, and
0.031%, 0.037% and 0.041% of the average daily net assets of One Group Investor
Growth Fund, One Group Investor Growth and Income Fund, and One Group Investor
Balanced Fund, respectively.
No single person is responsible for managing the assets of the Funds. Rather,
investment decisions for the Funds are made by committee. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which it
receives a fee.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .10% of each Fund's average daily net assets, on the first $500,000,000
in Fund assets. The fee declines to .075% on net assets between $500,000,000 and
$1 billion, and to .05% on assets over $1 billion. The fee is calculated daily
and paid monthly. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Funds' custodian, State Street holds the Funds' assets,
settles all portfolio trades and assists in calculating the Funds' net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
One Group's securities lending activities under an agreement with State Street
Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee for this
service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One
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27
Investment Advisors and The One Group Services Company have, and will continue
to, monitor the remediation progress of the service providers. This process
involves documentation, on-site visits, and review of remediation plans and test
results. Both Banc One Investment Advisors and The One Group Services Company
have budgeted in excess of $700,000 in fiscal year 1998 and over $1 million in
fiscal year 1999 toward the remediation effort for all systems and interfaces.
Neither One Group nor its shareholders will bear any of the direct remediation
expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 258
details about the funds' investment practices and policies
28
Investment Practices
- ----------------------------------------------------
The following is a brief description of the principal investment policies of the
underlying funds.
ONE GROUP(R) PRIME MONEY MARKET FUND
One Group(R) Prime Money Market Fund seeks current income with liquidity and
stability of principal. The fund intends to comply with the regulations of the
Securities and Exchange Commission applicable to money market funds using the
amortized cost method for calculating net asset value. These regulations impose
certain quality, maturity and diversification restraints on investments by the
fund. Under these regulations, the fund will invest only in U.S.
dollar-denominated securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will acquire only "eligible
securities" that present minimal credit risks and are treated as having a
maturity of 397 days or less.
ONE GROUP(R) SHORT-TERM BOND FUND
One Group(R) 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 will range between one and five years. The fund may also purchase
taxable or tax-exempt municipal securities. Up to 20% of the fund's total assets
may be invested in preferred stocks. This Fund was formerly called The One Group
Limited Volatility Bond Fund.
ONE GROUP(R) INTERMEDIATE BOND FUND
One Group(R) Intermediate Bond Fund seeks current income consistent with the
preservation of capital through investments in high and medium-grade
fixed-income securities with intermediate maturities. The fund will normally
invest at least 80% of total assets in debt securities of all types. Debt
securities include bonds, notes and other obligations. At least 65% of the
fund's total assets will consist of bonds rated in one of the 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(R) INCOME BOND FUND
One Group(R) Income Bond Fund seeks a high level of current income by investing
primarily in a diversified portfolio of high, medium and low grade debt
securities. The Fund normally will invest at least 70% of its total assets in
debt securities of all types rated as investment grade at the time of investment
or, if unrated, determined by Banc One Investment Advisors to be of comparable
quality. In addition, up to 30% of the Fund's total assets may be invested in
convertible securities, preferred stock, loan participations and debt securities
rated below investment grade or, if unrated, determined by Banc One Investment
Advisors to be of comparable quality. Securities rated below investment grade
are called "high yield bonds," "non-investment grade bonds" and "junk bonds."
These securities are rated in the fifth or lower rating categories, for example,
BB or lower by Standard & Poor's Corporation ("S&P") and Ba or lower by Moody's
Investors Service, Inc. ("Moody's"), and are considered to have speculative
characteristics. Even though it may invest in debt securities in all rating
categories, the Fund will not invest more than 20% of its total assets in
securities rated below the fifth rating category. As a matter of fundamental
policy, at least 65% of the Fund's total assets will consist of bonds. The Fund
also may purchase taxable or tax-exempt municipal securities.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range between five and twenty years. The Fund may shorten
its effective weighted average maturity to as little as two years if deemed
appropriate for temporary defensive purposes.
ONE GROUP(R) BOND FUND
One Group(R) 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
<PAGE> 259
29
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(R) HIGH YIELD BOND FUND
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of debt securities which are rated below investment grade
or unrated. Capital appreciation is a secondary objective. The Fund invests in
all types of high yield, high risk debt securities. The Fund also may invest in
convertible securities, preferred stock, common stock, and loan participations.
The Fund's weighted average maturity will normally range between five and ten
years, although the Fund may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary defensive purposes. The Fund
normally invests at least 80% of the Fund's total assets in debt securities
which are rated below investment grade or unrated, although the Fund may invest
up to 100% of the Fund's total assets in such securities. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds,"
"below investment grade bonds" and "junk bonds." These securities are rated in
the fifth or lower rating categories (for example, BB or lower by Standard &
Poor's Corporation and Ba or lower by Moody's Investors Service, Inc.), and are
considered to be speculative. The Fund also may invest up to 20% of its total
assets in other securities, including investment grade debt securities. As a
matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds.
ONE GROUP(R) GOVERNMENT BOND FUND
One Group(R) Government Bond Fund seeks a high level of current income with
liquidity and safety of principal. The Fund will limit its investments to
securities issued by the U.S. Government and its agencies and instrumentalities
or related to securities issued by the U.S. Government and its agencies and
instrumentalities. At least 65% of the total assets of the Fund will be invested
in obligations guaranteed as to principal and interest by the U.S. government or
its agencies and instrumentalities, some of which may be subject to repurchase
agreements, and other securities representing an interest in or collateralized
by mortgages that are issued or guaranteed by the U.S. government, its agencies
or instrumentalities. The average weighted 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(R) ULTRA SHORT-TERM BOND FUND
One Group(R) 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(R) MID CAP VALUE FUND
One Group(R) 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
<PAGE> 260
30
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 Disciplined Value Fund.
ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
One Group(R) International Equity Index Fund seeks to provide investment results
that correspond to the aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, 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(R) DIVERSIFIED INTERNATIONAL FUND
One Group(R) 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 attempts to track the performance of 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(R) LARGE CAP GROWTH FUND
One Group(R) 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(R) LARGE CAP VALUE FUND
One Group(R) 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.
ONE GROUP(R) MID CAP GROWTH FUND
One Group(R) Mid Cap Growth Fund seeks growth of capital and, secondarily,
current income by investing primarily in equity securities. The Fund invests
- ---------------
(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.
<PAGE> 261
31
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(R) DIVERSIFIED MID CAP FUND
One Group(R) 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(R) DIVERSIFIED EQUITY FUND
One Group(R) 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(R) SMALL CAP GROWTH FUND
One Group(R) 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(R) SMALL CAP VALUE FUND
One Group(R) 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
- ---------------
(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.
<PAGE> 262
32
securities, and other equity securities of companies described above. 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(R) EQUITY INCOME FUND
One Group(R) 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.
ONE GROUP(R) EQUITY INDEX FUND
One Group(R) Equity Index Fund seeks investment results that correspond to the
aggregate price and dividend performance of the securities in the S&P 500 Index.
The Fund normally invests in many of the stocks which comprise the S&P 500 Index
and secondarily in stock index futures. Cash reserves will not normally exceed
10% of the fund's net assets. The Advisor generally selects stocks for the Fund
in the order of their weightings in the S&P 500 Index beginning with the
heaviest weighted stocks. The percentage of the Fund's assets to be invested in
each stock is approximately the same as the percentage it represents in the S&P
500 Index.
Details about each underlying fund's investment practices and the risks
associated with those practices can be found in Appendix B.
Investment Policies
- ----------------------------------------------------
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund may not:
1. Purchase an issuer's securities if as a result more then 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of any of that issuer.
This does not include securities issued or guaranteed by the United States,
its agencies or instrumentalities, securities of other registered investment
companies and repurchase agreements involving these securities. This
restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year as well as within a
particular year. Higher portfolio turnover rates will likely result in higher
transaction costs to the Funds and may result in additional tax consequences to
you. To the extent portfolio turnover results in short-term capital gains, such
gains will generally be taxed at ordinary income tax rates. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights.
<PAGE> 263
appendix a
33
Investment Practices
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of the securities and techniques utilized by the Funds, as
well as the risks inherent in their use. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<CAPTION>
fund name fund code
<S> <C>
One Group Funds(R) Prime Money Market Fund 1
One Group Funds(R) Short-Term Bond Fund 2
One Group Funds(R) Intermediate Bond Fund 3
One Group Funds(R) Income Bond Fund 4
One Group Funds(R) Bond Fund 5
One Group Funds(R) High Yield Bond Fund 6
One Group Funds(R) Government Bond Fund 7
One Group Funds(R) Ultra Short-Term Bond Fund 8
One Group Funds(R) Mid Cap Value Fund 9
One Group Funds(R) International Equity Index
Fund 10
One Group Funds(R) Diversified International
Fund 11
One Group Funds(R) Large Cap Growth Fund 12
One Group Funds(R) Large Cap Value Fund 13
One Group Funds(R) Mid Cap Growth Fund 14
One Group Funds(R) Diversified Mid Cap Fund 15
One Group Funds(R) Diversified Equity Fund 16
One Group Funds(R) Small Cap Growth Fund 17
One Group Funds(R) Small Cap Value Fund 18
One Group Funds(R) Equity Income Fund 19
One Group Funds(R) Equity Index Fund 20
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-20 Market
CUBES.
TREASURY RECEIPTS: TRs, TIGRs, and CATS. 1-20 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-20 Market
agencies and instrumentalities of the U.S Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-6, 8-20 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1-6, 8-20 Liquidity
exchange for the deposit of funds. Credit
COMMON STOCK: Shares of ownership of a company. 6, 9-20 Market
REPURCHASE AGREEMENTS: The purchase of a security and the 1-20 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-20 Market
simultaneous commitment to buy the security back at an Leverage
agreed upon price on an agreed upon date. This is treated as
a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of a Fund's 1-20 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 1-20 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
</TABLE>
<PAGE> 264
34
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1-6, 8-20 Market
including One Group money market funds and shares of other
investment companies for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing
in funds for which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock that 3-6, 8-20 Market
convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the 3-20 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the 2-20 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment 2-20 Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-6, 8, Credit
on and accepted by a commercial bank. Maturities are 9, 12-20 Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-6, 8, Credit
promissory notes issued by corporations and other entities. 9, 12-20 Liquidity
Maturities generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Stocks or debt issued by foreign 1-6, 8-19 Market
companies, as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches of U.S. Liquidity
banks and supranational entities. Includes American Foreign Investment
Depository Receipts.
RESTRICTED SECURITIES: Securities not registered under the 1-6, 8-20 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, Market
interest rates which are reset daily, weekly, quarterly or 11-20 Credit
some other period and which may be payable to the Fund on Liquidity
demand.
WARRANTS: Securities, typically issued with preferred stock 1, 4, 6, Market
or bonds, that give the holder the right to buy a 10-13, Credit
proportionate amount of common stock at a specified price. 15, 17-19
PREFERRED STOCK: A class of stock that generally pays a 2-6, 10, Market
dividend at a specified rate and has preference over common 11, 13,
stock in the payment of dividends and in liquidation. 15, 17-19
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-8, 15, Pre-payment
estate loans and pools of loans. These include 18 Market
collateralized mortgage obligations ("CMOs"), Real Estate Credit
Investment Conduits ("REMICs"), and Stripped Mortgage-Backed Regulatory
Securities ("SMBS").
DEMAND FEATURES: Securities that are subject to puts and 1-6, 8, Market
standby commitments to purchase the securities at a fixed 15, 18 Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1-6, 8, Pre-payment
receivables, home equity loans, truck and auto loans, 15, 18 Market
leases, credit card receivables and other securities backed Credit
by other types of receivable or other assets. Regulatory
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells 2-8 Pre-payment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage 2-8 Pre-payment
pool which provide for a fixed initial mortgage interest Market
rate for a specified period of time, after which the rate Credit
may be subject to periodic adjustments. Regulatory
</TABLE>
<PAGE> 265
35
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
CORPORATE DEBT SECURITIES: Corporate bonds and 3-6, 8 Market
non-convertible debt securities. Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into these 2-20 Market
transactions to manage its exposure to changing interest Management
rates and other factors. Swaps involve an exchange of Credit
obligations by two parties. Caps and floors entitle a Liquidity
purchaser to a principal amount from the seller of the cap
or floor to the extent that a specified index exceeds or
falls below a predetermined interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts, 3-20 Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 3-8 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 2-6, 8 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
Notes, Revenue Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities and single
family revenue bonds.
OBLIGATIONS OF SUPRANATIONAL AGENCIES: Obligations of 10, 11 Credit
supranational agencies who are chartered to promote economic Foreign Investment
development and are supported by various governments and
governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Fund may engage in 10, 11 Management
transactions in financial futures and related options, which Liquidity
are generally described above. The Fund will enter into Credit
these transactions in foreign currencies and for hedging Market
purposes only. Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement 10, 11 Management
to purchase or sell one specified currency for another Liquidity
currency at a specified future date and price. The Fund will Credit
enter into forward foreign exchange transactions for hedging Market
purposes only. Political
Leverage
Foreign Investment
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay 2-6, 8 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their
maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero-coupon debt 2-6, 8 Credit
securities which convert on a specified date to Market
interest-bearing debt securities. Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class 3-8 Pre-payment
mortgage securities usually structured with two classes of Market
shares that receive different proportions of the interest Credit
and principal from a pool of mortgage backed obligations. Regulatory
These include IOs and POs.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged variable rate 3-8 Market
debt instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest to which Credit
the inverse floater is indexed.
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 2-6, 8 Credit
assignments of all or a portion of loans to corporations or Political
to governments of the less developed countries ("LDCs"). Foreign Investment
Market
Liquidity
FIXED RATE MORTGAGE LOANS: Investments in fixed rate 2-6, 8 Credit
mortgage loans or mortgage pools which bear simple interest Pre-payment
at fixed annual rates and have short to long final Regulatory
maturities. Market
</TABLE>
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36
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term 1-6, 8 Credit
funding agreements issued by banks and highly rated U.S. Liquidity
insurance companies such as Guaranteed Investment Contracts Market
(GICs) and Bank Investment Contracts (BICs).
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs 9, 12-20 Market
represent ownership in a long-term unit investment trust
that holds a portfolio of common stocks designed to track
the price performance and dividend yield of the S&P 500
Index. A SPDR entitles a holder to receive proportionate
quarterly cash distributions corresponding to the dividends
that accrue to the S&P 500 Index stocks in the underlying
portfolio, less trust expenses.
</TABLE>
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37
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 investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early prepayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
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38
- - 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.
<PAGE> 269
appendix b
39
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest payments.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
B Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties which could
lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D In payment default. The D rating category is used when payments on an
obligation are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
FITCH'S IBCA, INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
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40
F3 Adequate capacity for timely repayment, but more susceptible to adverse
changes in business, economic or financial conditions than for
obligations in higher categories.
B Capacity for timely repayment is uncertain and is susceptible to
adverse changes in business, economic or financial conditions.
C High risk of default or which are currently in default.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
PRIME-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT
PRIME Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation.
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41
Adverse business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial commitment
on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
MOODY'S
Investment Grade
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
FITCH
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest
is adequate. However, adverse changes in business, economic or
financial conditions and circumstances, are more likely to affect the
capacity for timely repayment than for obligations in higher rated
categories.
BB Obligations for which capacity for timely repayment of principal and
interest is uncertain. These obligations are speculative to some degree
and capacity for timely repayment remains susceptible over time to
adverse changes in business, financial or economic conditions.
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42
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.
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
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43
business conditions to meet financial commitments.
CC Extremely weak financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated "R" has experienced a regulatory action regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR Not Rated, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-)
Following ratings from "AA" to "CCC" show relative standing within the major
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & Short-term municipal securities rated MIG1 or VMIG1 are of the best
VMIG1 quality. They have strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG2 & These short-term municipal securities rated MIG2 & VMIG2 are of high
VMIG2 quality. Margins of protection are ample although not so large as in
the preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 undeniable strength of the preceding grades is lacking. Liquidity and
cash flow protection may be narrow and marketing access for
refinancing is likely to be less well established.
MIG4 & This denotes adequate quality protection commonly regarded as required
VMIG4 of an investment security is present and although not distinctly or
predominantly speculative, there is a specific risk.
SG This denotes speculative quality.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
ba Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
caa Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca Speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues so rated
can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay
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44
preferred stock dividends and any applicable sinking fund obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
N.R. No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS (INCLUDING FOREIGN, MORTGAGE AND
ASSET-BACKED SECURITIES)
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
Non-Investment 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.
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45
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
Investment Grade
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THE
FUNDS. THE CURRENT STATEMENT OF ADDITIONAL
INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE
WITHOUT CHARGE BY CALLING 1-800-480-4111 OR BY
WRITING TO THE ONE GROUP SERVICES COMPANY AT
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
THE SEC MAINTAINS A WEB SITE (WWW.SEC.GOV)
THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIALS INCORPORATED BY
REFERENCE AND OTHER INFORMATION REGARDING ONE
GROUP FUNDS(R).
TOG-F-125
<PAGE> 277
ONE GROUP MUTUAL FUNDS
EQUITY INDEX FUND
PROSPECTUS
MARCH 18, 1999
- --------------------------------------------------------------------------------
The information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK ONE CORPORATION OR ITS AFFILIATES: - ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY FEDERAL OR
STATE GOVERNMENTAL AGENCY: - INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 278
table of contents
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUND................................. 1
ABOUT THE FUND.............................................. 2
MORE ABOUT THE FUND......................................... 5
HOW TO DO BUSINESS WITH ONE GROUP........................... 6
Purchasing Fund Shares................................... 6
Sales Charges............................................ 8
Sales Charge Reductions and Waivers...................... 9
Exchanging Fund Shares................................... 11
Redeeming Fund Shares.................................... 12
SHAREHOLDER INFORMATION..................................... 14
Voting Rights............................................ 14
Dividend Policies........................................ 14
Tax Treatment of the Fund................................ 14
Tax Treatment of Shareholders............................ 15
Shareholder Inquiries.................................... 15
ORGANIZATION AND MANAGEMENT OF ONE GROUP.................... 16
One Group(R)............................................. 16
The Board of Trustees.................................... 16
The Advisor.............................................. 16
The Distributor.......................................... 16
The Administrator and Sub-Administrator.................. 16
The Transfer Agent, Custodian and Sub-Custodian.......... 16
Year 2000................................................ 16
DETAILS ABOUT ONE GROUP EQUITY INDEX FUND'S INVESTMENT
PRACTICES AND POLICIES.................................... 18
Investment Practices..................................... 18
Investment Risks......................................... 20
Investment Policies...................................... 20
APPENDIX: DESCRIPTION OF RATINGS............................ 22
</TABLE>
<PAGE> 279
1
a brief preview of the fund
WHAT IS THE GOAL OF ONE GROUP EQUITY INDEX FUND?
The Fund is designed to seek investment results that
correspond to the aggregate price and dividend performance of
securities in the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500"). *
WHAT IS THE FUND'S INVESTMENT STRATEGY?
The Fund normally will invest in a variety of equity
securities, primarily common stocks, that are included in the
S&P 500 Index and, secondarily, in stock index futures. The
Fund also may lend its securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
Equity securities such as those in which the Fund may invest
are more volatile and carry more risk than some other forms of
investment. Accordingly, as with all equity investments, you
may lose money by investing in the Fund. The Fund may invest
in derivative securities. These securities may expose the Fund
to special risks. An investment in the Funds is not a deposit
of BANK ONE CORPORATION or its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. For more information about risks,
please read "More About the Fund" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Fund currently offers four classes of Shares: Class A,
Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I shares are
offered to institutional investors, including affiliates of
BANK ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization
authorized to act in fiduciary, advisory, agency, custodial or
similar capacities. The section called "How To Do Business
With One Group Mutual Funds" will provide more information.
Class I shares are not available to Individual Retirement
Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Fund on any day that the
Fund is open for business. Purchase and redemption procedures
are explained in greater detail in "How To Do Business With
One Group Mutual Funds." For additional information, call The
One Group Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on the last business day of
each month and are distributed monthly on the first business
day of each month. Any capital gains are distributed at least
annually. Distributions are paid in additional shares of the
same class unless you elect to take the payment in cash. For a
more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUND?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Fund. Banc One Investment
Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under
the headings "The Advisor" and "Shareholder Expenses."
* "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.
<PAGE> 280
2
One Group(R)
Equity Index Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks investment results
that correspond to the aggregate
price and dividend performance of
securities in the S&P 500.
LOGO INVESTMENT STRATEGY
The Fund invests primarily in stocks
included in the S&P 500 and,
secondarily in stock index futures.
Banc One Investment Advisors will
seek to achieve a correlation
between the performance of the Fund
and that of the S&P 500. To
implement this strategy, Banc One
Investment Advisors generally
selects stocks in the order of their
weightings in the S&P 500 beginning
with the heaviest weighted stocks.
The Fund will attempt to achieve a
correlation between the performance
of its portfolio and that of the S&P
500 of at least 0.95, without taking
into account expenses. Perfect
correlation would be 1.00.
LOGO PORTFOLIO SECURITIES
The percentage of a stock that the
Fund holds will be approximately the
same percentage that the stock
represents in the S&P 500. In
addition, the Fund may hold up to
10% of its net assets in cash or
cash equivalents. For a list of all
the securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in equity
securities, which may increase or
decrease in value. Therefore, the
value of your investment in the Fund
may increase or decrease in value.
Because the Fund's investments are
tied to an index, fluctuations in
the index will affect the value of
your investment in the Fund. Before
you invest, please read "More About
the Funds" and "Investment Risks."
LOGO FUND MANAGEMENT
The Fund is managed by a team of
portfolio managers, research
analysts, and other investment
management professionals. Each team
member makes recommendations about
the securities in the Fund. The
research analysts provide in-depth
industry analysis and
recommendations, while the portfolio
managers determine strategy,
industry weightings, Fund holdings,
and cash positions.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C CLASS I
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price) 5.25% none none none
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .15% .15% .15% .15%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00% none
Other Expenses (after
reimbursements) (6) .21% .21% .21% .21%
Total Fund Operating Expenses (after
fee waivers) (7) .61% 1.36% 1.36% .36%
</TABLE>
(1) If you buy or sell shares through an account with a Shareholder
Servicing Agent, you may be charged separate transaction fees by the
Shareholder Servicing Agent. In addition, a $10.00 sub-minimum account
fee may be applicable and a $7.00 charge will be deducted from the
redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .30% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Without expense reimbursements, Other Expenses would be .28% for all
classes of shares.
(7) Without the voluntary reduction of Investment Advisory and 12b-1 fees
and reimbursements of Other Expenses, Total Operating Expenses would be
.93% for Class A shares, 1.58% for Class B shares, 1.58% for Class C
shares and .58% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) payment of the
maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of
each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 58 $ 71 $ 85 $125
Class A
(without fee
waivers) $ 61 $ 81 $101 $161
Class B $ 64 $ 73 $ 94 $143
Class B
(without fee
waivers) $ 66 $ 80 $106 $170
Class C $ 24 $ 43 $ 74 $164
Class C
(without fee
waivers) $ 26 $ 50 $ 86 $188
Class I $ 4 $ 12 $ 20 $ 46
Class I
(without fee
waiver) $ 6 $ 19 $ 32 $ 73
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in
the above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $ 58 $ 71 $ 85 $125
Class A
(without fee
waivers) $ 61 $ 81 $101 $161
Class B $ 14 $ 43 $ 74 $143
Class B
(without fee
waivers) $ 16 $ 50 $ 86 $170
Class C $ 14 $ 43 $ 74 $164
Class C
(without fee
waivers) $ 16 $ 50 $ 86 $188
Class I $ 4 $ 12 $ 20 $ 46
Class I
(without fee
waivers) $ 6 $ 19 $ 32 $ 73
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 281
3
One Group(R) Equity Index Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92
- ----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32 0.29
Net realized and unrealized gains (losses)
from investments 5.98 5.27 3.16 2.59 (0.20)
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.31 5.62 3.49 2.91 0.09
- ----------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29) (0.29)
In excess of net investment income -- -- (0.01) (0.02) (0.04)
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.48) (0.86) (0.47) (0.42)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- ----------------------------------------------------------------------------------------------------------------------
Total Return 29.73% 34.30% 25.47% 25.79% 0.63%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $671,422 $480,819 $321,058 $234,895 $165,370
Ratio of expenses to average net assets 0.35% 0.30% 0.30% 0.33% 0.46%
Ratio of net investment income to average
net assets 1.37% 1.87% 2.18% 2.57% 2.44%
Ratio of expenses to average net assets* 0.62% 0.61% 0.59% 0.66% 0.59%
Ratio of net investment income to average
net assets* 1.10% 1.56% 1.89% 2.24% 2.31%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81%
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
CLASS I 1993 1992(b)
- --------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.00
- --------------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.26
Net realized and unrealized gains (losses)
from investments 1.13 0.95
- --------------------------------------------------------------------
Total from Investment Activities 1.43 1.21
- --------------------------------------------------------------------
Distributions:
From net investment income (0.30) (0.26)
In excess of net investment income -- --
From net realized gains (0.13) (0.03)
- --------------------------------------------------------------------
Total Distributions (0.43) (0.29)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.92 $ 10.92
- --------------------------------------------------------------------
Total Return 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $96,446 $62,150
Ratio of expenses to average net assets 0.50% 0.73%(c)
Ratio of net investment income to average
net assets 2.46% 2.43%(c)
Ratio of expenses to average net assets* 0.87% 1.16%(c)
Ratio of net investment income to average
net assets* 2.09% 2.00%(c)
Portfolio turnover (a) 2.71% 21.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) The Fund
commenced operations on July 2, 1991. (c) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 21.81 $ 16.67 $ 14.02 $11.59 $11.91 $10.92 $ 10.94
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29 0.28 0.30 0.08
Net realized and unrealized
gains (losses) from
investments 5.97 5.28 3.18 2.58 (0.20) 1.10 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.23 5.57 3.45 2.87 0.08 1.40 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.28) (0.27) (0.28) (0.27) (0.28) (0.10)
In excess of net investment
income -- -- (0.01) -- (0.04) -- --
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09) (0.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.43) (0.80) (0.44) (0.40) (0.41) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.15 $ 21.81 $ 16.67 $14.02 $11.59 $11.91 $ 10.92
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 29.33% 33.94% 25.16% 25.43% 0.56% 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $218,518 $98,338 $32,186 $3,003 $1,416 $512 $5
Ratio of expenses to average
net assets 0.60% 0.55% 0.55% 0.56% 0.62% 0.52% 1.09%(c)
Ratio of net investment income
to average net assets 1.11% 1.59% 1.93% 2.38% 2.37% 2.51% 1.97%(c)
Ratio of expenses to average
net assets* 0.96% 0.95% 0.94% 1.01% 0.94% 0.99% 1.27%(c)
Ratio of net investment income
to average net assets* 0.75% 1.19% 1.54% 1.94% 2.05% 2.04% 1.79%(c)
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81% 2.71% 21.90%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued. (b) Class A
Shares commenced offering on February 18, 1992. (c) Annualized.
<PAGE> 282
4
One Group(R) Equity Index Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
CLASS B 1998 1997 1996 1995 1994(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.80 $ 16.68 $ 14.05 $11.61 $ 12.39
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18 0.09
Net realized and unrealized gains (losses) from
investments 5.97 5.27 3.16 2.61 (0.78)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.07 5.43 3.32 2.79 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.11) (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (0.63) (0.15) (0.52) (0.16) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.31) (0.69) (0.35) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $14.05 $ 11.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 28.47% 32.93% 24.05% 24.58% .(557)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $351,624 $168,699 $38,538 $1,408 $248
Ratio of expenses to average net assets 1.35% 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income to average net assets 0.36% 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average net assets* 1.61% 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income to average net assets* 0.10% 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover (d) 4.32% 5.81% 9.08% 2.71% 11.81%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Class B Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<TABLE>
<CAPTION>
NOVEMBER 4, 1997
TO JUNE 30,
CLASS C 1998(a)
- ------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.60
- ------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07
Net realized and unrealized gains (losses) from
investments 4.67
- ------------------------------------------------------------------------------------
Total from Investment Activities 4.74
- ------------------------------------------------------------------------------------
Distributions:
Net investment income (0.08)
Net realized gains (0.12)
- ------------------------------------------------------------------------------------
Total Distributions (0.20)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $27.14
- ------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.07%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,214
Ratio of expenses to average net assets 1.35%(c)
Ratio of net investment income to average net assets 0.27%(c)
Ratio of expenses to average net assets* 1.60%(c)
Ratio of net investment income to average net assets* 0.02%(c)
Portfolio turnover (d) 4.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<PAGE> 283
more about the fund
5
Illiquid Investments
- ----------------------------------------------------
The Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the One Group Board of Trustees in determining whether an
investment is illiquid.
Special Risk
Considerations
- ----------------------------------------------------
DERIVATIVES: The Fund invests in securities that are considered to be
"derivatives." "Derivatives" are securities or contracts that derive their value
from the performance of underlying assets or securities. These include:
- - options, futures contracts, and options on futures contracts
- - warrants
- - swap, cap and floor transactions
- - new financial products
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
INDEX FUNDS: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuations in the value of your investment.
<PAGE> 284
how to do business with One Group
6
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Years Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4 p.m.
Eastern Time ("ET") will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interest of the Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any organization
authorized to act in a fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
One Group Fund Direct IRA. One Group offers a retirement plan. This plan allows
participants to defer taxes while their retirement and education savings grow.
The education IRA requires a minimum investment of $500. Call The One Group
Services Company at 1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in the Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of the Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - The Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, NAV will be calculated as of the
time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the share class most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANK ONE
CORPORATION and its affiliates). The minimum initial investment for an IRA
is $250.
- Subsequent investments must be at least $100 ($25 for employees of BANK ONE
CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
<PAGE> 285
7
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)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from the Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "One Group" to State Street Bank and
Trust Company (see address above), authorize a bank transfer, or initiate a
wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO 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. 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 1-800-480-1111 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.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
<PAGE> 286
8
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. Occasionally,
The One Group Services Company, at its own expense, also will provide cash
incentives to select Shareholder Servicing Agents. Those Shareholder Servicing
Agents who may receive special incentives include Banc One Securities
Corporation, The Advisors Group, United Planners Financial Services of America,
Inc., The Legend Group, and Rosewood Retirement Advisory Services, LLC. 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.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF THE OFFERING PRICE
<S> <C> <C> <C> <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%
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.
<PAGE> 287
9
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial purchase
price, nor is a sales charge assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares in
your account that carry no CDSC, starting with Class A Shares. After that, the
Fund will redeem the shares you have held for the longest time and thus have
the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of 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
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.
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 One Group 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 One Group funds in 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.
<PAGE> 288
10
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 similar capacity.
- 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 the Fund, such as
mergers, asset acquisitions and exchange offers to which the Fund is a party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Fund:
1. Provided that you withdraw no more than 10% of your account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset
<PAGE> 289
11
acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class B shares of other One Group Funds.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Fund:
1. Provided that you withdraw no more than 10% of the account value annually.
You do not have to participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one year
of death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Acquired in exchange for Class C shares of other One Group Funds.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of account
that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
Exchanging
Fund Shares
- ----------------------------------------------------
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of the Fund may be exchanged for Class A shares of that Fund or
for Class A or Class I shares of another One Group Fund.
- - Class A shares of the Fund may be exchanged for Class I shares of that Fund or
for Class A or Class I shares of another One Group Fund, but only if you are
eligible to purchase those shares.
- - Class B shares of the Fund may be exchanged for Class B shares of another One
Group Fund.
- - Class C shares of the 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 the Fund and you want
to exchange those shares for Class A shares, unless you qualify for a sales
charge waiver (see above).
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
- - If you exchange Class B or Class C shares of the Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund
<PAGE> 290
12
into which you exchanged, or any Fund from which you have previously
exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable for
Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results in a
capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
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
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services Company at
1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a domestic
stock exchange, or a member of the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
- - On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing Agent.
- - State Street Bank and Trust Company may charge you a wire redemption fee. The
current charge is $7.00.
- - Your redemption proceeds will be paid within seven days after receipt of the
redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If you own Class A and Class I shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that day's
NAV.
- - If you own Class B or Class C shares and the Fund receives your redemption
request by 4:00 p.m. ET (or when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
<PAGE> 291
13
- - Call your Shareholder Servicing Agent or The One Group Services 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 the
redemption request is received.
3. If you are age 70 1/2, you may elect to receive payments to the extent
that the payment represents a minimum required distribution from an IRA or
other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and 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. 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.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
- - You generally will recognize a gain or loss on a redemption for Federal income
tax purposes. You should talk to your tax advisor before making a redemption.
<PAGE> 292
shareholder information
14
Voting Rights
- ----------------------------------------------------
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. The Fund,
and each class of shares within the Fund, votes separately on matters relating
solely to the Fund or class, or which affect the Fund or class differently than
other Funds of One Group. However, all shareholders will have equal voting
rights on matters that affect all shareholders of One Group equally.
BANK ONE CORPORATION (One First National Plaza, Chicago, Illinois 60670),
through its affiliates, may be deemed for purposes of the Investment Company Act
of 1940, to control the Fund. This is because as of December 1, 1998, BANK ONE
CORPORATION or its affiliates possessed the power to vote substantially all of
the Class I shares of the Fund.
On the same date, the following shareholders owned 25% or more of Class A and
Class C shares of the Fund. As a consequence, they are considered to be
controlling persons of these classes of the Fund.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C> <C>
Banc One Securities Corp Fbo Equity Index Fund 35.89% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 61.27% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Fund generally declares dividends on the last business day of each month.
Dividends are distributed on the first business day of the next month. Capital
gains, if any, for the Fund are distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
The Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Fund qualifies, as it has in the past, it will pay
no federal income tax on the earnings it distributes to shareholders.
<PAGE> 293
15
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) on at least an
annual basis. Dividends you receive from the Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from the Fund's net
investment income will be taxable as ordinary income and dividends from the
Fund's long-term capital gains will be taxable to you as such, regardless of how
long you have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as a distribution from a
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Fund provides you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Fund or its shareholders.
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 294
organization and management of One Group
16
ONE GROUP
The Fund is a series of One Group, an open-end management investment company.
One Group currently offers of 49 separate Funds. Only One Group Equity Index
Fund is described in this prospectus; the other Funds are described in separate
prospectuses. The Fund described in this prospectus is diversified and is
supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Fund. 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 Fund
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Fund and continuously reviews, supervises and administers the Fund's investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Fund paid advisory fees at an
annual rate of 0.10% of the average daily net assets of the Fund.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Fund and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Fund's administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of One Group. For the first $1.5 billion in One Group
assets, The One Group Services Company receives an annual fee of .20% of each
Fund's average daily net assets. The annual rate declines to .18% on assets up
to $2 billion, and to .16% when assets exceed $2 billion. The fee is calculated
daily and paid monthly. Some Funds are not included in the calculations. Banc
One Investment Advisors, the Sub-Administrator, provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Fund's custodian, State Street holds the Fund's assets,
settles all portfolio trades and assists in calculating the Fund's net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
the Fund's securities lending activities under an agreement with State Street
Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee by the Fund
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" is
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One
<PAGE> 295
17
Investment Advisors and The One Group Services Company have, and will continue
to, monitor the remediation progress of the service providers. This process
involves documentation, on-site visits, and review of remediation plans and test
results. Both Banc One Investment Advisors and The One Group Services Company
have budgeted in excess of $700,000 in fiscal year 1998 and over $1 million in
fiscal year 1999 toward the remediation effort for all systems and interfaces.
Neither One Group nor its shareholders will bear any of the direct remediation
expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates that the move to Year 2000 will have a material impact on
their ability to continue to provide the Fund with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 296
details about the funds' investment practices and policies
18
Investment Practices
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk, although certain securities may be subject to additional risks. For a more
complete discussion, see the Statement of Additional Information. Following the
table is a more complete discussion of risk.
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
<S> <C>
COMMON STOCK: Shares of ownership of a company.
Market
REPURCHASE AGREEMENTS: The purchase of a security and the
simultaneous commitment to return the security to the seller
at an agreed upon price on an agreed upon date. This is
treated as a loan.
Credit
Market
Liquidity
REVERSE REPURCHASE AGREEMENT: The sale of a security and the
simultaneous commitment to buy the security back at an
agreed upon price on an agreed upon date. This is treated as
a borrowing by the Fund.
Market
Leverage
SECURITIES LENDING: The lending of up to 331/3% of the
Fund's total assets. In return the Fund will receive cash,
other securities, and/or letters of credit as collateral.
Credit
Market
Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or
contract to purchase securities at a fixed price for
delivery at a future date.
Market Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds,
including One Group money market funds and shares of other
investment companies for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing
in funds for which it serves as investment advisor.
Market
CONVERTIBLE SECURITIES: Bonds or preferred stock that
convert to common stock.
Market
Credit
CALL AND PUT OPTIONS: A call option gives the buyer the
right to Market Management buy, and obligates the seller of
the option to sell, a security Liquidity at a specified
price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a
security at a specified price. The Fund will sell only
covered call and Leverage secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the
future sale and purchase of a specified amount of a
specified security, class of securities, or an index at a
specified time in the future and at a specified price.
Management
Market
Credit
Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment
vehicles which invest primarily in income producing real
estate or real estate related loans or interest.
Liquidity
Management
Market
BANKERS ACCEPTANCES: Bills of exchange or time drafts drawn
on and accepted by a commercial bank. Maturities are
generally six months or less.
Regulatory
Tax
Pre-payment
Credit
Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term
promissory notes issued by corporations and other entities.
Maturities generally vary from a few days to nine months.
Credit
Liquidity
Market
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and
CUBES.
Market
TREASURY RECEIPTS: TRs, TIGRs, and CATs.
Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by
agencies and instrumentalities of the U.S. Government. These
include Ginnie Mae, Fannie Mae, and Freddie Mac.
Market Credit
CERTIFICATES OF DEPOSIT: Negotiable instruments with a
stated maturity.
Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in
exchange for the deposit of funds.
Liquidity
Credit
Market
RESTRICTED SECURITIES: Securities not registered under the
Securities Act of 1933, such as privately placed commercial
paper and Rule 144A securities.
Liquidity Market
</TABLE>
<PAGE> 297
19
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
<S> <C>
PREFERRED STOCK: A class of stock that generally pays a
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
Market
SWAPS, CAPS AND FLOORS: The Fund may enter into these
transactions Management to manage its exposure to changing
interest rates and other factors. Credit Swaps involve an
exchange of obligations by two parties. Caps and Liquidity
floors entitle a purchaser to a principal amount from the
seller of Market the cap or floor to the extent that a
specified index exceeds or falls below a predetermined
interest rate or amount.
Management
Credit
Market
Liquidity
NEW FINANCIAL PRODUCTS: New options and futures contracts
and other financial products, continue to be developed and
the Fund may invest in such options, contracts and products.
Management
Credit
Market
Liquidity
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs
represent ownership in a long-term unit investment trust
that holds a portfolio common stocks designed to track the
price performance and dividend yield of the S&P 500 Index. A
SPDR entitles a holder to receive proportionate quarterly
cash distributions corresponding to the dividends that
accrue to the S&P 500 Index stocks in the underlying
portfolio, less trust expenses.
Market
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with
interest rates which are reset daily, weekly, quarterly or
some other period and which may be payable to the Fund on
demand.
Market
Credit
Liquidity
WARRANTS: 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.
Market
Credit
</TABLE>
<PAGE> 298
20
Investment Risks
- ----------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price 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
the Fund's hedging transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by the Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing market
rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest rates
typically causes a fall in values, while a fall in rates typically causes a
rise in values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments in
foreign securities.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, the Fund may have to
reinvest in securities with a lower yield. Further, with early prepayment,
the Fund may fail to recover any premium paid, resulting in an unexpected
capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply with
certain requirements of the Internal Revenue Code, which would cause adverse
tax consequences.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a 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.
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
<PAGE> 299
21
Fund. The full text of the fundamental policies can be found in the Statement of
Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund would
own more than 10% of the outstanding voting securities of that issuer. This
does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, and repurchase agreements involving these
securities. This restriction applies with respect to 75% of the Fund's total
assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
4. Invest more than 10% of its total assets in securities issued or guaranteed
by the United States, its agencies or instrumentalities.
Additional investment policies can be found in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors decides that the Fund should temporarily
be invested in cash and cash equivalents. Cash equivalents include:
- - Securities issued by the U.S. Government, its agencies and instrumentalities
- - Repurchase Agreements
- - Certificates of Deposit
- - Bankers' Acceptances
- - Commercial Paper (rated in one of the two highest rating categories)
- - Variable Rate Master Demand Notes
- - Bank Money Market Deposit Accounts
The Fund may temporarily invest only 10% of its total assets in cash and cash
equivalents.
While the Fund is engaged in a temporary defensive position, it will not be
pursuing its investment objective. Therefore, the Fund will pursue a temporary
defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund and may result in additional tax consequences to you. To the extent
portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates. The portfolio turnover rate for
the Fund for the fiscal year ended June 30, 1998 is shown on the Financial
Highlights.
<PAGE> 300
appendix
22
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH'S IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated A1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas
<PAGE> 301
23
the issuer normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make payments for a preferred stock in this
category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 302
(This page intentionally left blank)
<PAGE> 303
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company
3435 Stelzer road
Columbus, OH 43219
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION
CONTAINS MORE DETAILED INFORMATION ABOUT THE
FUNDS. THE CURRENT STATEMENT OF ADDITIONAL
INFORMATION HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE
WITHOUT CHARGE BY CALLING 1-800-480-4111 OR BY
WRITING TO THE ONE GROUP SERVICES COMPANY AT
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
THE SEC MAINTAINS A WEB SITE (WWW.SEC.GOV)
THAT CONTAINS THE STATEMENT OF ADDITIONAL
INFORMATION, MATERIALS INCORPORATED BY
REFERENCE AND OTHER INFORMATION REGARDING ONE
GROUP.
TOG-F-221
<PAGE> 304
One Group(R) mutual funds
CASH MANAGEMENT
MONEY MARKET FUNDS COMBINED PROSPECTUS
March 18, 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
This prospectus describes five money market mutual funds. The Funds are offered
only to certain institutional and accredited investors. The information in this
prospectus is important. Please read it carefully before you invest, and save it
for future reference.
Please remember that shares of the Funds: Are not deposits or obligations of, or
guaranteed by BANK ONE CORPORATION or its affiliates; Are not insured or
guaranteed by the Federal Deposit Insurance Corporation or by any federal or
state governmental agency; Involve investment risk, including the possible loss
of the principal amount invested.
There is no assurance that the Funds will meet their investment objectives or be
able to maintain a net asset value of $1.00 per share on a continuous basis.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE> 305
table of contents
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Cash Management Money Market Fund........... 2
One Group(R) Treasury Cash Management Money Market Fund.. 4
One Group(R) Treasury Prime Cash Management Money Market
Fund................................................... 6
One Group(R) U.S. Government Securities Cash Management
Money Market Fund...................................... 8
One Group(R) Municipal Cash Management Money Market
Fund................................................... 10
MORE ABOUT THE FUNDS........................................ 12
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 13
Purchasing Fund Shares................................... 13
Sales Charges............................................ 14
Exchanging Fund Shares................................... 14
Redeeming Fund Shares.................................... 15
SHAREHOLDER INFORMATION..................................... 17
Voting Rights............................................ 17
Dividend Policies........................................ 17
Tax Treatment of the Funds............................... 17
Tax Treatment of Shareholders............................ 17
Shareholder Inquiries.................................... 18
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 19
The Funds................................................ 19
The Board of Trustees.................................... 19
The Advisor.............................................. 19
The Distributor.......................................... 19
The Administrator and Sub-Administrator.................. 19
The Transfer Agent, Custodian and Sub-Custodian.......... 19
Year 2000................................................ 19
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 21
Investment Practices..................................... 21
Investment Risks......................................... 23
Investment Policies...................................... 23
APPENDIX: DESCRIPTION OF RATINGS............................ 25
</TABLE>
<PAGE> 306
1
a brief preview of the funds
WHAT ARE THE GOALS OF THE FUNDS?
The Funds are designed to produce high current income with
liquidity and stability of principal. Each Fund will use its
best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that each Fund will
be able to do so. Please read about each Fund before
investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a dollar-
weighted basis of 90 days or less, and will acquire only
"eligible securities" that present minimal credit risks and
have a maturity of 397 days or less. The Funds intend to
comply with Rule 2a-7 under The Investment Company Act of
1940. An investment in the Funds is not a deposit of BANK ONE
CORPORATION or its affiliates and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in securities that are backed by "credit
enhancements" such as letters of credit. The value of
investments in the Funds could decrease if the credit quality
of the credit enhancement provider declines. The Cash
Management Money Market Fund, the U.S. Government Securities
Cash Management Money Market Fund and the Municipal Cash
Management Money Market Fund invest in mortgage-related
securities which have significantly greater price and yield
volatility than traditional fixed income securities. For more
information about risks, please read "More About the Funds"
and "Investment Risks."
WHO CAN BUY SHARES?
The Funds are offered only to institutional and other
accredited investors. For more details, please see the section
of this prospectus entitled "Purchasing Fund Shares."
WHAT CLASSES OF SHARES ARE AVAILABLE?
Each Fund offers Class I and Class A shares. Class I and Class
A shares are identical except for the services offered and the
expenses borne by each class.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are
distributed monthly. Any capital gains are distributed at
least annually. Distributions are paid in additional shares of
the same class unless you elect to take the payment in cash.
For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under
the headings "The Advisor" and "Shareholder Expenses."
<PAGE> 307
2
One Group(R)
Cash Management
Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
The Fund invests in short-term money
market obligations, including
securities that are issued or
guaranteed by the U.S. government or
its agencies and instrumentalities,
some of which are subject to
repurchase agreements, certificates
of deposit, variable and floating
rate instruments, mortgage-backed
securities, puts, municipal
securities and other short-term
obligations. The Fund may invest in
other money market funds if those
funds have similar investment
policies and objectives and invest
only in securities with short-term
ratings that are equal to or higher
than those in which the Fund
invests. The Fund 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
will be invested in the financial
services industry. The Fund may also
engage in securities lending. For a
list of all the securities in which
the Fund may invest, please read
"Investment Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in securities that
are backed by "credit enhancements"
such as letters of credit. The value
of your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. Before you
invest, please read "More About the
Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS I CLASS A
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (2) .16% .16%
12b-1 fees none .25%
Other Expenses (after
reimbursements) (3) .18% .18%
Total Fund Operating Expenses (after
fee waivers) (4) .34% .59%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Without the fee waiver, Investment Advisory Fees would be .20% for both
classes of shares.
(3) Without expense reimbursements, Other Expenses would be .19% for both
classes of shares.
(4) Without a voluntary reduction of Investment Advisory fees and
reimbursement of other expenses, Total Fund Operating Expenses would be
.39% for Class I shares and .64% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
CLASS I
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 3 $ 11 $ 19 $ 43
Without Fee
Waivers $ 4 $ 13 $ 22 $ 49
</TABLE>
<TABLE>
<CAPTION>
CLASS A
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 6 $ 19 $ 33 $ 74
Without Fee
Waivers $ 7 $ 20 $ 36 $ 80
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 308
3
One Group(R) Cash Management Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, for years ended 1998, 1997 and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED JUNE 30,
---------------------------------------------- --------------------------------
CLASS I 1998 1997 1996 1996(a) 1995(b) 1994 1993(c)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 0.9997 $ 0.9998 $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999 $ 1.0000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.0523 0.0528 0.0508 0.0277 0.0507 0.0333 0.0297
Net realized and unrealized gains (losses)
from investments -- (0.0001) 0.0002 0.0002 (0.0059) (0.0006) (0.0001)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.0523 0.0527 0.0510 0.0279 0.0448 0.0327 0.0296
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.0523) (0.0528) (0.0508) (0.0277) (0.0507) (0.0333) (0.0297)
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) (0.0333) (0.0297)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 0.9997 $ 0.9997 $ 0.9998 $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.36% 5.41% 5.23% 2.80%(e) 5.19(b) 3.38% 3.25%(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $1,076,045 $705,270 $885,946 $389,127 $319,214 $143,820 $175,713
Ratio of expenses to average net assets 0.35% 0.35% 0.35% 0.35%(d) 0.35% 0.31% 0.05%(d)
Ratio of net investment income to average
net assets 5.21% 5.36% 5.19% 5.51%(d) 5.11% 3.33% 3.19%(d)
Ratio of expenses to average net assets* 0.39% 0.38% 0.42% 0.43%(d) 0.44% 0.43% 0.56%(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) 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) For the period
July 30, 1992 (commencement of operations) through June 30, 1993. (d)
Annualized. (e) Not annualized.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ----------
CLASS A 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.
<PAGE> 309
4
One Group(R)
Treasury Cash Management
Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
The Fund invests exclusively in 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. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS I CLASS A
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none
ANNUAL OPERATING EXPENSES (2) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) .17% .17%
12b-1 Fees none .25%
Other Expenses (after
reimbursements) (3) .17% .17%
Total Fund Operating Expenses (after
fee waivers) (4) .34% .59%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Without the fee waiver, Investment Advisory fees would be .20% for both
classes of shares.
(3) Without expense fee reimbursements, Other Expenses would be .18% for
both classes of shares.
(4) Without a voluntary reduction of Investment Advisory Fees and the
reimbursement of Other Expenses, Total Fund Operating Expenses would be
.38% for Class I shares and .63% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and
(2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
CLASS I
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 3 $ 11 $ 19 $ 43
Without Fee
Waivers $ 4 $ 12 $ 21 $ 48
</TABLE>
<TABLE>
<CAPTION>
CLASS A
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 6 $ 19 $ 33 $ 74
Without Fee
Waivers $ 6 $ 20 $ 35 $ 79
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or
indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 310
5
One Group(R) Treasury Cash Management Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
CLASS I 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
DECEMBER 31,
---------------------
CLASS A 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.
<PAGE> 311
6
One Group(R)
Treasury Prime Cash Management
Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
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. For
a list of all the securities in
which the Fund may invest, please
read "Investment Practices."
LOGO RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS I CLASS A
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (2) .15% .15%
12b-1 Fees none .25%
Other Expenses (after
reimbursements) (3) .19% .19%
Total Fund Operating Expenses (after
fee waivers) (4) .34% .59%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Without the fee waiver, Investment Advisory Fees would be .20% for both
classes of shares.
(3) Without expense reimbursements, Other Expenses would be .20% for both
classes of shares.
(4) Without a voluntary reduction of Investment Advisory Fees and
reimbursement of Other Expenses, Total Fund Operating Expenses would be
.40% for Class I shares and .65% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
CLASS I
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 3 $ 11 $ 19 $ 43
Without Fee
Waivers $ 4 $ 13 $ 22 $ 51
</TABLE>
<TABLE>
<CAPTION>
CLASS A
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 6 $ 19 $ 33 $ 74
Without Fee
Waivers $ 7 $ 21 $ 36 $ 81
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the
Fund. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 312
7
One Group(R) Treasury Prime Cash Management Money Market Fund Financial
Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, for years ended 1998, 1997 and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
CLASS I 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>
YEAR ENDED DECEMBER 31,
--------------------------------------------
CLASS A 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.
<PAGE> 313
8
One Group(R)
U.S. Government Securities Cash
Management Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
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 may also engage
in securities lending. For a list of
all the securities in which the Fund
may invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS I CLASS A
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (2) .18% .18%
12b-1 Fees none .25%
Other Expenses (after
reimbursements) (3) .17% .17%
Total Fund Operating Expenses (after
fee waivers) (4) .35% .60%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Without the fee waiver, Investment Advisory Fees would be .20% for both
classes of shares.
(3) Without expense reimbursements, Other Expenses would be .18% for both
classes of shares.
(4) Without the voluntary reduction of Investment Advisory Fees and
reimbursement of Other Expenses, Total Operating Expenses would be .38%
for Class I shares and .63% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
CLASS I
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 4 $ 11 $ 20 $ 44
Without Fee
Waivers $ 4 $ 12 $ 21 $ 48
</TABLE>
<TABLE>
<CAPTION>
CLASS A
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 6 $ 19 $ 33 $ 75
Without Fee
Waivers $ 6 $ 20 $ 35 $ 79
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 314
9
One Group(R) U.S. Government Securities Cash Management Money Market Fund
Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, for years ended 1998, 1997 and 1996, whose
report, along with the Fund's financial statements, is incorporated by reference
in the Statement of Additional Information, which is available upon request.
Information for years ended prior to December 31, 1996 have been audited by
other independent accountants.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
CLASS I 1998 1997 1996 1995(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 0.9992 $ 0.9988 $ 0.9990 $ 0.9989
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.0513 0.0521 0.0502 0.0320
Net realized and unrealized gains
(losses) from investments -- 0.0004 (0.0002) 0.0001
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 0.0513 0.0525 0.0500 0.0321
- ----------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.0513) (0.0521) (0.0502) (0.0320)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.0513) (0.0521) (0.0502) (0.0320)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 0.9992 $ 0.9992 $ 0.9988 $ 0.9990
- ----------------------------------------------------------------------------------------------------
Total Return 5.26% 5.34% 5.15% 3.24%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $1,017,830 $534,364 $369,163 $489,395
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 5.11% 5.27% 5.09% 5.46%(c)
Ratio of expenses to average net
assets* 0.37% 0.36% 0.43% 0.42%(c)
<CAPTION>
PERIOD ENDED MAY 31,
----------------------------------------
CLASS I 1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 0.9999 $ 1.0000 $ 1.0000
- ----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.0492 0.0302 0.0319
Net realized and unrealized gains
(losses) from investments (0.0010) (0.0001) --
- ----------------------------------------------------------------------------------
Total from Investment Activities 0.0482 0.0301 0.0319
- ----------------------------------------------------------------------------------
Distributions:
Net investment income (0.0492) (0.0302) (0.0319)
- ----------------------------------------------------------------------------------
Total Distributions (0.0492) (0.0302) (0.0319)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 0.9989 $ 0.9999 $ 1.0000
- ----------------------------------------------------------------------------------
Total Return 5.03% 3.06% 3.25%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $475,248 $413,634 $130,550
Ratio of expenses to average net
assets 0.34% 0.30%(c) 0.60%(c)
Ratio of net investment income to
average net assets 4.94% 3.02%(c) 4.72%(c)
Ratio of expenses to average net
assets* 0.41% 0.41%(c) 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 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
YEAR ENDED DECEMBER 31, MAY 31,
-------------------------------------------------------- ----------
CLASS A 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.
<PAGE> 315
10
One Group(R)
Municipal Cash Management
Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
exempt from Federal income tax with
liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
As a matter of fundamental policy,
the Fund will invest at least 80% of
its total assets in municipal
securities. These are securities
issued by or on behalf of the
states, territories and possessions
of the United States, including the
District of Columbia, and their
political subdivisions, agencies,
instrumentalities and authorities.
These municipal securities produce
interest that, in the opinion of
bond counsel for the issuer, is
exempt from Federal income tax.
However, the Fund may invest as much
as 100% of its assets in municipal
securities that produce income that
is subject to the Federal
alternative minimum tax. If you are
subject to the Federal alternative
minimum tax, please read the section
of this prospectus entitled "Tax
Treatment of Shareholders" before
you invest. The Fund also may invest
up to 20% of its total assets in
other types of securities, such as
taxable money market instruments,
including repurchase agreements, as
well as engage in securities
lending. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in securities that
are backed by "credit enhancements"
such as letters of credit. The value
of your investment in the Fund could
decrease if the value of the
securities in the portfolio
decreases in response to declining
credit quality of a credit
enhancement provider. In addition,
the Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed-income
securities. Before you invest,
please read "More About the Funds"
and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS I CLASS A
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (2) .17% .17%
12b-1 Fees none .25%
Other Expenses (after
reimbursements) (3) .17% .17%
Total Fund Operating Expenses (after
fee waivers) (4) .34% .59%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Without the fee waiver, Investment Advisory Fees would be .20% for both
classes of shares.
(3) Without expense reimbursements, Other Expenses would be .18% for both
classes of shares.
(4) Without the voluntary reduction of Investment Advisory Fees and
reimbursement of Other Expenses, Total Operating Expenses would be .38%
for Class I shares and .63% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
CLASS I
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 3 $ 11 $ 19 $ 43
Without Fee
Waivers $ 4 $ 12 $ 21 $ 48
</TABLE>
<TABLE>
<CAPTION>
CLASS A
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
With Fee
Waivers $ 6 $ 19 $ 33 $ 74
Without Fee
Waivers $ 6 $ 20 $ 35 $ 79
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the
Fund. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 316
11
One Group(R) Municipal Cash Management Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, is incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
CLASS I 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.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
CLASS A 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.
<PAGE> 317
more about the funds
12
Portfolio Quality
- ----------------------------------------------------
Securities will be purchased by the Funds only if Banc One Investment Advisors
determines that they present minimal credit risk under guidelines adopted by the
One Group Board of Trustees. In addition, unless a more specific rating is
specified, all investments of the Funds must be rated in one of the three
highest rating categories described in "Description of Ratings" in the Appendix.
If an investment is unrated, Banc One Investment Advisors must determine that it
is of comparable quality to a rated security. Banc One Investment Advisors will
look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the Board of Trustees in determining whether an investment
is illiquid.
Special Risk Considerations
- ----------------------------------------------------
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
PORTFOLIO TURNOVER: The Funds attempt to increase yield by taking advantage of
short-term market variations. This policy is expected to result in high
portfolio turnover. However, this should not adversely affect the Funds because
they usually do not pay brokerage commissions when purchasing U.S. government
securities.
FIXED INCOME SECURITIES: The value of the securities held by the Funds will
increase or decrease based on changes in interest rates. If rates increase, the
value of the Funds' investments generally declines. On the other hand, if rates
fall, the value of the investments generally increases. The value of your
investment in a Fund will increase or decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: The 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. "Derivatives" are securities or contracts that derive their value
from the performance of underlying assets or securities. These securities may be
more volatile than other securities. These include mortgage-backed securities,
including collateralized mortgage obligations and Real Estate Mortgage
Investment Conduits (CMOs and REMICs). Derivatives present, to varying degrees,
market, credit, regulatory and pre-payment risks. The Fund's use of derivatives
may cause the Fund to recognize higher amounts of short-term capital gains
(generally taxed at ordinary income tax rates) than it would if the Fund did not
use such instruments. For a more detailed discussion of these risks, please read
"Investment Risks."
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 an issuer fails to make
principal or interest payments or if the market value of a security declines.
<PAGE> 318
how to do business with One Group Mutual Funds
13
Purchasing
Fund Shares
- ----------------------------------------------------
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held for
you by the Shareholder Servicing Agent.
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 1-800-480-4111.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and
Christmas.
- - Purchase requests will be effective on the day received by The One Group
Services Company and you will be eligible to receive dividends declared the
same day, if (i) such purchase orders are received by The One Group Services
Company before 3:00 p.m., Eastern Time ("ET") for the Funds (other than the
Treasury Prime Cash Management Money Market Fund and the Municipal Cash
Management Money Market Fund), before 12:00 p.m. ET for the Municipal Cash
Management Money Market Fund, and before 2:00 p.m. ET for the Treasury Prime
Cash Management Money Market Fund, and (ii) the Fund's custodian, State Street
Bank and Trust Company, receives "federal funds" before 4:00 p.m. ET. If State
Street Bank and Trust Company does not receive federal funds by the cut-off
time, the purchase order will not be effective until the next business day on
which federal funds are timely received by State Street Bank and Trust
Company. On occasion, the NYSE will close before 4:00 p.m. ET. When that
happens, purchase requests received after the NYSE closes will be effective
the following business day.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or shareholders to accept
the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets (minus expenses) by the number of outstanding
shares. The Funds use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able to do so.
- - NAV is calculated each business day as of 12:00 p.m. ET and 4:00 p.m. ET for
the Municipal Cash Management Money Market Fund, 2:00 p.m. ET and 4:00 p.m. ET
for the Treasury Prime Cash Management Money Market Fund and 3:00 p.m. ET and
4:00 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
that happens, NAV will be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
<PAGE> 319
14
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 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Authorize a bank transfer or initiate a wire transfer payable to "One Group"
to State Street Bank and Trust Company at the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO 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
Sales Charges
- ----------------------------------------------------
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. Compensation comes from 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 to
select Shareholder Servicing Agents. Those Shareholder Servicing Agents who may
receive special incentives include Banc One Securities Corporation, The Advisors
Group, United Planners Financial Services of America, Inc., The Legend Group,
and Rosewood Retirement Advisory Services, LLC.
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 brokers and other 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) for
brokerage and other agency transactions.
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 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
this privilege, please select it on your account application. To learn more
about it, please call
<PAGE> 320
15
The One Group Services Company at 1-800-480-4111.
- - One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 12:00 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.
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, the Treasury Cash
Management Money Market Fund and the 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
1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a domestic
stock exchange, or a member of the Securities Transfer Association Medallion
Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
- - On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. A designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing Agent.
- - Your redemption proceeds will ordinarily be paid within seven days after
receipt of the redemption request. However, the 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?".
- - The Funds will attempt to honor requests for payments the next business day,
if the redemption request is received after the time listed in "When Can I
Redeem Shares?"
<PAGE> 321
16
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
1-800-480-4111 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.
- - 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. The redemption price of shares is expected
to remain constant at $1.00 per share, although there is no assurance that
this will always be the case.
- - If you redeem shares for which you paid by check, and 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.
- - One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
- - You generally will recognize a gain or loss on a redemption for Federal income
tax purposes. You should talk to your tax adviser before making a redemption.
<PAGE> 322
shareholder information
17
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 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 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 must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
Tax Treatment of the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no Federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may produce either a taxable gain
or a loss. You are responsible for any tax liabilities generated by your
transactions.
TAXATION OF DISTRIBUTIONS -- ALL FUNDS OTHER THAN ONE GROUP MUNICIPAL CASH
MANAGEMENT FUND
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess, if any, of net short-term capital
gains over net long-term capital losses) and its net capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses), if
any, to investors on at least an annual basis. Distributions 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, 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.
TAXATION OF DISTRIBUTIONS -- ONE GROUP MUNICIPAL CASH MANAGEMENT FUND
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess, if any, net short-term capital gains
over net long-term capital losses) and its net capital gains (i.e., the excess
of net long-term capital gains over net short-term capital losses), if any, to
investors on at least an annual basis. Distributions you receive from a Fund,
whether reinvested or received in cash, will be taxable to you. 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. 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 result in
foreign liability for Federal alterna-
<PAGE> 323
18
tive 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 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 year.
TAX INFORMATION
The Form 1099 that is mailed to eligible taxpayers every 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 discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 324
organization and management of the funds
19
THE FUNDS
Each Fund is a series of One Group, an open-end management investment company.
One Group currently consists of 49 separate Funds. Five of the Funds are
described in this prospectus; the other Funds are described in separate
prospectuses. Each Fund described in this prospectus is diversified. Each Fund
is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets. The Cash Management Money
Market Fund, the Treasury Prime Cash Management Money Market Fund, the Treasury
Cash Management Money Market Fund, the U.S. Government Securities Cash
Management Money Market Fund and the Municipal Cash Management Money Market Fund
paid investment advisory fees of .16%, .15%, .16%, .18%, and .16%, respectively,
of each Fund's average daily net assets as of December 31, 1998.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .05% of each Fund's average daily net assets. The fee is calculated daily
and paid monthly. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN, AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder record
keeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for
<PAGE> 325
20
all systems and interfaces. Neither One Group nor its shareholders will bear any
of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, One Group currently anticipates that the move to Year 2000 will not
have a material impact on its operations.
<PAGE> 326
details about the funds' investment practices and policies
fund name
21
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 code
<S> <C> <C>
One Group(R) Treasury Cash Management Money Market Fund 1
One Group(R) Treasury Prime Cash Management Money Market
Fund 2
One Group(R) U.S. Government Securities Cash Management
Money Market Fund 3
One Group(R) Cash Management Money Market Fund 4
One Group(R) 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 by 3-5 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and the 1,3-5 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
SECURITIES LENDING: The lending of up to 33 1/3% of the 3-5 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 3-5 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 3-5 Market
including money market funds of One Group and shares of
other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator. Banc
One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment
advisor.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes with a 4 Market
maximum stated maturity of thirteen months which, on a Credit
designated day each month, may be extended by the purchaser Liquidity
for an additional thirteen months. The note's maturity
cannot be extended beyond the tenth anniversary of its
issuance.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 3-5 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 3-5 Pre-Payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 4,5 Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 4,5 Liquidity
exchange for the deposit of funds. Credit
Market
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 4,5 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
</TABLE>
<PAGE> 327
22
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
COMMERCIAL PAPER: Secured and unsecured short-term 4,5 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
DEMAND FEATURES: Securities that are subject to puts and 4,5 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state or 4,5 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 General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Regulatory
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 banks 4 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Contracts Liquidity
("BICs").
RESTRICTED SECURITIES: Securities not registered under the 4,5 Liquidity
Securities Act of 1933, such as privately placed commercial Credit
paper and Rule 144A securities. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and 4 Market
obligations of foreign banks, overseas branches of U.S. Political
banks and supranational entities. Liquidity
Form
PARTICIPATION INTERESTS: Interests in municipal securities, 4,5 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any 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 4,5 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
</TABLE>
<PAGE> 328
23
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.
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.
<PAGE> 329
24
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00 per
share, although there is no guarantee that the Funds will be able to do so.
2. Will not purchase the securities of an issuer if as a result more than 5% of
its total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of a
Fund's total assets. The Funds may invest the remaining 25% of their total
assets without 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.
<PAGE> 330
appendix
25
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F-1+ possess
a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
Aaa The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
Aa The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
<PAGE> 331
26
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks
appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
Aaa This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
Aa The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/
MUNICIPAL BOND RATINGS
S&P
Investment Grade
Aaa The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
Aa Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
Bbb Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Non-Investment Grade
Bb Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
Ccc Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet their financial commitment on the obligation.
Cc Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
Investment Grade
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the
<PAGE> 332
27
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & Short-term municipal securities rated MIG1 or VMIG1 are of the best
VMIG1 quality. They have strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG2 & These short-term municipal securities are of high quality. Margins of
VMIG2 protection are ample although not so large as in the preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 undeniable strength of the preceding grades is lacking. Liquidity and
cash flow protection may be narrow and marketing access for
refinancing is likely to be less well established.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 333
(This page intentionally left blank)
<PAGE> 334
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Distributor and Administrator
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information
contains more detailed information about
the Funds. The current Statement of
Additional Information has been filed
with the Securities and Exchange
Commission and is available without
charge by calling 1-800-480-4111 or by
writing to The One Group Services
Company at 3435 Stelzer Road, Columbus,
Ohio 43219. The Statement of Additional
Information is incorporated into this
prospectus by reference. The SEC
maintains a Web site (www.sec.gov) that
contains the Statement of Additional
Information, materials incorporated by
reference and other information
regarding One Group(R).
TOG-F-126
<PAGE> 335
One Group(R) mutual funds
INSTITUTIONAL MONEY MARKET FUNDS
COMBINED PROSPECTUS
March 18, 1999
One Group(R) Government Money Market Fund
One Group(R) Treasury Only Money Market Fund
This prospectus describes two money market mutual funds. The Funds are offered
only to certain institutional and accredited investors. The information in this
prospectus is important. Please read it carefully before you invest, and save it
for future reference.
Please remember that shares of the Funds: - Are not deposits
or obligations of, or guaranteed by
BANK ONE CORPORATION or its affiliates; - Are not insured or guaranteed by the
Federal Deposit Insurance Corporation or by any federal or state governmental
agency; - Involve investment risk, including the possible loss of the principal
amount invested.
There is no assurance that the Funds will meet their investment objectives or be
able to maintain a net asset value of $1.00 per share on a continuous basis.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE> 336
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
One Group(R) Government Money Market Fund................ 2
One Group(R) Treasury Only Money Market Fund............. 4
MORE ABOUT THE FUNDS........................................ 6
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS.............. 7
Purchasing Fund Shares................................... 7
Exchanging Fund Shares................................... 8
Redeeming Fund Shares.................................... 8
SHAREHOLDER INFORMATION..................................... 10
Voting Rights............................................ 10
Dividend Policies........................................ 10
Tax Treatment of the Funds............................... 10
Tax Treatment of Shareholders............................ 10
Shareholder Inquiries.................................... 10
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 11
The Funds................................................ 11
The Board of Trustees.................................... 11
The Advisor.............................................. 11
The Distributor.......................................... 11
The Administrator and Sub-Administrator.................. 11
The Transfer Agent, Custodian and Sub-Custodian.......... 11
Year 2000................................................ 11
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 13
Investment Practices..................................... 13
Investment Risks......................................... 14
Investment Policies...................................... 14
APPENDIX: DESCRIPTION OF RATINGS............................ 16
</TABLE>
table of contents
<PAGE> 337
1
a brief preview of the funds
WHAT ARE THE GOALS OF THE FUNDS?
The Funds are designed to produce high current income with
liquidity and stability of principal. Each Fund will use its
best efforts to maintain a constant net asset value of $1.00
per share, although there is no guarantee that each Fund will
be able to do so. Please read about each Fund before
investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a dollar-
weighted basis of 90 days or less, and will acquire only
"eligible securities" that present minimal credit risks and
have a maturity of 397 days or less. The Funds intend to
comply with Rule 2a-7 under The Investment Company Act of
1940. An investment in the Funds is not a deposit of BANK ONE
CORPORATION or its affiliates and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in securities that are backed by "credit
enhancements" such as letters of credit. The value of
investments in the Funds could decrease if the credit quality
of the credit enhancement provider declines. The Government
Money Market Fund invests in mortgage-related securities which
have significantly greater price and yield volatility than
traditional fixed income securities. For more information
about risks, please read "More About the Funds" and
"Investment Risks."
WHO CAN BUY SHARES?
The Funds are offered only to institutional and other
accredited investors. For more details, please see the section
of this prospectus entitled "Purchasing Fund Shares."
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the
Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do
Business With One Group Mutual Funds." For additional
information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are
distributed monthly. Any capital gains are distributed at
least annually. Distributions are paid in additional shares of
the same class unless you elect to take the payment in cash.
For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of BANK ONE CORPORATION,
serves as the advisor of the Funds. Banc One Investment
Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under
the headings "The Advisor" and "Shareholder Expenses."
<PAGE> 338
2
One Group(R)
Government Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
LOGO PORTFOLIO SECURITIES
The Fund invests exclusively in
securities that are issued or
guaranteed by the U.S. government or
by select U.S. government agencies
and instrumentalities, some of which
are subject to repurchase
agreements, as well as variable and
floating rate instruments, mortgage-
backed securities, and puts. The
Fund may invest in other money
market funds if those funds have
similar investment policies and
objectives and invest only in
securities with short-term ratings
that are equal to or higher than
those in which the Fund invests. The
Fund may also engage in securities
lending. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
The Fund invests in mortgage-related
securities which have significantly
greater price and yield volatility
than traditional fixed income
securities. Before you invest,
please read "More About the Funds"
and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
Shareholder Transaction Expenses (1)
<S> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none
ANNUAL OPERATING EXPENSES (2) (as a
percentage of average daily net
assets)
Investment Advisory Fees .08%
Other Expenses .10%
Total Fund Operating Expenses .18%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Expense information has been restated to reflect current fees.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each
time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C>
$2 $6 $10 $23
</TABLE>
These examples are designed to assist you in understanding the various costs
and expenses that may be directly or indirectly paid by investors in the Fund.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 339
3
One Group(R) Government Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JUNE 14,
YEAR ENDED JUNE 30, 1993 TO
---------------------------------------------------------------------------- JUNE 30,
1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.055 0.053 0.055 0.053 0.033 0.001
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.055) (0.053) (0.055) (0.053) (0.033) (0.001)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.64% 5.43% 5.61% 5.41% 3.40% 3.28%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $3,712,252 $1,083,438 $855,613 $720,699 $692,253 $244,991
Ratio of expenses to average net
assets 0.15% 0.14% 0.18% 0.21% 0.11% 0.07%(b)
Ratio of net investment income
to average net assets 5.48% 5.31% 5.46% 5.28% 3.41% 3.13%(b)
Ratio of expenses to average net
assets* 0.15% 0.14% 0.18% 0.22% 0.20% 0.33%(b)
Ratio of net investment income
to average net assets* 5.48% 5.31% 5.46% 5.27% 3.32% 2.87%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Annualized.
<PAGE> 340
4
One Group(R)
Treasury Only Money Market Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal with the added assurance
of a Fund that does not purchase
securities that are subject to
repurchase agreements.
LOGO PORTFOLIO SECURITIES
The Fund invests exclusively in U.S.
Treasury bills, notes, bonds and
other U.S. obligations issued or
guaranteed by the U.S. Treasury. The
Fund may also engage in securities
lending. For a list of all the
securities in which the Fund may
invest, please read "Investment
Practices."
LOGO RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
Shareholder Transaction Expenses (1)
<S> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none
ANNUAL OPERATING EXPENSES (2) (as a
percentage of average daily net
assets)
Investment Advisory Fees .08%
Other Expenses .10%
Total Fund Operating Expenses .18%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Expense information has been restated to reflect current fees.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$2 $6 $10 $23
</TABLE>
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 341
5
One Group(R) Treasury Only Money Market Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JUNE 14,
YEAR ENDED JUNE 30, 1993 TO
------------------------------------------------------------------------ JUNE 30,
1998 1997 1996 1995 1994 1993(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.052 0.051 0.052 0.051 0.032 0.006
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.052) (0.051) (0.052) (0.051) (0.032) (0.006)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.30% 5.24% 5.38% 5.22% 3.23% 2.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $719,570 $480,860 $415,961 $288,697 $217,725 $60,330
Ratio of expenses to average net
assets 0.15% 0.15% 0.17% 0.20% 0.15% 0.07%(b)
Ratio of net investment income to
average net assets 5.18% 5.12% 5.23% 5.14% 3.23% 2.95%(b)
Ratio of expenses to average net
assets* 0.15% 0.15% 0.17% 0.21% 0.22% 0.33%(b)
Ratio of net investment income to
average net assets* 5.18% 5.12% 5.23% 5.13% 3.16% 2.69%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) Period from commencement of operations. (b) Annualized.
<PAGE> 342
more about the funds
6
Portfolio Quality
- ----------------------------------------------------
Securities will be purchased by the Funds only if Banc One Investment Advisors
determines that they present minimal credit risk under guidelines adopted by the
One Group Board of Trustees. In addition, unless a more specific rating is
specified, all investments of the Funds must be rated in one of the two highest
rating categories described in "Description of Ratings" in the Appendix. If an
investment is unrated, Banc One Investment Advisors must determine that it is of
comparable quality to a rated security. Banc One Investment Advisors will look
at a security's rating at the time of investment. For more information about
ratings, please see "Description of Ratings" in the Appendix.
Illiquid Investments
- ----------------------------------------------------
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by the Board of Trustees in determining whether an investment
is illiquid.
Special Risk Considerations
- ----------------------------------------------------
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
PORTFOLIO TURNOVER: The Funds attempt to increase yield by taking advantage of
short-term market variations. This policy is expected to result in high
portfolio turnover. However, this should not adversely affect the Funds because
they usually do not pay brokerage commissions when purchasing U.S. government
securities.
FIXED INCOME SECURITIES: The value of the securities held by the Funds will
increase or decrease based on changes in interest rates. If rates increase, the
value of the Funds' investments generally declines. On the other hand, if rates
fall, the value of the investments generally increases. The value of your
investment in a Fund will increase or decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: The Government Money Market Fund may invest in securities that are
considered to be derivatives. "Derivatives" are securities or contracts that
derive their value from the performance of underlying assets or securities.
These securities may be more volatile than other securities. These include
mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs). Derivatives present,
to varying degrees, market, credit, regulatory and pre-payment risks. The Fund's
use of derivatives may cause the Fund to recognize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than it would if
the Fund did not use such instruments. For a more detailed discussion of these
risks, please read "Investment Risks."
<PAGE> 343
how to do business with One Group Mutual Funds
7
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 1-800-480-4111.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and
Christmas.
- - Purchase requests will be effective on the day received by The One Group
Services Company and you will be eligible to receive dividends declared the
same day, if (i) such purchase orders are received by The One Group Services
Company before 4:00 p.m., Eastern Time ("ET") for the Government Money Market
Fund and 2:00 p.m. ET for the Treasury Only Money Market Fund, and (ii) the
Fund's custodian, State Street Bank and Trust Company, receives "federal
funds" before 4:00 p.m. ET. If State Street Bank and Trust Company does not
receive federal funds by the cut-off time, the purchase order will not be
effective until the next business day on which federal funds are timely
received by State Street Bank and Trust Company. On occasion, the NYSE will
close before 4:00 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or shareholders to accept
the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets (minus expenses) by the number of outstanding
shares. The Funds use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able to do so.
- - NAV is calculated each business day as of 2:00 p.m. ET and following the close
of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before 4:00 p.m.
ET. When that happens, NAV will be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
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
<PAGE> 344
8
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 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company at
1-800-480-4111 to relay your purchase instructions.
- - Authorize a bank transfer or initiate a wire transfer payable to "One Group"
to State Street Bank and Trust Company at the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Government 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. You may also exchange your shares for shares of any institutional
money market fund that One Group may offer.
- - One Group may change the terms and conditions of your exchange privileges upon
60 days written notice.
- - One Group 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
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.
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 2:00 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.
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 for the Government Money Market Fund and
<PAGE> 345
9
2:00 p.m. ET for the Treasury Only 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
1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a domestic
stock exchange, or a member of the Securities Transfer Association Medallion
Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record address;
or
4. the redemption is payable by wire or bank transfer (ACH) to a pre-existing
bank account.
- - On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing Agent.
- - Your redemption proceeds will ordinarily be paid within seven days after
receipt of the redemption request. However, the Funds will attempt to honor
requests for same day payment on redemptions, if the request is received
before 4:00 p.m. ET for the Government Money Market Fund and 2:00 p.m. ET for
the Treasury Only Money Market Fund.
- - The Funds will attempt to honor requests for payments the next business day,
if the redemption request is received after the time listed above.
WHAT WILL MY SHARES BE WORTH?
- - The NAV of shares of the Funds is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
- - You will receive the NAV calculated after your redemption request is received.
Please read "How Much Do Shares Cost?"
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or The One Group Services 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.
- - 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. The redemption price of shares is expected
to remain constant at $1.00 per share, although there is no assurance that
this will always be the case.
- - If you redeem shares for which you paid by check, and 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.
- - One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
- - You generally will recognize a gain or loss on a redemption for Federal income
tax purposes. You should talk to your tax adviser before making a redemption.
<PAGE> 346
shareholder information
10
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.
BANK ONE CORPORATION (One First National Plaza, Chicago, Illinois, 60670),
through its affiliates, may be deemed for purposes of the Investment Company Act
of 1940, to control the Treasury Only Money Market Fund and Government Money
Market Fund. This is because as of December 1, 1998, BANK ONE CORPORATION or its
affiliates possessed the power to vote substantially all of the shares of the
Funds.
Dividend Policies
- ----------------------------------------------------
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund 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 the Funds
- ----------------------------------------------------
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no Federal income tax on the earnings they distribute to shareholders.
Tax Treatment of Shareholders
- ----------------------------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares 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
(including, for this purpose, the excess, if any, of net short-term capital
gains over net long-term capital losses) and its net capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses), if
any, to investors on at least an annual basis. Dividends you receive from a
Fund, whether reinvested or received in cash, will be taxable to you. Dividends
from a Fund's net investment income will be taxable as ordinary income and
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 in the previous year.
TAX INFORMATION
The Form 1099 that is mailed to eligible taxpayers every 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 discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
Shareholder Inquiries
- ----------------------------------------------------
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from One Group.
In addition, One Group will periodically send you proxy statements and other
reports.
<PAGE> 347
organization and management of the funds
11
THE FUNDS
Each Fund is a series of One Group Mutual Funds, an open-end management
investment company. One Group currently consists of 49 separate Funds. Two of
the Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund described in this prospectus is diversified.
Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to One
Group since 1993. Prior to that time, One Group was advised by affiliates of
Banc One Investment Advisors. In addition to One Group, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual,
corporate, charitable and retirement accounts. As of June 30, 1998, Banc One
Investment Advisors, an indirect, wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees of .08% of each Fund's average
daily net assets.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .05% of each Fund's average daily net assets. The fee is calculated daily
and paid monthly. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN, AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder record
keeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for One Group. Both The One Group
Services Company and Banc One Investment Advisors have formed dedicated teams to
help them successfully achieve Year 2000 compliance. In addition, these teams
are responsible for assessing the readiness of all other service providers to
One Group. Year 2000 remediation efforts are directed toward both information
technology and non-information technology systems. Non-information technology
systems include elevators, photocopy machines, and facsimile machines, and
should have no significant impact on the delivery of services to One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of One Group. Each system rated "high" was
scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, One Group's Custodian). Consequently, remediation efforts must be
made by those servicers. Banc One Investment Advisors and The One Group Services
Company have, and will continue to, monitor the remediation progress of the
service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1999 toward the remediation effort
for all systems and interfaces. Neither One Group nor its shareholders will bear
any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipates
<PAGE> 348
12
that the move to Year 2000 will have a material impact on their ability to
continue to provide the Funds with service at current levels. Likewise, One
Group currently anticipates that the move to Year 2000 will not have a material
impact on its operations.
<PAGE> 349
details about the funds' investment practices and policies
fund name
13
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 code
<S> <C> <C> <C>
One Group(R) Government Money Market Fund 1
One Group(R) Treasury Only Money Market Fund 2
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. 1-2 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and the 1 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
SECURITIES LENDING: The lending of up to 33 1/3% of the 1-2 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-2 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1 Market
including money market funds of One Group and shares of
other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator. Banc
One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment
advisor.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1 Pre-Payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
PUT OPTIONS: A put option gives the buyer the right to sell, 1 Liquidity
and obligates the seller to buy, a security at a specified Management
price. The Fund will sell only secured put options. Market
Credit
Leverage
</TABLE>
<PAGE> 350
14
Investment Risks
- ----------------------------------------------------
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these risks
than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price 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.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities instead
or forego an investment opportunity, any of which could have a negative effect
on fund management or performance. This includes the risk of missing out on an
investment opportunity because the assets necessary to take advantage of it
are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management may fail
to produce the intended result. This includes the risk that changes in the
value of a hedging instrument will not match those of the asset being hedged.
Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. There also is the
risk that the current interest rate may not accurately reflect existing market
rates. For fixed income securities, market risk is largely, but not
exclusively, influenced by changes in interest rates. A rise in interest rates
typically causes a fall in values, while a fall in rates typically causes a
rise in values. Finally, key information about a security or market may be
inaccurate or unavailable.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early repayment, a Fund may
fail to recover any premium paid, resulting in an unexpected capital loss.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a 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.
Investment Policies
- ----------------------------------------------------
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00 per
share, although there is no guarantee that the Funds will be able to do so.
2. Will not purchase the securities of an issuer if as a result more than 5% of
its total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the United
States, its agencies or instrumentalities, and repurchase agreements
involving these securities. This restriction applies with respect to 75% of a
Fund's total assets. The Funds may invest the remaining 25% of their total
assets without 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.
<PAGE> 351
15
4. Will not borrow money or issue senior securities, except that the Funds may
borrow from banks for temporary purposes in amounts not exceeding 10% of
their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in connection
with borrowing specified in 4 above and in amounts not in excess of the
lesser of the dollar amount borrowed or 10% of the value of the respective
Fund's total assets at the time of its borrowing.
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Treasury Only Money Market Fund:
1. Will not purchase securities other than U.S. Treasury bills, notes and other
U.S. obligations issued or guaranteed by the U.S. Treasury.
2. Will not invest in any securities subject to repurchase agreements.
The Government Money Market Fund:
1. Will not purchase securities other than those issued or guaranteed by the
U.S. government or its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
Additional investment policies can be found in the Statement of Additional
Information.
<PAGE> 352
appendix
16
Description of Ratings
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
FITCH IBCA INC. ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F-1+ possess
a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
Aaa The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
Aa The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
<PAGE> 353
17
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks
appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/
MUNICIPAL BOND RATINGS
S&P
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Non-Investment Grade
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet their financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
Investment Grade
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the
<PAGE> 354
18
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & Short-term municipal securities rated MIG1 or VMIG1 are of the best
VMIG1 quality. They have strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG2 & These short-term municipal securities are of high quality. Margins of
VMIG2 protection are ample although not so large as in the preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 undeniable strength of the preceding grades is lacking. Liquidity and
cash flow protection may be narrow and marketing access for refinancing
is likely to be less well established.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
<PAGE> 355
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<PAGE> 356
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Distributor and Administrator
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information
contains more detailed information about
the Funds. The current Statement of
Additional Information has been filed
with the Securities and Exchange
Commission and is available without
charge by calling 1-800-480-4111 or by
writing to The One Group Services
Company at 3435 Stelzer Road, Columbus,
Ohio 43219. The Statement of Additional
Information is incorporated into this
prospectus by reference. The SEC
maintains a Web site (www.sec.gov) that
contains the Statement of Additional
Information, materials incorporated by
reference and other information
regarding One Group(R).
TOG-F-124
<PAGE> 357
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")
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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 TEXAS MUNICIPAL BOND FUND (THE "TEXAS MUNICIPAL BOND FUND")
ONE GROUP TREASURY MONEY MARKET FUND (THE "TREASURY MONEY MARKET 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 INVESTOR AGGRESSIVE GROWTH FUND (THE "INVESTOR
AGGRESSIVE GROWTH")
ONE GROUP INVESTOR FIXED INCOME FUND (THE "INVESTOR FIXED INCOME FUND")
ONE GROUP SMALL CAP VALUE FUND (THE "SMALL CAP VALUE FUND")
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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") AND
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND (THE "MUNICIPAL CASH
MANAGEMENT MONEY MARKET FUND")
(EACH A "FUND," AND COLLECTIVELY THE "FUNDS")
MARCH 18, 1999
This Statement of Additional Information is not a Prospectus, but supplements
and should be read in conjunction with the Prospectuses dated March 18, 1999.
This Statement of Additional Information is incorporated in its entirety into
each Fund's Prospectus. A copy of each Prospectus is available without charge by
writing to The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio
43219, or by telephoning toll free (800)-480-4111.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
THE TRUST.............................................................. 5
INVESTMENT OBJECTIVES AND POLICIES..................................... 8
Additional Information on Fund Instruments ....................... 8
Asset-Backed Securities ...................................... 8
Bank Obligations ............................................. 8
Commercial Paper ............................................. 9
Common Stock ................................................. 10
Convertible Securities ....................................... 10
Demand Features .............................................. 10
Foreign Investments .......................................... 11
Risk Factors of Foreign Investments ..................... 11
Limitations on the Use of Foreign Investments ........... 13
Foreign Currency Transactions ................................ 13
Position Hedging ........................................ 15
Forward Foreign Currency Exchange Contracts ............. 16
Foreign Currency Futures Contracts ...................... 16
Foreign Currency Options ................................ 18
Foreign Currency Conversion ............................. 19
Other Foreign Currency Hedging Strategies ............... 20
Risk Factors in Hedging Transactions .................... 20
Futures and Options Trading .................................. 21
Futures Contracts ....................................... 21
Limitations on the Use of Futures Contracts ............. 22
Risk Factors in Futures Transactions .................... 24
Options Contracts ....................................... 25
Writing (Selling) Covered Calls ......................... 26
Purchasing Call Options ................................. 29
Purchasing Put Options .................................. 29
Secured Puts ............................................ 29
Straddles and Spreads ................................... 29
Risk Factors in Options Transactions .................... 30
Limitations on the Use of Options ....................... 31
Government Securities ........................................ 31
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds ........................ 31
High Yield/High Risk Securities/Junk Bonds ................... 33
Index Investing by the Equity Index, Market Expansion Index
and International Equity Index Funds .................... 35
Investment Company Securities ................................ 38
Loan Participations and Assignments .......................... 38
Mortgage-Related Securities .................................. 39
Mortgage-Backed Securities (CMOs and REMICs) ............ 39
Limitations on the Use of Mortgage Backed Securities .... 42
Mortgage Dollar Rolls ................................... 43
Stripped Mortgage Backed Securities ..................... 44
</TABLE>
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<TABLE>
<S> <C>
Adjustable Rate Mortgage Loans ............................................................. 44
Risk Factors of Mortgage-Related Securities ................................................ 46
Municipal Securities ............................................................................ 48
Risk Factors in Municipal Securities ....................................................... 50
Limitations on the Use of Municipal Securities ............................................. 51
Arizona Municipal Securities ............................................................... 52
Kentucky Municipal Securities .............................................................. 54
Louisiana Municipal Securities ............................................................. 54
Michigan Municipal Securities .............................................................. 55
Ohio Municipal Securities .................................................................. 57
Texas Municipal Securities ................................................................. 58
West Virginia Municipal Securities ......................................................... 59
New Financial Products .......................................................................... 59
PERCS ........................................................................................... 60
Preferred Stock ................................................................................. 60
Real Estate Investment Trusts ("REITs") ......................................................... 60
Repurchase Agreements ........................................................................... 61
Reverse Repurchase Agreements ................................................................... 61
Restricted Securities ........................................................................... 62
Securities Lending .............................................................................. 64
Short-term Funding Agreements ................................................................... 65
SPDRs ........................................................................................... 65
Structured Instruments .......................................................................... 65
Swaps, Caps and Floors .......................................................................... 67
Treasury Receipts ............................................................................... 69
U.S. Treasury Obligations ....................................................................... 69
Variable and Floating Rate Instruments .......................................................... 70
Warrants ........................................................................................ 72
When-Issued Securities and Forward Commitments .................................................. 72
Investment Restrictions ............................................................................. 73
Portfolio Turnover .................................................................................. 81
Additional Tax Information Concerning All Funds ..................................................... 83
Additional Tax Information Concerning the Tax-Advantaged Funds ...................................... 87
Additional Tax Information Concerning the International Funds ....................................... 89
Foreign Tax Credit .................................................................................. 90
Additional Tax Information Concerning the Funds of Funds ............................................ 91
VALUATION ............................................................................................ 91
Valuation of the Money Market and Institutional Money Market Funds .................................. 91
Valuation of the Equity Funds, the Bond Funds and the Municipal Bond Funds .......................... 91
ADDITIONAL INFORMATION REGARDING THE CALCULATION OF PER SHARE NET ASSET VALUE ............................ 92
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ........................................................... 93
Exchanges ........................................................................................... 94
Redemptions ......................................................................................... 95
MANAGEMENT OF THE TRUST .................................................................................. 96
Trustees & Officers ................................................................................. 96
Investment Advisor and Sub-Advisors .................................................................102
</TABLE>
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<TABLE>
<S> <C>
Glass-Steagall Act .................................................................................. 107
Portfolio Transactions .............................................................................. 108
Administrator ....................................................................................... 111
Distributor ......................................................................................... 118
Distribution Plan ................................................................................... 118
Predecessor Funds' Distribution and Shareholder Servicing Plans ..................................... 121
Custodian and Transfer Agent ........................................................................ 122
Experts ............................................................................................ 124
ADDITIONAL INFORMATION ................................................................................... 125
Description of Shares ............................................................................... 125
Shareholder and Trustee Liability ................................................................... 127
Performance ......................................................................................... 128
Calculation of Performance Data ..................................................................... 128
Miscellaneous ....................................................................................... 150
</TABLE>
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THE TRUST
One Group Mutual Funds (the "TRUST") is an open-end management
investment company. 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, and the
Michigan Municipal Money Market Fund (formerly, Pegasus Michigan
Municipal Money Market Fund) (these five 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) (these fourteen Funds being collectively referred
to as the "EQUITY FUNDS"),
Bond Funds. The Intermediate Bond Fund (formerly, Pegasus Intermediate
Bond Fund), the Income Bond Fund (formerly, Pegasus Multi-Sector 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
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(formerly, Pegasus Short Municipal Bond Fund), the Ohio Municipal Bond
Fund, the Texas Municipal Bond Fund, the West Virginia Municipal Bond
Fund, the Kentucky Municipal Bond Fund, the Arizona Municipal Bond
Fund, the Louisiana Municipal Bond Fund, and the Michigan Municipal
Bond Fund (formerly, Pegasus Michigan Municipal Bond Fund) (these
eleven Funds being collectively referred to as the "MUNICIPAL BOND
FUNDS"),
Institutional Money Market Funds. The Treasury Money Market Fund, the
Treasury Only Money Market Fund, the Government Money Market Fund, the
Tax-Exempt Money Market Fund, 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 Cash Management Fund) (these ten Funds
being collectively referred to as the "INSTITUTIONAL MONEY MARKET
FUNDS"),
Funds of Funds. The Investor Growth Fund, the Investor Growth & Income
Fund, the Investor Aggressive Growth Fund, the Investor Fixed Income
Fund, the Investor Conservative Growth Fund, and the Investor Balanced
Fund (these six Funds being collectively referred to as the "FUNDS OF
FUNDS").
TAX-ADVANTAGED FUNDS. The Municipal Money Market Fund, the Ohio Municipal Money
Market Fund, the 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 Ohio
Municipal Bond Fund, the Kentucky Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Texas Municipal Bond Fund, the Arizona Municipal Bond
Fund, the Michigan Municipal Bond Fund, the Michigan Municipal Money Market
Fund, the Ohio Municipal Money Market Fund, and the Louisiana Municipal Bond
Fund, which are non-diversified.
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<PAGE> 365
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.(1) The U.S. Treasury Securities Money Market Fund and the Prime Money
Market Fund offer Class A Shares, Class B Shares, Class C Shares, Class I Shares
and Service Class Shares. The Institutional Money Market Funds (other than the
Cash Management Funds) offer only a single class of shares. The Michigan
Municipal Money Market Fund, the Ohio Municipal Money Market Fund and the
Municipal Money Market Fund offer Class A, Class C, Class I and Service Class
Shares. The Cash Management Funds offer Class A and Class I Shares only. 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 Merger. In March, 1999, the Funds of the Trust merged with the Pegasus
Funds pursuant to an Agreement and Plan of Reorganization. Except for the
following 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:
<TABLE>
<CAPTION>
NAME OF FORMER PEGASUS FUND ONE GROUP MUTUAL FUNDS' NAME
<S> <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 Market Fund 11. the Michigan Municipal Money 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 Management Fund 14. the Treasury Prime Cash Management Money Market Fund
15. Pegasus U.S. Government Securities Cash Management Fund 15. the U.S. Government Securities 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' name.
[FN]
(1)Class C shares are currently not available for purchase in all of the Funds.
</FN>
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INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement each Fund's investment objective and
policies as set forth in the respective Prospectus for that Fund.
ADDITIONAL INFORMATION ON FUND INSTRUMENTS
ASSET-BACKED SECURITIES
Asset-backed securities consist of securities secured by company
receivables, home equity loans, truck and auto loans, leases, credit card
receivables and other securities backed by other types of receivables or other
assets. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying debt may be
refinanced or paid off prior to their maturities during periods of declining
interest rates. In that case, a Fund manager may have to reinvest the proceeds
from the securities at a lower rate. Potential market gains on a security
subject to prepayment risk may be more limited than potential market gains on a
comparable security that is not subject to prepayment risk. Under certain
prepayment rate scenarios, a Fund may fail to recoup any premium paid on
asset-backed securities.
BANK OBLIGATIONS
Bank obligations consist of bankers' acceptances, certificates of
deposit, and demand and time deposits.
BANKERS' ACCEPTANCES are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks and savings and loan associations having, at the time
of investment, total assets in excess of $1 billion (as of the date of their
most recently published financial statements).
CERTIFICATES OF DEPOSIT are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
will be those of domestic and foreign branches of U.S. commercial banks which
are members of the Federal Reserve System or the deposits of which are insured
by the Federal Deposit Insurance Corporation, and in certificates of deposit of
domestic savings and loan associations the deposits of which are insured by the
Federal Deposit Insurance Corporation if, at the time of purchase, such
institutions have total assets in excess of $1 billion (as of the date of their
most recently published financial statements). Certificates of deposit may also
include those issued by foreign banks outside the United States with total
assets at the time of purchase in excess of the equivalent of $1 billion. The
Funds may also invest in Eurodollar certificates of deposit, which are U.S.
dollar-denominated certificates of deposit issued by branches of
8
<PAGE> 367
foreign and domestic banks located outside the United States, and Yankee
certificates of deposit, which are certificates of deposit issued by a U.S.
branch of a foreign bank denominated in U.S. dollars and held in the United
States. Certain Funds may also invest in obligations (including banker's
acceptances and certificates of deposit) denominated in foreign currencies (see
"Foreign Investments" herein).
DEMAND DEPOSITS are funds deposited in a commercial bank or a savings
and loan association which, without prior notice to the bank, may be withdrawn
generally by negotiable draft. Time and demand deposits will be maintained only
at banks or savings and loan associations from which a Fund could purchase
certificates of deposit. TIME DEPOSITS are interest-bearing non-negotiable
deposits at a bank or a savings and loan association that have a specific
maturity date. A time deposit earns a specific rate of interest over a definite
period of time. Time deposits cannot be traded on the secondary market and those
exceeding seven days and with a withdrawal penalty are considered to be
illiquid.
COMMERCIAL PAPER
Commercial paper consists of promissory notes issued by corporations.
Although such notes are generally unsecured, the Funds may also purchase secured
commercial paper. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return. The Funds only purchase commercial paper
that meets the following criteria.
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.
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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. (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.
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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 Banker's 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.
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
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<PAGE> 370
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. 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 will be redenominated in euros. All government bonds
issued by participating nations will be in euros, and outstanding
government bonds will be 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 could adversely affect the value of
the foreign securities held by the Funds.
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.
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- 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.
- 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. Except for the
International Funds, investments in all types of foreign obligations or
securities will not exceed 25% of the net assets of the Funds that may invest in
such securities.
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.
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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 Fund generally arising in connection with the
purchase or sale of its 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
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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.
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 or, in the case of the
International Equity Index Fund, Independence International Associates, Inc.
(the "INTERNATIONAL SUB-ADVISOR" or a "SUB-ADVISOR") expects to purchase, when
the Fund holds cash or short-term investments). In connection with the position
hedging, 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
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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.
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.
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Rather, initial margin is similar to a performance bond or good faith
deposit that is returned to the Fund upon termination of the contract, assuming
the Fund satisfies its contractual obligation.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market." These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying currency rises above the delivery price, the Fund's position declines
in value. The Fund then pays a broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the currency underlying the futures contract. Conversely, if the price
of the underlying currency falls below the delivery price of the contract, the
Fund's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the currency underlying the futures
contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or gain. Such closing transactions involve
additional commission costs.
In addition to the margin requirements discussed above, transactions in
currency futures contracts may involve the segregation of funds pursuant to
requirements imposed by the Securities and Exchange Commission (the "SEC").
Under those requirements, where a Fund has a long position in a futures or
forward contract, it may be required to establish a segregated account (not with
a futures commission merchant or broker) containing cash or certain liquid
assets equal to the purchase price of the contract (less any margin on deposit).
For a short position in futures or forward contracts held by a Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker) with cash or certain liquid assets that,
when added to the amounts deposited as margin, equal the market value of the
instruments or currency underlying the futures or forward contracts (but are not
less than the price at which the short positions were established). However,
segregation of assets is not required if the Fund "covers" a long position. For
example, instead of segregating assets, a Fund, when holding a long position in
a futures or forward contract, could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held by the Fund. In addition, where a Fund takes short positions, or
engages in sales of call options, it need not segregate assets if it "covers"
these positions. For example, where a Fund holds a short position in a futures
or forward contract, it may cover by owning the instruments or currency
underlying the contract. A Fund may also cover such a position by holding a call
option permitting it to purchase the same futures or forward contract at a price
no higher than the price at which the short position was established. Where a
Fund sells a call option on a futures or forward contract, it may cover either
by entering into a long position in the same contract at a price no higher than
the strike price of the call option or by owning the instruments or currency
underlying the futures or forward contract. The Fund could also cover this
position by holding a separate call option permitting it to purchase the same
futures or
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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
on the opportunity to profit without limit from increases in the relative value
of the yen to the dollar.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or to sell a currency
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at a fixed price on a future date. Listed options are third-party contracts
(i.e., performance of the parties' obligations is guaranteed by an exchange or
clearing corporation) which are issued by a clearing corporation, traded on an
exchange and have standardized strike prices and expiration dates. OTC options
are two-party contracts and have negotiated strike prices and expiration dates.
Options on futures contracts are traded on boards of trade or futures exchanges.
Currency swap contacts are negotiated two party agreements entered into in the
interbank market whereby the parties exchange two foreign currencies at the
inception of the contract and agree to reverse the exchange at a specified
future time and at a specified exchange rate. The International Funds will not
speculate in foreign currency options, futures or related options or currency
swap contracts. Accordingly, the International Funds will not hedge a currency
substantially in excess (as determined by Banc One Investment Advisors or the
International Sub-Advisor, in the case of the International Equity Index Fund)
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
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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 the Fund's securities.
Liquidity. In addition, these instruments may not be liquid in all
circumstances. As a result, in volatile markets, the Fund may not be
able to dispose of or offset a transaction without incurring losses.
Although the contemplated use of hedging instruments should tend to
reduce the risk of loss due to a decline in the value of the hedged
security, at the same time the use of these instruments could tend to
limit any potential gain which might result from an increase in the
value of such security.
Judgement of the Advisor and the International Sub-Advisor. Successful
use of hedging instruments by the International 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.
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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.
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.
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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
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so as described herein. In addition, none of the Equity Funds will enter into
futures contracts to the extent that the value of the futures contracts held
would exceed 25% of the respective Fund's total assets.
The Funds have undertaken to restrict their futures contract trading as
follows: first, the Funds will not engage in transactions in futures contracts
for speculative purposes; second, the Funds will not market themselves to the
public as commodity pools or otherwise as vehicles for trading in the
commodities futures or commodity options markets; third, the Funds will disclose
to all prospective Shareholders the purpose of and limitations on their
commodity futures trading; fourth, the Funds will submit to the CFTC special
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.
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RISK FACTORS IN FUTURES TRANSACTIONS
Liquidity. Positions in futures contracts may be closed out only on an
exchange which provides a secondary market for such futures. However,
there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash
payments to maintain the required margin. In such situations, if a Fund
has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to
do so. In addition, a Fund may be required to make delivery of the
instruments underlying futures contracts it holds. The inability to
close options and futures positions also could have an adverse impact
on the ability to effectively hedge such positions. The Funds will
minimize the risk that they will be unable to close out a futures
contract by only entering into futures contracts which are traded on
national futures exchanges and for which there appears to be a liquid
secondary market.
Risk of Loss. The risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits
required, and the extremely high degree of leverage involved in futures
pricing. Because the deposit requirements in the futures markets are
less onerous than margin requirements in the securities market, there
may be increased participation by speculators in the futures market
which may also cause temporary price distortions. A relatively small
price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at
the time of purchase, 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit,
before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of
the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess
of the amount invested in the contract. However, because the futures
strategies engaged in by the Funds are only for risk management
purposes, Banc One Investment Advisors and, with respect to the
International Equity Index Fund, the International Sub-Advisor, and,
with respect to the High Yield Bond, the High Yield Sub-Advisor do not
believe that the Funds are subject to the risks of loss frequently
associated with futures transactions. Each Fund would presumably have
sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the
decline.
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.
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Price Fluctuations. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the
price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily
limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
Some futures strategies, including selling futures, buying puts and
writing covered calls, may reduce a Fund's exposure to price fluctuations. Other
strategies, including buying futures, and buying calls, tend to increase market
exposure. Futures and options may be combined with each other in order to adjust
the risk and return characteristics of the overall portfolio. A Fund expects to
enter into these transactions to manage a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities a Fund anticipates purchasing at a later date, or for other
risk management strategies.
OPTIONS CONTRACTS
Some of the Funds may use options on securities or futures contracts as
a hedging device. An option gives the buyer of the option the right (but not the
obligation) to purchase a futures contract or security at a specified price
(also called the STRIKE price). A CALL OPTION gives the buyer the "right to
purchase" a security at a specified price (the exercise price) at any time until
a certain date (the expiration date). So long as the obligation of the writer of
a call option continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the writer to deliver
the underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure the writer's obligation to deliver
the underlying security in the case of a call option, subject to the rules of
the Options Clearing Corporation, a writer is required to deposit in escrow the
underlying security or other assets in accordance with such rules.
A PUT OPTION gives the buyer the right to sell the underlying futures
contract or security. The purchase price of an option is referred to as its
"premium." The seller (or "writer") of a put option must purchase futures
contracts or securities at a strike price if the option is exercised. In the
case of a call option, the seller must sell the futures contract or security in
the underlying futures contract or security at the strike price if the option is
exercised.
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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
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option, a Fund, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
Unlike one who owns securities not subject to an option, a Fund has no control
over when it may be required to sell the underlying securities, since it may be
assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. Thus, the security could be "called away" at a price
substantially below the fair market value of the security. If a call option
which a Fund has written expires, a Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security during the option period. If the call option is
exercised, a Fund will realize a gain or loss from the sale of the underlying
security. The security covering the call will be maintained in a segregated
account of the Fund's custodian. The Funds do not consider a security covered by
a call to be "pledged" as that term is used in each Fund's policy which limits
the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium each
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Fund's Advisor or Sub-Advisor, in
determining whether a particular call option should be written on a particular
security, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The
premium received by a Fund for writing covered call options will be recorded as
a liability in the Fund's statement of assets and liabilities. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per Share of the Fund
is computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The liability will be extinguished upon expiration
of the option, the purchase of an identical option in the closing transaction,
or delivery of the underlying security upon the exercise of the option.
Generally, a Fund, in order to avoid the exercise of an option sold by
it, will be able to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in a Fund's best interest. A closing purchase
transaction consists of a Fund purchasing an option having the same terms as the
option sold by a Fund, and has the effect of cancelling a Fund's position as a
seller. The premium which a Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by a Fund
are exercised and a Fund delivers securities to the holder of a call option, a
Fund's turnover rate will increase, which would cause a Fund to incur additional
brokerage expenses.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security.
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Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. If a Fund desires to sell a
particular security from its portfolio on which it has written a call options it
will seek to effect a closing transaction prior to, or concurrently with, the
sale of the security. There is, of course, no assurance that a Fund will be able
to effect such closing transactions at a favorable price. If a Fund cannot enter
into such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security. This could result in higher transaction costs. A Fund will pay
transaction costs in connection with the writing of options to close out
previously written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
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PURCHASING CALL OPTIONS
Certain Funds may purchase call options to hedge against an increase in
the price of securities that the Fund wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Fund, as
holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Fund might
have realized had it bought the underlying security at the time it purchased the
call option. In the event that paying a premium for a call option, together with
a price movement in the underlying security, is such that exercise of the option
would not be profitable to the Fund, loss of the premium may be offset by a
decrease in the acquisition cost of securities by the Fund.
PURCHASING PUT OPTIONS
Certain Funds may also purchase put options to protect their portfolio
holdings in an underlying security against a decline in market value. Such hedge
protection is provided during the life of the put option since the Fund, as
holder of the put option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying security's market
price. For a put option to be profitable, the market price of the underlying
security must decline sufficiently below the exercise price to cover the premium
and transaction costs. By using put options in this manner, the Fund will reduce
any profit it might otherwise have realized from appreciation of the underlying
security by the premium paid for the put option and by transaction cost.
However, any loss of premium may be offset by an increase in the value of the
Fund's securities.
SECURED PUTS
Certain Funds may write secured puts. For the secured put writer,
substantial depreciation in the value of the underlying security would result in
the security being "put to" the writer at the strike price of the option which
may be substantially in excess of the fair market value of the security. If a
secured put option expires unexercised, the writer realizes a gain in the amount
of the premium.
STRADDLES AND SPREADS
Certain Funds also may engage in straddles and spreads. In a straddle
transaction, a Fund either buys a call and a put or sells a call and a put on
the same security. In a spread, the Fund purchases and sells a call or a put.
The Fund will sell a straddle when Banc One Investment Advisors or the
applicable Sub-Advisor believes the price of a security will be stable. The Fund
will receive a premium on the sale of the put and the call. A spread permits the
Fund to make a hedged investment that the price of a security will increase or
decline.
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RISK FACTORS IN OPTIONS TRANSACTIONS
Risk of Loss. When it purchases an option, a Fund runs the risk that it
will lose its entire investment in the option in a relatively short
period of time, unless the Fund exercises the option or enters into a
closing sale transaction with respect to the option during the life of
the option. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, a Fund
will lose part or all of its investment in the option. This contrasts
with an investment by a Fund in the underlying securities, since the
Fund may continue to hold its investment in those securities
notwithstanding the lack of a change in price of those securities. In
addition, there may be imperfect or no correlation between the changes
in market value of the securities held by the Funds and the prices of
the options.
Judgement of Advisor and Sub-Advisors. The successful use of the
options strategies depends on the ability of Banc One Investment
Advisors or the applicable Sub-Advisor to assess interest rate and
market movements correctly and to accurately calculate the fair price
of the option. The effective use of options also depends on a Fund's
ability to terminate option positions at times when Banc One Investment
Advisors or the applicable Sub-Advisor, deems it desirable to do so. A
Fund will take an option position only if Banc One Investment Advisors
or the applicable Sub-Advisor believes there is a liquid secondary
market for the option, however, there is no assurance that a Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.
Liquidity. If a secondary trading market in options were to become
unavailable, a Fund could no longer engage in closing transactions.
Lack of investor interest might adversely affect the liquidity of the
market for particular options or series of options. A marketplace may
discontinue trading of a particular option or options generally. In
addition, a market could become temporarily unavailable if unusual
events, such as volume in excess of trading or clearing capability,
were to interrupt normal market operations. A marketplace may at times
find it necessary to impose restrictions on particular types of options
transactions, which may limit a Fund's ability to realize its profits
or limit its losses.
Market Restrictions. Disruptions in the markets for the securities
underlying options purchased or sold by a Fund could result in losses
on the options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as well. As
a result, a Fund as purchaser or writer of an option will be unable to
close out its positions until option trading resumes, and it may be
faced with losses if trading in the security reopens at a substantially
different price. In addition, the Options Clearing Corporation ("OCC")
or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the
option has also been halted, a Fund as purchaser or writer of an option
will be locked into its position until one of the two restrictions has
been lifted. If a prohibition on exercise remains in effect until
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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 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
MONEYMARKET 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.
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The Treasury Money Market Fund, 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
Treasury Money Market Fund, 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.
The Tax-Exempt Money Market Fund may invest only in obligations which,
at the time of purchase, (i) possess the highest short-term ratings from a NRSRO
or (ii) possess, in the case of multiple-rated securities, the highest
short-term ratings by at least two NRSROs; or (iii) do not possess a rating
(i.e., are unrated) but are determined by Banc One Investment Advisors to be of
comparable quality to the rated instruments eligible for purchase by the Fund
under guidelines adopted by the Board of Trustees (collectively, "FIRST TIER
SECURITIES"). Some of the securities of the Tax-Exempt Money Market Fund may be
subject to repurchase agreements.
With regard to the Money Market Funds and the Institutional Money
Market Funds (other than the Tax-Exempt Money Market Fund), investments will be
limited to those obligations which, at the time of purchase, (i) possess one of
the two highest short-term ratings from an NRSRO in the case of single-rated
securities; or (ii) possess, in the case of multiple-rated securities, one of
the two highest short-term ratings by at least two NRSROs or (iii) do not
possess a rating (i.e., are unrated) but are determined by Banc One Investment
Advisors to be of comparable quality to the rated instruments eligible for
purchase by the Trust under guidelines adopted by the Board of Trustees
(collectively, "ELIGIBLE SECURITIES"). A security that has not received a rating
will be deemed to possess the rating assigned to an outstanding class of the
issuer's short-term debt obligations if determined by Banc One Investment
Advisors to be comparable in priority and security to the obligation selected
for purchase by the Trust.
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, are
determined by Banc One Investment Advisors to be of comparable quality;
provided, however, that where the demand feature would be readily exercisable in
the event of a default in payment of principal or interest on the underlying
security, the obligation may be acquired based on the rating possessed by the
demand feature or, if the demand feature does not possess a rating, a
determination of comparable quality by Banc One Investment Advisors. A security
which at the time of issuance had a maturity exceeding 397 days but, at the time
of purchase, has a remaining maturity of 397 days or less, is not considered an
Eligible Security if it does not possess a high quality rating and the long-term
rating, if any, is not within the top three highest rating categories.
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Eligible Securities include First-Tier Securities and Second-Tier
Securities. First-Tier Securities include those that possess a rating in the
highest category, in the case of a single-rated security, or at least two
ratings in the highest rating category, in the case of multiple-rated
securities, or, if the securities do not possess a rating, are determined to be
of comparable quality by Banc One Investment Advisors pursuant to the guidelines
adopted by the Board of Trustees. Second-Tier Securities are all other Eligible
Securities.
Each Money Market Fund (other than the Ohio Municipal Money Market
Fund, 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
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yield securities may not be as strong financially as those issuing higher rated
securities. These securities are regarded as predominately speculative. The
market value of high yield securities may fluctuate more than the market value
of higher rated securities, since high yield securities tend to reflect
short-term corporate and market developments to a greater extent than higher
rated securities, which fluctuate primarily in response to the general level of
interest rates, assuming that there has been no change in the fundamental
quality of such securities. The market prices of fixed income securities
generally fall when interest rates rise. Conversely, the market prices of
fixed-income securities generally rise when interest rates fall. Additional
risks of high yield securities include limited liquidity and secondary market
support. As a result, the prices of high yield securities may decline rapidly in
the event that a significant number of holders decide to sell. Changes in
expectations regarding an individual issuer, an industry or high yield
securities generally could reduce market liquidity for such securities and make
their sale by the Funds more difficult, at least in the absence of price
concessions. Reduced liquidity also could adversely affect the Funds' ability to
accurately value high yield securities. Issuers of high yield securities also
are more vulnerable to real or perceived economic changes (for instance, an
economic downturn or prolonged period of rising interest rates), political
changes or adverse developments specific to the issuer. Adverse economic,
political or other developments may impair the issuer's ability to service
principal and interest obligations, to meet projected business goals and to
obtain additional financing, particularly if the issuer is highly leveraged. In
the event of a default, the Funds would experience a reduction of their income
and could expect a decline in the market value of the defaulted securities.
Further, proposed or yet to be proposed new laws may have a possible
negative impact on the market for high yield, high risk bonds. As an example, in
the late 1980's, legislation required federally-insured savings and loan
associations to divest their investments in high yield, high risk bonds. New
legislation, if enacted, could have a material negative effect on a Fund's net
asset value and investment practices.
Finally, the market prices of high-yield, high risk securities
structured as zero coupon or pay-in-kind securities (as defined below) are
generally affected to a greater extent by interest rate changes and tend to be
more volatile than securities which pay interest periodically. In addition, zero
coupon, pay-in-kind and delayed interest bonds often do not pay interest until
maturity. Accordingly, such bonds may involve greater credit risks than bonds
paying interest currently. However, the Fund must recognize a computed amount of
interest income and pay dividends to shareholders even though it has received no
cash. In some instances, the Funds may have to sell securities to have
sufficient cash to pay the dividends.
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.
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Zero-coupon debt securities. These bear no interest obligation
but are issued at a discount from their value at maturity.
When held to maturity, their entire return equals the
difference between their issue price and their maturity value.
Zero-fixed-coupon debt securities. These are zero-coupon debt
securities which convert on a specified date to
interest-bearing debt securities.
Pay-in-kind bonds. These are bonds which allow the issuer, at
its option, to make current interest payments on the bonds
either in cash or in additional bonds.
Private Placements. These are bonds sold directly to a small
number of investors, usually institutional, without
registration under the Securities Act of 1933
Convertible Securities. These are bonds or preferred stock
that convert to common stock.
Preferred Stock. These are stocks that generally pay a
dividend at a specified rate and which have preference over
common stock in the payment of dividends and in liquidation.
Loan Participations and Assignments. These are participations
in, or assignments of all or a portion of loans to
corporations or to governments, including governments of the
less developed countries ("LDC'S").
This foregoing list is not definitive. The prospectus and this Statement of
Additional Information list additional types of permissible investments. Such
investments may be purchased by some of the Funds even if they are classified as
non-investment grade securities.
INDEX INVESTING BY THE EQUITY INDEX, MARKET EXPANSION INDEX AND INTERNATIONAL
EQUITY INDEX FUNDS
Equity Index Fund. It is anticipated that the indexing approach that
will be employed by the Equity Index Fund will be an effective method of
substantially tracking percentage changes in the S&P 500 Index (the "INDEX"). It
is a reasonable expectation that there will be a close correlation between the
Fund's performance and that of the Index in both rising and falling markets. The
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the Index of at least 0.95, without taking into account
expenses. A correlation of 1.00 would indicate perfect correlation, which would
be achieved when the Fund's net asset value, including the value of its dividend
and capital gains distributions, increases or decreases in exact proportion to
changes in the Index. The Fund's ability to correlate its performance with the
Index, however, may be affected by, among other things, changes in securities
markets, the manner in which the Index is calculated by Standard & Poor's
Corporation ("S&P") and the timing of purchases and redemptions. In the future,
the Trustees of the Trust, subject
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to the approval of Shareholders, may select another index if such a standard of
comparison is deemed to be more representative of the performance of common
stocks.
S&P chooses the stocks to be included in the Index largely on a
statistical basis. Inclusion of a stock in the Index in no way implies an
opinion by S&P as to its attractiveness as an investment. The Index is
determined, composed and calculated by S&P without regard to the Equity Index
Fund. S&P is neither a sponsor of, nor in any way affiliated with the Equity
Index Fund, and S&P makes no representation or warranty, expressed or implied on
the advisability of investing in the Equity Index Fund or as to the ability of
the Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Index or any data included therein. "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. It is anticipated that the indexing approach that will
be employed by the Market Expansion Index Fund will be an effective method of
substantially tracking percentage changes in the Indices. Small capitalization
companies are also added to the Fund in equal weightings according to an
analysis of the industry diversification of the combined Indices. It is a
reasonable expectation that there will be a close correlation between the Fund's
performance and that of the combined Indices in both rising and falling markets.
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
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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.
S&P chooses the stocks to be included in the Indices largely on a statistical
basis. Inclusion of a stock in the Indices in no way implies an opinion by S&P
as to its attractiveness as an investment. 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. "S&P SmallCap
600" and "S&P MidCap 400" are registered service marks of S&P.
Banc One Investment Advisors generally selects stocks for the Market
Expansion Index Fund based on both capitalization weightings in the Indices and
industry representation.
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
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income earned from domestic investments by foreigners). Country weights are thus
established in proportion to the size of their economies as measured by Gross
Domestic Product, which results in a more uniform distribution of capital across
the EAFE markets than if capitalization weights were used as the basis. The
country weights within the International Index are systematically rebalanced
annually to the most recent GDP weights.
MSCI chooses the stocks to be included in the International Index
largely on a statistical basis. Inclusion of a stock in the International Index
in no way implies an opinion by MSCI as to its attractiveness as an investment.
The International Index is determined, composed and calculated by MSCI without
regard to the International Equity Index Fund. MSCI is neither a sponsor of, nor
in any way affiliated with the International Equity Index Fund, and MSCI makes
no representation or warranty, expressed or implied on the advisability of
investing in the International Equity Index Fund or as to the ability of the
International Index to track general stock market performance, and MSCI
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the International Index or any data included therein.
"MSCI EAFE Index" is a service mark of MSCI.
INVESTMENT COMPANY SECURITIES
Some of the Funds may invest up to 5% of their total assets in the
securities of any one investment company (another mutual fund), but may not own
more than 3% of the outstanding securities of any one investment company or
invest more than 10% of their total assets in the securities of other investment
companies. These limits do not apply to the Funds of Funds. Other investment
company securities may include securities of a money market fund of the Trust,
and securities of other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator. Because other investment
companies employ an investment advisor, such investments by the Funds may cause
Shareholders to bear duplicate fees. Banc One Investment Advisors will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust and in other funds advised by Banc One Investment Advisors;
and, to the extent required by the laws of any state in which shares of the
Trust are sold, Banc One Investment Advisors will waive its fees attributable to
the assets of any Fund invested in any investment company.
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
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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 Participations and not an Assignment. A Fund may have difficulty
disposing of Assignments and Participations because to do so it will have to
assign such securities to a third party. Because there is no liquid market for
such securities, the Funds anticipate that such securities could be sold only to
a limited number of institutional investors. The lack of a liquid secondary
market may have an adverse impact on the value of such securities and a Fund's
ability to dispose of particular Assignments or Participations when necessary to
meet a Fund's liquidity needs in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Fund to assign a value to those securities for purposes of
valuing a Fund's portfolio and calculating its net asset value.
MORTGAGE-RELATED SECURITIES
MORTGAGE-BACKED SECURITIES (CMOS AND REMICS). Certain of the Funds may
invest in mortgage-backed securities including collateralized mortgage
obligations ("CMOS") and Real Estate Mortgage Investment Conduits ("REMICS").
Mortgage-backed securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as Ginnie Mae and
government-related organizations such as Fannie Mae and Freddie Mac, as well as
by nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies. Such
non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. A REMIC is a CMO that qualifies
for special tax treatment under the Code and invests in certain mortgages
principally secured by interests in real property and other permitted
investments.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue.
Ginnie Mae Securities. Mortgage-related securities issued by Ginnie Mae
include Ginnie Mae Mortgage Pass-Through Certificates which are
guaranteed as to the timely payment of principal and interest by Ginnie
Mae and such guarantee is
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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 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
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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 require that specified amounts of
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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.
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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 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
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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 prepayment increase and falling as prepayments decrease.
The market value of the class consisting entirely of principal payments
generally is unusually volatile in response to changes in interest rates. The
yields on a class of SMBS that receives all or most of the interest from
mortgage assets are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that any premium paid will not be fully recouped.
Banc One Investment Advisors will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using certain
analytical and hedging.
The Bond Funds (other than the 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.
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,
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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
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volatility in the market value of the Fund's portfolio and therefore in the net
asset value of the Fund's shares will be a function of the length of the
interest rate reset periods and the degree of volatility in the applicable
indices.
In general, changes in both prepayment rates and interest rates will
change the yield on Mortgage-Backed Securities. The rate of principal
prepayments with respect to ARMs has fluctuated in recent years. As is the case
with fixed mortgage loans, ARMs may be subject to a greater rate of principal
prepayments in a declining interest rate environment. For example, if prevailing
interest rates fall significantly, ARMs could be subject to higher prepayment
rates than if prevailing interest rates remain constant because the availability
of fixed rate mortgage loans at competitive interest rates may encourage
mortgagors to refinance their ARMs to "lock-in" a lower fixed interest rate.
Conversely, if prevailing interest rates rise significantly, ARMs may prepay at
lower rates than if prevailing rates remain at or below those in effect at the
time such ARMs were originated. As with fixed rate mortgages, there can be no
certainty as to the rate of prepayments on the ARMs in either stable or changing
interest rate environments. In addition, there can be no certainty as to whether
increases in the principal balances of the ARMs due to the addition of deferred
interest may result in a default rate higher than that on ARMs that do not
provide for negative amortization. Other factors affecting prepayment of ARMs
include changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgage properties and servicing decisions.
RISKS FACTORS OF MORTGAGE-RELATED SECURITIES
Guarantor Risk. There can be no assurance that the U.S. government
would provide financial support to Fannie Mae, Freddie Mac or Ginnie
Mae if necessary in the future. Although certain mortgage-related
securities are guaranteed by a third party or otherwise similarly
secured, the market value of the security, which may fluctuate, is not
so secured.
Interest Rate Sensitivity. If a Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline
in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As
with other interest-bearing securities, the prices of such securities
are inversely affected by changes in interest rates. However, though
the value of a mortgage-related security may decline when interest
rates rise, the converse is not necessarily true since in periods of
declining interest rates the mortgages underlying the securities are
prone to prepayment. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments
on the underlying mortgages and, therefore, it is not possible to
predict accurately the security's return to the Funds. In addition,
regular payments received in respect of mortgage-related securities
include both interest and principal. No assurance can be given as to
the return the Funds of the Trust will receive when these amounts are
reinvested.
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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, 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.
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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
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water pollution control facilities, sewage or solid waste disposal facilities,
and certain facilities for water supply. Other private activity bonds and
industrial development bonds issued to fund the construction, improvement,
equipment or repair of privately-operated industrial, distribution, research, or
commercial facilities may also be Municipal Securities, but the size of such
issues is limited under current and prior federal tax law. The aggregate amount
of most private activity bonds and industrial development bonds is limited
(except in the case of certain types of facilities) under federal tax law by an
annual "volume cap." The volume cap limits the annual aggregate principal amount
of such obligations issued by or on behalf of all governmental instrumentalities
in the state.
The two principal classifications of Municipal Securities consist of
"general obligation" and "limited" (or revenue) issues. General obligation bonds
are obligations involving the credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon appropriation by the issuer's
legislative body. Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Private
activity bonds and industrial development bonds generally are revenue bonds and
thus not payable from the unrestricted revenues of the issuer. The credit and
quality of such bonds is generally related to the credit of the bank selected to
provide the letter of credit underlying the bond. Payment of principal of and
interest on industrial development revenue bonds is the responsibility of the
corporate user (and any guarantor).
The Funds may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities, and in other tax-exempt
investments including pollution control bonds and tax-exempt commercial paper.
Each Fund may purchase short-term tax-exempt General Obligations Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, and other forms of short-term tax-exempt loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements, or other revenues. Project Notes are issued by a
state or local housing agency and are sold by the Department of Housing and
Urban Development. While the issuing agency has the primary obligation with
respect to its Project Notes, they are also secured by the full faith and credit
of the United States through agreements with the issuing authority which provide
that, if required, the federal government will lend the issuer an amount equal
to the principal of and interest on the Project Notes.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligations, and the rating of the
issue. The ratings of Moody's and S&P represent their opinions as to the quality
of Municipal Securities. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Securities with
the same maturity, interest rate and
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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. The Board of Trustees is responsible for determining the
credit quality of unrated municipal leases, on an ongoing basis, including an
assessment of the likelihood that the lease will not be canceled.
RISK FACTORS IN MUNICIPAL SECURITIES
Tax Risk. The Code imposes certain continuing requirements on issuers
of tax-exempt bonds regarding the use, expenditure and investment of
bond proceeds and the payment of rebates to the United States of
America. Failure by the issuer to comply subsequent to the issuance of
tax-exempt bonds with certain of these requirements could cause
interest on the bonds to become includable in gross income retroactive
to the date of issuance.
Housing Authority Tax Risk. The exclusion from gross income for Federal
income tax purposes for certain housing authority bonds depends on
qualification under relevant provisions of the Code and on other
provisions of Federal law. These provisions of Federal law contain
certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage
bonds and the income levels of tenants of the rental projects financed
with the proceeds of the multi-family housing bonds. While the issuers
of the bonds, and other parties, including the originators and
servicers of the single-family mortgages and the owners of the rental
projects financed with the multi-family housing bonds, covenant to meet
these ongoing requirements and generally agree to institute procedures
designed to insure that these requirements will be consistently met,
there is no assurance that the requirements will be
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consistently met. The failure to meet these requirements could cause
the interest on the bonds to become taxable, possibly retroactively
from the date of issuance, thereby reducing the value of the bonds and
subjecting Shareholders to unanticipated tax liabilities and possibly
requiring a Fund to sell the bonds at the reduced value. Furthermore,
any failure to meet these ongoing requirements might constitute an
event of default under the applicable mortgage or permit the holder to
accelerate payment of the bond or require the issuer to redeem the
bond. In any event, where the mortgage is insured by the Federal
Housing Administration ("FHA"), the consent of the FHA may be required
before insurance proceeds would become payable to redeem the mortgage
subsidy
Information Risk. Information about the financial condition of issuers
of Municipal Securities may be less available than about corporations
having a class of securities registered under the Securities Exchange
Act of 1934.
State and Federal Laws. An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency, and
other laws affecting the rights and remedies of creditors, such as the
federal bankruptcy code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon the
enforcement of such obligations. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of
its Municipal Securities may be materially adversely affected by
litigation or other conditions.
Litigation and Current Developments. Such litigation or conditions may
from time to time have the effect of introducing uncertainties in the
market for tax-exempt obligations or certain segments thereof, or may
materially affect the credit risk with respect to particular bonds or
notes. Adverse economic, business, legal or political developments
might affect all or a substantial portion of a Fund's Municipal
Securities in the same manner.
New Legislation. From time to time, proposals have been introduced
before Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on tax exempt bonds, and
similar proposals may be introduced in the future. The Supreme Court
has held that Congress has the constitutional authority to enact such
legislation. It is not possible to determine what effect the adoption
of such proposals could have on (i) the availability of Municipal
Securities for investment by the Funds, and (ii) the value of the
investment portfolios of the Funds.
LIMITATIONS ON THE USE OF MUNICIPAL SECURITIES
As a matter of fundamental policy, under normal market conditions, at
least 80% of the total assets (net assets in the case of the Louisiana Municipal
Bond Fund) of each of the Municipal Money Market Fund, the Ohio Municipal Money
Market Fund, the 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 Texas Municipal Bond Fund, the Kentucky
Municipal Bond Fund, the Louisiana Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Arizona
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Municipal Bond Fund, and the Tax-Exempt Money Market Fund will be invested in
Municipal Securities. Other Funds may also invest in Municipal Securities if
Banc One Investment Advisors or the applicable Sub-Advisor determines that such
Municipal Securities offer attractive yields. The Funds may invest in Municipal
Securities either by purchasing them directly or by purchasing certificates of
accrual or similar instruments evidencing direct ownership of interest payments
or principal payments, or both, on Municipal Securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on such certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related Municipal
Securities will to the same extent as interest on such Municipal Securities be
exempt from federal income tax and state income tax (where applicable) and not
treated as a preference item for individuals for purposes of the federal
alternative minimum tax.
The Funds may also invest in Municipal Securities by purchasing from
banks participation interests in all or part of specific holdings of Municipal
Securities. Such participation may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from a Fund in connection with the arrangement. A Fund will
not purchase participation interests unless it receives an opinion of counsel or
a ruling of the Internal Revenue Service that interest earned by it on Municipal
Securities in which it holds such participation interest is exempt from federal
income tax and state income tax (where applicable) and not treated as a
preference item for individuals for purposes of the federal alternative minimum
tax.
The Tax-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 1996 and a substantially similar percentage increase in 1997. Arizona's
employment rate increased 6.7% in 1994, 6.1% in 1995, 5.6% in 1996 and 4.4% in
1997. For 1997, Arizona ranked second in the country for job growth, and the
Phoenix-Mesa metropolitan area ranked first among all United States metropolitan
areas for job growth. Recent lay offs by Motorola and Intel, two large Phoenix
area employers, may lead to more modest job growth in 1998. The 1996
unemployment rate was 5.5%, and the 1997 unemployment rate was 4.7%.
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Arizona's per capita personal income has generally varied between 5%
and 15% below the national average due to such factors as the chronic poverty on
the state's Indian reservations, the states relatively high number of retirees
and children, and the state's below-average wage scale. However, Arizona's
aggregate personal income grew nearly 5.3% during 1996 to approximately $84.5
billion and is estimated to have reached $100.8 billion in 1997.
Despite an increase in population, employment and aggregate personal
income, retail sales growth rates have declined over the last few years. The
growth rate was 12.0% in 1994, 8.8% in 1995, 5.9% in 1996 and an estimated 5.1%
in 1997.
After experiencing several years of budget shortfalls requiring
mid-year adjustments, the State of Arizona has had significant budget surpluses
each year since 1993, including a $593.3 million surplus for the fiscal year
ended June 30, 1997. An amendment to the Arizona Constitution requiring a 2/3
majority vote in both houses of the Legislature to enact any tax or fee increase
limits Arizona's ability to raise additional revenue when needed, but Arizona
has placed some of its surplus revenues in a rainy-day fund to address this
risk.
The State of Arizona, as such, has no general obligation debt. The
Arizona Department of Transportation, the Arizona Board of Regents, the Arizona
Power Authority and the Water Infrastructure Authority of Arizona have each
issued revenue bonds. The State of Arizona has financed certain capital
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
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districts to issue bonds. There are currently no challenges pending with respect
to the legislation.
KENTUCKY MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional Information,
the term "Kentucky Municipal Securities" refers to debt securities which are
issued by or on behalf of Kentucky or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and Kentucky personal income tax.
Risk Factors Regarding Investments in Kentucky Municipal Securities. As
of June 30, 1998, Kentucky had an unemployment rate of 4.5%, slightly less than
the 4.7% national average. For calendar year 1997, Kentucky's per capita income
ranked 41st in the nation and was 81% of the national average. The most current
audited financial statements for Kentucky indicate a surplus of funds in the
General Fund of $538,075,000 as of June 30, 1997, which was $411,185,000 above
the budgeted balance.
Unlike the municipal securities of most states, nearly all Kentucky
Municipal Securities are not general obligations of the issuer; rather, payment
depends on revenues generated by the property financed by the securities.
LOUISIANA MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional Information,
the term "Louisiana Municipal Securities" refers to debt securities which are
issued by or on behalf of Louisiana or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and Louisiana personal income tax.
Risk Factors Regarding Investments in Louisiana Municipal Securities.
The State of Louisiana continues to consolidate its economic and financial gains
after a period of difficulty. In the mid-1980's, abrupt declines in the price of
oil disrupted both the economy and financial operations of the State. Recent
years have generally produced operating surpluses and major financial issues,
such as Medicaid and risk management, have been addressed. Also, debt has been
reduced to a moderate level, at $574 per capita and 2.9% of personal income.
Louisiana's economy is resource based, led by oil and gas, but
agribusiness and tourism are also significant components. Growth in the service
employment sector is providing more diversity, but the State is still very
dependent on oil and gas for direct or indirect employment and income. The price
of oil is estimated at $17 per barrel in 1998 and $17.50 in 1999.
Personal income gains were in excess of the national rates in 1990 -
1994, both in total and on a per capita basis, but the gains were lower in 1995
and 1996. Louisiana's per capita personal income is currently equal to 81% of
the national average, but this is still well below the 90% figure recorded in
1981 when the oil and gas industry was
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extremely active. The State projects employment to increase 4.8% in 1998 and
4.5% in 1999.
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 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
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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
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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 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.
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RISK FACTORS REGARDING INVESTMENTS IN OHIO MUNICIPAL SECURITIES
The economy of Ohio, while becoming increasingly diversified and
increasingly reliant on the service sector, continues to rely in significant
part on durable goods manufacturing, which is largely concentrated in motor
vehicles and equipment, steel, rubber products and household appliances. As a
result, general economic activity in Ohio, as in many other industrial states,
tends to be more cyclical than in some other states and in the nation as a
whole. Agriculture also is an important segment of the Ohio economy, and the
state has instituted several programs to provide financial assistance to
farmers. Although revenue obligations of the state or its political subdivisions
may be payable from a specific source or project, and general obligation debt
may be payable from a specific tax, there can be no assurance that future
economic difficulties and the resulting impact on state and local government
finances will not adversely affect the market value of the Ohio Municipal
Securities in the Funds of the Trust or the ability of the respective obligors
to make timely payment of interest and principal on such obligations.
Since the Ohio Municipal Bond Fund and Ohio Municipal Money Market Fund
invest primarily in Ohio Municipal Securities, the value of each Fund's Shares
may be especially affected by factors pertaining to the economy of Ohio and
other factors specifically affecting the ability of issuers of Ohio Municipal
Securities to meet their obligations. As a result, the value of the Shares of
the Ohio Municipal Bond Fund and the Ohio Municipal Money Market Fund may
fluctuate more widely than the value of Shares of a portfolio investing in
securities relating to a number of different states. The ability of Ohio state,
county, or local governments to meet their obligations will depend primarily on
the availability of tax and other revenues to those governments and on their
fiscal conditions generally. The amounts of tax and other revenues available to
issuers of Ohio Municipal Securities may be affected from time to time by
economic, political and demographic conditions within the state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of Ohio Municipal Securities may also affect their ability to meet their
obligations. Payments of principal and interest on limited obligation securities
will depend on the economic condition of the facility or specific revenue source
from which revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions in the state. Any reduction
in the actual or perceived ability to meet obligations on the part of either an
issuer of an Ohio Municipal Security or a provider of credit enhancement for
such Ohio Municipal Security (including a reduction in the rating of its
outstanding securities) would likely affect adversely the market value and
marketability of that Ohio Municipal Security and could adversely affect the
values of other Ohio Municipal Securities as well.
TEXAS MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional Information,
the term "Texas Municipal Securities" refers to debt securities which are issued
by or on behalf of Texas or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from federal income tax.
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Risk Factors Regarding Investments in Texas Municipal Securities.
Because the Fund invests primarily in obligations issued by Texas entities, the
Fund's performance is partially dependent upon economic conditions within the
State of Texas generally and upon the economic condition of issuing governments
and their instrumentalities in particular. In the late 1980's, weakness in the
oil and gas related and agricultural sectors of the Texas economy adversely
affected consumer spending, financial institutions, utility demand, and real
estate values within the state. Consequently, the state and many of its local
governments had to increase sales, utilities, and ad valorem tax rates in order
to maintain revenue yields. In the past two years, however, in contrast to the
national economy, business activity in Texas has strengthened, with employment
growth occurring in most sectors. In addition, Texas' major financial
institutions have been recapitalized and bank failures have generally ceased.
WEST VIRGINIA MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional Information,
the term "West Virginia Municipal Securities" refers to debt securities which
are issued by or on behalf of West Virginia or its authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and is generally exempt from West Virginia income tax.
Risk Factors Regarding Investments in West Virginia Municipal
Securities. Being invested primarily in West Virginia securities, the West
Virginia Municipal Bond Fund is subject to the risks of West Virginia's economy
and of the financial condition of its state and local governments and their
agencies.
West Virginia's economy is relatively stable. While coal mining,
chemicals and manufacturing make up an important part of that economy, state and
local governments have made and continue to make concentrated efforts to
encourage diversification of the state's economy with some success. However,
unemployment for the State continues to exceed the national average.
The financial resources for state and local governments in recent years
have been adequate. But, with little or no population growth, an aging
population, unemployment remaining above the national average, continuing
decline in school enrollment, the government and school boards continue to
struggle to produce sufficient revenues to fund operations to support public
education.
NEW FINANCIAL PRODUCTS
New options and futures contracts and other financial products, and
various combinations thereof, continue to be developed and certain of the Funds
may invest in any such options, contracts and products as may be developed to
the extent consistent with each Fund's investment objective, policies and
restrictions and the regulatory requirements applicable to investment companies.
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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.
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
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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
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seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although (with respect to repurchase agreements subject to U.S. law)
the Board of Trustees of the Trust believes that, under the regular procedures
normally in effect for custody of a Fund's securities subject to repurchase
agreements and under federal laws, a court of competent jurisdiction would rule
in favor of the Trust if presented with the question. Securities subject to
repurchase agreements will be held by the Trust's custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered by the SEC to be loans by a Fund under the 1940 Act.
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
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investors like the Funds through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Funds believe that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat restricted securities that meet the liquidity criteria
established by the Board of Trustees, including Section 4(2) commercial paper
and Rule 144A Securities, as determined by Banc One Investment Advisors, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a SEC Staff position set forth in the
adopting release for Rule 144A under the Securities Act of 1933 ("RULE 144A").
Rule 144A is a nonexclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for resale. The Funds believe that the Staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Trustees. The Trustees have directed Banc One Investment Advisors to
consider the following criteria in determining the liquidity of certain
restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace trades.
Certain Section 4(2) commercial paper programs cannot rely on Rule 144A
because, among other things, they were established before the adoption of the
rule. However, the Trustees may determine for purposes of the Trust's liquidity
requirements that an issue of 4(2) commercial paper is liquid if the following
conditions, which are set forth in a 1994 SEC no-action letter, are met:
- The 4(2) paper must not be traded flat or in default as to principal
or interest;
- The 4(2) paper must be rated in one of the two highest rating
categories by a least two NRSROS, or if only one NRSRO rates the security, by
that NRSRO, or if unrated, is determined by Banc One Investment Advisors or the
applicable Sub-Advisor to be of equivalent quality; and
- Banc One Investment Advisors or the applicable Sub-Advisor must
consider the trading market for the specific security, taking into account all
relevant factors, including but not limited, to whether the paper is the subject
of a commercial paper program that is administered by an issuing and paying
agent bank and for which there exists a dealer
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willing to make a market in that paper, or is administered by a direct issuer
pursuant to a direct placement program; and
- Banc One Investment Advisors or the applicable Sub-Advisor shall
monitor the liquidity of the 4(2) commercial paper purchased and shall report to
the Board of Trustees promptly if any such securities are no longer determined
to be liquid if such determination causes a Fund to hold more than 15% (10% for
Money Market Funds) of its net assets in illiquid securities in order for the
Board of Trustees to consider what action, if any, should be taken on behalf of
The One Group, unless Banc One Investment Advisors or the applicable Sub-Advisor
is able to dispose of illiquid assets in an orderly manner in an amount that
reduces the Fund's holdings of illiquid assets to less than 15% (10% for Money
Market Funds) of its net assets; and
- Banc One Investment Advisors or the applicable Sub-Advisor shall
report to the Board of Trustees on the appropriateness of the purchase and
retention of liquid restricted securities under these Guidelines no less
frequently that quarterly.
SECURITIES LENDING
In order to generate additional income, each of the Funds, except the
Treasury Cash Management Money Market Fund, the Treasury Prime Cash Management
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 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
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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.
SPDRS
Certain Funds may invest in Standard & Poor's Depository Receipts
("SPDRS"). SPDRs are interests in unit investment trusts. Such investment trusts
invest in a securities portfolio that includes substantially all of the common
stocks (in substantially the same weights) as the common stocks included in a
particular Standard Poor's Index such as the S&P 500. SPDRs are traded on the
American Stock Exchange, but may not be redeemed. The results of SPDRs will not
match the performance of the designated S&P Index due to reductions in the
SPDRs' performance attributable to transaction and other expenses, including
fees paid by the SPDR to service providers. SPDRs distribute dividends on a
quarterly basis.
SPDRs are not actively managed. Rather, a SPDR's objective is to track
the performance of a specified index. Therefore, securities may be purchased,
retained and sold by SPDRs at times when an actively managed trust would not do
so. As a result, you can expect greater risk of loss (and a correspondingly
greater prospect of gain) from changes in the value of securities that are
heavily weighted in the index than would be the case if SPDR was not fully
invested in such securities. Because of this, a SPDRs price can be volatile, a
Fund may sustain sudden, and sometimes substantial, fluctuations in the value of
its investment in SPDRs.
A Fund will limit its investments in SPDRs to 5% of the Fund's total
assets and 3% of the outstanding voting securities of the SPDRs issuer.
Moreover, a Fund's investments in SPDRs will not exceed 10% of the Fund's total
assets, when aggregated with all other investments in investment companies.
STRUCTURED INSTRUMENTS
Structured instruments are debt securities issued by agencies of the
U.S. government (such as Ginnie Mae, Fannie Mae, and Freddie Mac), banks,
corporations,
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and other business entities whose interest and/or principal payments are indexed
to certain specific foreign currency exchange rates, interest rates, or one or
more other reference indices. Structured instruments frequently are assembled in
the form of medium-term notes, but a variety of forms are available and may be
used in particular circumstances. Structured instruments are commonly considered
to be derivatives.
The terms of such structured instruments provide that their principal
and/or interest payments are adjusted upwards or downwards to reflect changes in
the reference index while the structured instruments are outstanding. In
addition, the reference index may be used in determining when the principal is
redeemed. As a result, the interest and/or principal payments that may be made
on a structured product may vary widely, depending on a variety of factors,
including the volatility of the reference index and the effect of changes in the
reference index on principal and/or interest payment.
While structured instruments may offer the potential for a favorable
rate of return from time to time, they also entail certain risks. Structured
instruments may be less liquid than other debt securities, and the price of
structured instruments may be more volatile. If the value of the reference index
changes in a manner other than that expected by Banc One Investment Advisors or
the applicable Sub-Advisor, principal and/or interest payments on the structured
instrument may be substantially less than expected. In addition, although
structured instruments may be sold in the form of a corporate debt obligation,
they may not have some of the protection against counterparty default that may
be available with respect to publicly traded debt securities (i.e., the
existence of a trust indenture). In that respect, the risks of default
associated with structured instruments may be similar to those associated with
swap contracts. See "Swaps, Caps and Floors."
The Funds will invest only in structured securities that are consistent
with each Fund's investment objective, policies and restrictions and Banc One
Investment Advisors' or the applicable Sub-Advisor's outlook on market
conditions. In some cases, depending on the terms of the reference index, a
structured instrument may provide that the principal and/or interest payments
may be adjusted below zero; however, the Funds will not invest in structured
instruments if the terms of the structured instrument provide that the Funds may
be obligated to pay more than their initial investment in the structured
instrument, or to repay any interest or principal that has already been
collected or paid back.
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.
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SWAPS, CAPS AND FLOORS
Certain of the Funds may enter into swaps, caps, and floors on various
securities (such as U.S. government securities), securities indexes, interest
rates, prepayment rates, foreign currencies or other financial instruments or
indexes, in order to protect the value of the Fund from interest rate
fluctuations and to hedge against fluctuations in the floating rate market in
which the Fund's investments are traded, for both hedging and non-hedging
purposes. While swaps, caps, and floors (sometimes hereinafter collectively
referred to as "SWAP CONTRACTS") are different from futures contracts (and
options on futures contracts) in that swap contracts are individually negotiated
with specific counterparties, the Funds will use swap contracts for purposes
similar to the purposes for which they use options, futures, and options on
futures. Those uses of swap contracts (i.e., risk management and hedging)
present the Funds with risks and opportunities similar to those associated with
options contracts, futures contracts, and options on futures. See "Futures
Contracts" and "Risk Factors in Futures Contracts."
The Funds may enter into these transactions to manage their exposure to
changing interest rates and other market factors. Some transactions may reduce
each Fund's exposure to market fluctuations while others may tend to increase
market exposure.
Swap contracts typically involve an exchange of obligations by two
sophisticated parties. For example, in an interest rate swap, the Fund may
exchange with another party their respective rights to receive interest, such as
an exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of respective rights to make or receive payments in
specified currencies. Mortgage swaps are similar to interest rate swaps in that
they represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles
the purchaser to receive a principal amount from the party selling the cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the
obligation of the respective counterparties, and there is a risk that a
counterparty will be unable to meet its obligations under a particular swap
contract. If a counterparty defaults on a swap contract with a Fund, the Fund
may suffer a loss. To address this risk, each Fund will usually enter into
interest rate swaps on a net basis, which means that the two payment streams
(one from the Fund to the counterparty, one to the Fund from the counterparty)
are netted out, with the Fund receiving or paying, as the case may be, only the
net amount of the two payments. Interest rate swaps do not involve the delivery
of securities, other underlying assets, or principal, except for the purposes of
collateralization as discussed below. Accordingly, the risk of loss with respect
to interest rate swaps entered into on a
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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
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restrictions. The net amount of the excess, if any, of each Fund's obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis and an amount of cash or liquid securities having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Funds' Custodian. Each of the Bond Funds generally
will limit their investments in swaps, caps and floors to 25% of its total
assets.
TREASURY RECEIPTS
Certain of the Funds may purchase interests in separately traded
interest and principal component parts of U.S. Treasury obligations that are
issued by banks or brokerage firms and are created by depositing U.S. Treasury
notes and U.S. Treasury bonds into a special account at a custodian bank.
Receipts include Treasury Receipts ("TRs"), Treasury Investment Growth Receipts
("TIGRS"), and Certificates of Accrual on Treasury Securities ("CATS").
U.S. TREASURY OBLIGATIONS
The Funds may invest in bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known as
Separately Traded Registered Interest and Principal Securities ("STRIPS") and
Coupon Under Book Entry Safekeeping ("CUBES"). The Funds may also invest in
Inflation Indexed Treasury Obligations.
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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 thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because master demand
notes are direct lending arrangements between a Fund and the issuer, they are
not normally traded. Although there is no secondary market in the notes, a Fund
may demand payment of principal and accrued interest. 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
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be no active secondary market with respect to a particular variable or floating
rate instrument purchased by a Fund. The absence of such an active secondary
market, could make it difficult for the Fund to dispose of the variable or
floating rate instrument involved in the event the issuer of the instrument
defaulted on its payment obligations, and the Fund could, for this or other
reasons, suffer a loss to the extent of the default. Variable or floating rate
instruments may be secured by bank letters of credit or other assets. A Fund
will purchase a variable or floating rate instrument to facilitate portfolio
liquidity or to permit investment of the Fund's assets at a favorable rate of
return.
With respect to the Money Market Funds and the Institutional Money
Market Funds, variable or floating rate instruments with stated maturities of
more than 397 days may, under the Securities and Exchange Commission's amortized
cost rule, Rule 2a-7 under the 1940 Act, be deemed to have shorter maturities as
follows:
(1) Adjustable Rate Government Securities. A Government Security which
is a Variable Rate Security where the variable rate of interest is readjusted no
less frequently than every 762 days shall be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate. A
Government Security which is a Floating Rate Security shall be deemed to have a
remaining maturity of one day.
(2) Short-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have
maturity equal to the earlier of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand.
(3) Long-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a Demand Feature shall be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand.
(4) Short-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have a
maturity of one day.
(5) Long-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a demand feature, shall be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand.
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
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an amount which, together with securities with legal or contractual restrictions
on resale or for which no readily available market exists (including repurchase
agreements providing for settlement more than seven days after notice), exceeds
10% (with respect to the Money Market and Institutional Money Market Funds) or
15% (with respect to all Funds, other than the Money Market and Institutional
Money Market Funds, which can purchase such notes) of the Fund's net assets only
if such instruments are subject to a demand feature that will permit the Fund to
demand payment of the principal within seven days after demand by the Fund.
There is no limit on the extent to which a Fund may purchase demand instruments
that are not illiquid. If not rated, such instruments must be found by Banc One
Investment Advisors or the Sub-Advisor, under guidelines established by the
Trust's Board of Trustees, to be of comparable quality to instruments that are
rated high quality. A rating may be relied upon only if it is provided by a
nationally recognized statistical rating organization that is not affiliated
with the issuer or guarantor of the instruments. For a description of the rating
symbols of S&P, Moody's, and Fitch used in this paragraph, see the Appendix. The
above Funds may also invest in Canadian Commercial Paper which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation and in Europaper which is U.S. dollar denominated commercial paper
of a foreign issuer.
WARRANTS
Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to buy a proportionate amount of common
stock at a specified price, usually at a price that is higher than the market
price at the time of issuance of the warrant. The right may last for a period of
years or indefinitely.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Some Funds may purchase securities on a "when-issued" and forward
commitment basis. When a Fund agrees to purchase securities, the Fund's
custodian will set aside cash or liquid portfolio securities equal to the amount
of the commitment in a separate account. The Funds may purchase securities on a
when-issued basis when deemed by Banc One Investment Advisors or the applicable
Sub-Advisor to present attractive investment opportunities. When-issued
securities are purchased for delivery beyond the normal settlement date at a
stated price and yield, thereby involving the risk that the yield obtained will
be less than that available in the market at delivery. The Funds generally will
not pay for such securities or earn interest on them until received. Although
the purchase of securities on a when-issued basis is not considered to be
leveraging, it has the effect of leveraging. When Banc One Investment Advisors
or the applicable Sub- Advisor purchases a when-issued security, the Custodian
will set aside cash or liquid securities to satisfy the purchase commitment. In
such a case, a Fund may be required subsequently to place additional assets in
the separate account in order to assure that the value of the account remains
equal to the amount of the Fund's commitment. The Fund's net assets may
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, when a Fund
engages in "when-issued" transactions, it relies on the seller to
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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.
INVESTMENT RESTRICTIONS
The following investment restrictions are FUNDAMENTAL and may be
changed with respect to a particular Fund only by a vote of a majority of the
outstanding Shares of that Fund. See "ADDITIONAL INFORMATION--Miscellaneous" in
this Statement of Additional Information.
Each of the Equity Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. With respect to The One
Group Equity Index Fund, no more than 10% of the Fund's assets may be invested
in securities issued or guaranteed by the United States, its agencies or
instrumentalities. For purposes of these limitations, a security is considered
to be issued by the government entity whose assets and revenues guarantee or
back the security. With respect to private
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activity bonds or industrial development bonds backed only by the assets and
revenues of a non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this information does not apply to investments in the obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities. For purposes of this limitation
(i) utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
Each of the Bond Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. For purposes of these
limitations, a security is considered to be issued by the government entity
whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
2. Purchase any securities that would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in the obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities. For purposes of this limitation
(i) utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
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.
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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 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
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industrial development bonds backed only by the assets and revenues of a
nongovernmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. With
respect to the Prime Money Market Fund, (i) this limitation does not apply to
investments in the obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, domestic bank certificates of deposit or
bankers' acceptance and repurchase agreements involving such securities; (ii)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents; and (iii) utilities will be divided according to
their services (for example, gas, gas transmission, electric and telephone will
each be considered a separate industry.) With respect to the Prime Money Market
Fund, 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 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:
The Treasury Only Money Market Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and other
U.S. obligations issued or guaranteed by the U.S. Treasury.
2. Invest in any securities subject to repurchase agreements.
The Government Money Market Fund may not:
1. Purchase securities other than those issued or guaranteed by the
U.S. government or its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
Each of the Institutional Money Market Funds may not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks for temporary purposes in amounts up to 10% of the value of
the Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets, except in connection with any such borrowing and in
amounts not in excess of the lesser
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of the dollar amounts borrowed or 10% of the value of the respective Fund's
total assets at the time of its borrowing.
2. Purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the respective Fund's net assets.
3. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities and, if
consistent with such Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of such issuer or the
Fund would own more than 10% of the outstanding voting securities of such
issuer; provided, however, that a Fund may invest up to 25% of its total assets
without regard to this restriction as permitted by applicable law. For purposes
of these limitations, a security is considered to be issued by the government
entity whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
With respect to the Municipal Bond Funds:
The Intermediate Tax-Free Bond Fund and the Municipal Income Fund may
not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. For purposes of these
limitations, a security is considered to be issued by the government entity
whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
2. Purchase any securities that would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to Municipal Securities or governmental
guarantees of Municipal Securities, and with respect to the Municipal Income
Fund, housing authority obligations. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
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:
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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).
None of the Municipal Bond Funds may:
1. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in this Prospectus and in the Statement of Additional Information.
None of the Funds may:
1. Purchase securities on margin, sell securities short, or participate
in a joint or joint and several basis in any securities trading account, except,
in the case of the Municipal Bond Funds, for use of short-term credit necessary
for clearance of purchases of portfolio securities.
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2. Underwrite the securities of other issuers except to the extent that
a Fund may be deemed to be an underwriter under certain securities laws in the
disposition of "restricted securities."
3. Purchase or sell commodities or commodity contracts (including
futures contracts), except that for bona fide hedging and other permissible
purposes: (i) the Equity, Bond and International Equity Index Funds may purchase
or sell financial futures contracts and (except for the Treasury & Agency Fund)
may purchase call or put options on financial futures contracts, and (ii) the
International Equity Index Fund may purchase or sell foreign currency futures
contracts and foreign currency forward contracts, and may purchase put or call
options on foreign currency futures contracts and on foreign currencies on
appropriate U.S. exchanges, and may purchase or sell foreign currency on a spot
basis.
4. Except for the Treasury & Agency Fund, purchase participation or
other direct interests in oil, gas or mineral exploration or development
programs (although investments by all Funds other than the U.S. Treasury
Securities Money Market, Treasury Money Market, Treasury Only Money Market and
Government Money Market Fund in marketable securities of companies engaged in
such activities are not hereby precluded).
5. Invest in any issuer for purposes of exercising control or
management.
6. Purchase securities of other investment companies except as
permitted by the 1940 Act and rules, regulations and applicable exemptive relief
thereunder.
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:
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1. Buy state, municipal, or private activity bonds.
The following investment restrictions are NON-FUNDAMENTAL except as
noted otherwise and therefore can be changed by the Board of Trustees without
prior shareholder approval.
No Fund may:
1. Invest in illiquid securities in an amount exceeding, in the
aggregate 15% of the Fund's net assets (10% of net assets for a Fund that is a
Money Market Fund 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,
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<PAGE> 439
economic or business development affecting one security will also affect other
municipal securities.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the year by the monthly
average value of the portfolio securities. The calculation excludes all
securities whose maturities at the time of acquisition were one year or less.
Thus, for regulatory purposes, the portfolio turnovers with respect to the Money
Market Funds were zero for the period from the commencement of their respective
operations to June 30, 1998 and are expected to remain zero, and the portfolio
turnover rate with respect to the Institutional Money Market Funds is expected
to be zero.
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<PAGE> 440
The portfolio turnover rates of the Funds for the fiscal years ended June 30,
1998 and 1997 were as follows:
ONE GROUP PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
--------
FUND 1998 1997
- ---- ---- ----
<S> <C> <C>
U.S. Treasury Securities Money Market NA** NA**
Prime Money Market NA** NA**
Municipal Money Market NA** NA**
Ohio Municipal Money Market NA** NA**
Equity Income 14.64% 28.18%
Mid Cap Value 106.41% 92.66%
Mid Cap Growth 158.43% 301.35%
Equity Index 4.32% 5.81%
Large Cap Value 47.35% 77.05%
Balanced 46.04% 80.96%
International Equity Index 9.90% 9.61%
Large Cap Growth 117.34% 57.17%
Short-Term Bond 56.99% 66.61%
Intermediate Tax-Free Bond 109.03% 86.89%
Municipal Income 69.76% 62.83%
Ohio Municipal Bond 10.49% 7.45%
Government Bond 91.49% 60.53%
Ultra Short-Term Bond 41.15% 70.36%
Treasury Only Money Market NA** NA**
Government Money Market NA** NA**
Kentucky Municipal Bond 5.81% 13.30%
Institutional Prime Money Market NA* NA+
Treasury Money Market NA* NA+
Tax-Exempt Money Market NA* NA+
Arizona Municipal Bond 20.89% 5.66%***
Texas Municipal Bond NA* NA+
W. Virginia Municipal Bond 16.69% 6.21%***
Louisiana Municipal Bond 12.03% 17.39%
Diversified Equity 62.37% 113.17%
Small Cap Growth 83.77% 92.01%
Investor Growth 4.05% 18.49%++
Investor Growth & Income 11.38% 18.07%++
Investor Aggressive Growth NA* NA+
Investor Conservative Growth 3.22% 28.46%++
Investor Balanced 9.71% 12.20%++
Investor Fixed Income NA* NA+
High Yield Bond NA* NA+
Treasury & Agency 41.60% 54.44%***
* As of June 30, 1998, the Fund had not commenced operations.
** Turnover rate is not applicable to money market funds.
*** Portfolio turnover rate for the period January 20, 1997 through June 30, 1997.
</TABLE>
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<PAGE> 441
+ As of June 30, 1997, the Fund had not commenced operations.
++ Portfolio turnover rate for the period December 10, 1996 through June
30, 1997.
Some of the Funds listed above had portfolio turnover rates in excess
of 100%. This means that these Funds sold and replaced over 100% of their
investments. The high portfolio turnover rates for 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.
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%
Michigan Municipal Money Market NA+ NA+
Cash Management Money Market NA+ NA+
Treasury Cash Management Money Market NA+ NA+
Treasury Prime Cash Management Money Market NA+ NA+
U.S. Government Securities Cash Management Money Market NA+ NA+
Municipal Cash Management Money Market NA+ NA+
</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.
+ Turnover rate is not applicable to money market funds.
ADDITIONAL TAX INFORMATION CONCERNING ALL FUNDS
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with The One Group's other funds. It is the policy
of each Fund of the Trust to meet the requirements necessary to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). By following such policy, each Fund expects to
eliminate or reduce to a nominal amount the federal income taxes to which it may
be subject.
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<PAGE> 442
In order to qualify as a regulated investment company, each Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies, and (2)
diversify its holdings so that at the end of each quarter of its taxable year
(i) at least 50% of the market value of the Fund's assets is represented by cash
or cash items, U.S. government securities, securities of other regulated
investment companies, and other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the value of the Fund's assets and
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its assets is invested in the securities of any one issuer
(other than U.S. government securities or the securities of other regulated
investment companies) or of two or more issuers that the Fund controls and that
are engaged in the same, similar, or related trades or businesses. These
requirements may limit the range of the Fund's investments. If a Fund qualifies
as a regulated investment company, it will not be subject to federal income tax
on the part of its income distributed to Shareholders, provided the Fund
distributes during its taxable year at least (a) 90% of its taxable net
investment income (very generally, dividends, interest, certain other income,
and the excess, if any, of net short-term capital gain over net long-term loss),
and (b) 90% of the excess of (i) its tax-exempt interest income (if any) less
(ii) certain deductions attributable to that income. Each Fund of the Trust
intends to make sufficient distributions to Shareholders to qualify for this
special tax treatment.
If a Fund failed to qualify as a regulated investment company receiving
special tax treatment in any taxable year, the Fund would be subject to tax on
its taxable income at corporate rates, and all distributions from earnings and
profits, including any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to Shareholders as ordinary income. In addition,
the Fund could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company and being accorded special tax treatment.
Generally, regulated investment companies that do not distribute in
each calendar year an amount equal to 98% of their "ordinary income" (as
defined) for the calendar year, plus 98% of their capital gain net income (as
defined) for the one-year period ending on October 31 of such calendar year,
plus any undistributed amounts from the previous year are subject to a
non-deductible excise tax equal to 4% of the undistributed amounts. For purposes
of the excise tax, a Fund is treated as having distributed any amount on which
it is subject to income tax for any taxable year ending in such calendar year.
Each Fund of the Trust intends to make sufficient distributions to avoid
liability for the excise tax.
Shareholders of the Funds will generally be subject to federal income
tax on distributions received from the Funds. Dividends that are attributable to
a Fund's net investment income will be taxed to shareholders as ordinary income.
Distributions of net capital gain that are designated by a Fund as capital gain
dividends will generally be
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<PAGE> 443
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. The sale, exchange or
redemption of Fund shares by a Shareholder may give rise to a taxable gain or
loss to that Shareholder. In general, any gain or loss realized upon a taxable
disposition of shares will be treated as long-term capital gain or loss if the
Shareholder has held the shares for more than 12 months (generally taxed at a
20% tax rate for non-corporate shareholders), and otherwise as short-term
capital gain or loss. However, if a Shareholder sells shares at a loss within
six months of purchase, any loss will be disallowed for Federal income tax
purposes to the extent of any exempt-interest dividends received on such shares.
Dividends and distributions on a Fund's shares are generally subject to federal
income tax as described herein to the extent they do not exceed the Fund's
realized income and gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's investment. Such
distributions are likely to occur in respect of shares purchased at a time when
the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed.
In addition, any loss (not already disallowed as provided in the
preceding sentence) realized upon a taxable disposition of shares held for six
months or less will be treated as long-term to the extent of any long-term
capital gain distributions received by the Shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable disposition of Fund
shares will be disallowed if other Fund shares are purchased within 30 days
before or after the disposition. In such a case, the basis of the newly
purchased shares will be adjusted to reflect the disallowed loss.
Certain investment and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, swaps, short sales, foreign currencies, and foreign
securities will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale and short sale rules). In a given case,
these rules may accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains, convert short-term capital losses
into long-term capital losses, or otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing and character of
distributions to Shareholders and cause differences between a Fund's book income
and taxable income. Income earned as a result of these transactions would, in
general, not be eligible for the dividends-received deduction or for treatment
as exempt-interest dividends when distributed to Shareholders 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.
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<PAGE> 444
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRS,
TIGRS, and CATS), as defined in "Details About the Funds' Investment Practices
and Policies" in the Funds' Prospectuses, are sold at original issue discount
and thus do not make periodic cash interest payments. Similarly, zero-coupon
bonds do not make periodic interest payments. A Fund will be required to include
as part of its current income for tax purposes the imputed interest on such
obligations even though the Fund has not received any interest payments on such
obligations during that period. Because each Fund distributes substantially all
of its net investment income to its Shareholders (including such imputed
interest), the Fund may have to sell portfolio securities in order to generate
the cash necessary for the required distributions. Such sales may occur at a
time when Banc One Investment Advisors would not otherwise have chosen to sell
such securities and may result in a taxable gain or loss.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any individual Shareholder who has provided to the Fund
either an incorrect tax identification number or no number at all, or who is
subject to withholding by the Internal Revenue Service for failure properly to
report payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the Shareholder's ultimate U.S. tax liability.
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 1999 (although transition rules will apply). In
some circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in a Fund should consult their tax
advisors with respect to the potential application of these new regulations. The
foregoing is only a summary of some of the important federal tax considerations
generally affecting purchasers of Shares of a Fund of the Trust. Further tax
information regarding the Tax-Advantaged Funds and the International 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.
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.
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<PAGE> 445
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
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<PAGE> 446
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.
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.
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<PAGE> 447
Michigan Taxes. Distributions received from the Michigan Municipal Bond
Fund are exempt from Michigan personal income tax. 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.
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.
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<PAGE> 448
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
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
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<PAGE> 449
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.
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
91
<PAGE> 450
Except as noted below, investments of the Equity Funds, Bond Funds, and
Municipal Bond Funds of the Trust in securities the principal market for which
is a securities exchange are valued at their market values based upon the latest
available sales price or, absent such a price, by reference to the latest
available bid and asked prices in the principal market in which such securities
are normally traded. Except as noted below, investments of the International
Funds in securities the principal market for which is a securities exchange are
valued at the closing mid-market price on that exchange on the day of
computation.
With regard to each of the above-mentioned Funds, securities the
principal market for which is not a securities exchange are valued at the mean
of their latest bid and ask quotations in such principal market. Securities and
other assets for which quotations either (1) are not readily available or (2) in
the case of the International 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.
The value of a foreign security is determined in its national currency
as of the close of trading on the foreign exchange or other principal market on
which it is traded, which value is then converted into its U.S. dollar
equivalent at the foreign exchange closing mid-market rate reported in the
Financial Times as the closing rate for that date. When an occurrence subsequent
to the time a value of a foreign security was so established is likely to have
changed the value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Trustees of the
Trust or their delegates.
Securities for which market quotations are readily available will be valued on
the basis of quotations provided by dealers in such securities or furnished by a
pricing service. Securities for which market quotations are not readily
available and other assets will be valued at fair value using methods determined
in good faith by 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 and Service Class Shares are priced as of the times
specified in each Fund's Prospectus. The net asset value per Share of each
Fund's Class I, Class A, Class B, Class C and Service Class Shares is calculated
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.
92
<PAGE> 451
The net asset value of a Fund's Class I, Class A, Class B, Class C and Service
Class Shares may differ from each other due to the expense of the Distribution
and Shareholders Services Plan fee applicable to a Fund's Class A, Class B,
Class C and Service Class Shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
All of the classes of Shares in each Fund (other than Service Class
shares) are sold on a continuous basis by The One Group Services Company (the
"DISTRIBUTOR"), and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders.
Class I Shares in a Fund may be purchased, through procedures
established by the Distributor, by institutional investors, including affiliates
of BANK ONE CORPORATION and any bank, depository institution, insurance company,
pension plan or other organization authorized to act in fiduciary, advisory,
agency, custodial or similar capacities. Class I Shares are not available to
Individual Retirement Accounts.
Class A, Class B and Class C Shares may be purchased by any investor
that does not meet the purchase eligibility criteria, described above, with
respect to Class I Shares. In addition to purchasing Class A, Class B and Class
C Shares directly from the Distributor, an investor may purchase Class A, Class
B and Class C Shares through a financial institution, such as a bank, savings
and loan association, insurance company (each a "SHAREHOLDER SERVICING AGENT")
that has established a Shareholder servicing agreement with the Distributor, or
through a broker-dealer that has established a dealer agreement with the
Distributor. Questions concerning the eligibility requirements for each class of
the Trust's Shares may be directed to the Distributor at 1-800-480-4111.
Service Class Shares are available only in 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).
93
<PAGE> 452
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. If a Class A
Shareholder of the High Yield Bond Fund exchanges his or her Shares within one
year of receipt of the Shares, the Shareholder will be assessed a 2% redemption
fee.
Class A Shares. If a Shareholder seeks to exchange Class A Shares of a
Fund that does not impose a sales charge for Class A Shares of a Fund that does,
or the Fund being exchanged into has a higher sales charge, the Shareholder will
be required to pay a sales charge in the amount equal to the difference between
the sales charge applicable to the Fund into which the Shares are being
exchanged and any sales charge previously paid for the exchanged Shares,
including any sales charges incurred on any earlier exchanges of the Shares
(unless such sales charge is otherwise waived as provided above). The exchange
of Class I Shares for Class A Shares also will require payment of the sales
charge unless the sales charge is waived, as provided above. If a Shareholder
(no longer eligible to purchase Class I Shares) purchases Class A Shares of a
Fund, the Shareholder will be subject to Distribution and Shareholder Services
Plan Fees.
Class B Shares. Class B Shareholders of a Fund may exchange their
Shares for Class B Shares of any other Fund of the Trust on the basis of the net
asset value of the exchanged Class B Shares, without the payment of any
Contingent Deferred Sales Charge that might otherwise be due upon redemption of
the 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.
94
<PAGE> 453
Class C Shares. Class C Shareholders may not exchange their Class C
Shares for shares of any other class nor may shares of any other class be
exchanged for Class C Shares.
Service Class Shares. Service Class Shareholders may not exchange their
Service Class Shares for Shares of any other class, nor may Shares of any other
class be exchanged for Service Class Shares.
Institutional Money Market Funds. Shares of the Institutional Money
Market Funds may be purchased by commercial and retail institutional investors,
including affiliates of BANK ONE CORPORATION, that have opened an account with
the Transfer Agent either directly or through a Shareholder Servicing Agent, by
persons whose individual net worth, or joint net worth with that person's
spouse, at the time of his or her purchase exceeds $1,000,000, or by persons
whose individual annual income, or joint annual income with that person's
spouse, at the time of his or her purchase exceeds $200,000.
REDEMPTIONS
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when:
(a) trading on the New York Stock Exchange (the "EXCHANGE") is
restricted by applicable rules and regulations of the
Securities and Exchange Commission,
(b) the Exchange is closed for other than customary weekend and
holiday closings,
(c) the SEC has by order permitted such suspension, or
(d) an emergency exists as determined by the SEC.
95
<PAGE> 454
MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust. There are currently five Trustees, all of whom, except
John F. Finn, are not "interested persons" of the Trust within the meaning of
that term under the 1940 Act. The Trustees, in turn, elect the officers of the
Trust to supervise actively its day-to-day operations.
The Trustees of the Trust, their addresses, their ages, and principal
occupations during the past five years are set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION HELD PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
WITH THE TRUST
<S> <C> <C> <C>
Peter C. Marshall 56 Trustee From November, 1993 to present, President, DCI
DCI Marketing, Inc. Marketing, Inc.
2727 W. Good Hope Road
Milwaukee, WI 53209
Charles I. Post 70 Trustee From July, 1986 to present, self employed as a
7615 4th Avenue West consultant.
Bradenton, FL 34209
Frederick W. Ruebeck 59 Trustee From June, 1988 to present, Director of
Eli Lilly & Company Investments, Eli Lilly and Company.
Lilly Corporate Center
307 East McCarty
Indianapolis, IN 46258
Robert A. Oden, Jr. 52 Trustee From 1995 to present, President , Kenyon College;
Office of the President from 1989 to 1995, Headmaster, The Hotchkiss
Ransom Hall School.
Kenyon College
Gambier, OH 43022
*John F. Finn 51 Trustee Since 1975, President of Gardner, Inc. (wholesale
President distributor to the outdoor power equipment industry).
Gardner, Inc.
1150 Chesapeake Avenue
Columbus, Ohio 43212
</TABLE>
* John F. Finn is an "interested person" as that term is defined in the
Investment Company Act of 1940.
96
<PAGE> 455
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.
98
<PAGE> 456
<TABLE>
<CAPTION>
COMPENSATION TABLE(1)
NAME OF PERSON, POSITION AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION RETIREMENT BENEFITS BENEFITS UPON FROM THE FUND
FROM THE TRUST ACCRUED AS PART OF RETIREMENT COMPLEX(3)
TRUST EXPENSES(2)
<S> <C> <C> <C> <C>
PETER C. MARSHALL, $47,500 N/A N/A $50,500
CHAIRMAN
CHARLES I. POST, $45,500 N/A N/A $48,500
TRUSTEE
FREDERICK W. RUEBECK, $45,500 N/A N/A $48,500
TRUSTEE
ROBERT A. ODEN, JR., $46,260 N/A N/A $49,250
TRUSTEE
JOHN F. FINN, $ 0 N/A N/A $ 0
TRUSTEE
</TABLE>
1 Figures are for the Trust's fiscal year ended June 30, 1998.
2 The Trustees may defer all or a part of their compensation payable by
the Trust pursuant to the Deferred Compensation Plan for Trustees of
The One Group (the "PLAN"). Under the Plan, the Trustees may specify
Class I shares of one or more Funds of the Trust
99
<PAGE> 457
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 The One Group and the funds of
The One Group(R) Investment Trust that were operational as of June 30,
1998.
100
<PAGE> 458
The officers of the Trust receive no compensation directly from the
Trust for performing the duties of their offices. The officers of the Trust,
their addresses, and principal occupations during the past five years are shown
below.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
- ---------------- -------------- -------------------
<S> <C> <C>
Mark S. Redman President and From November, 1997 to present,
The One Group Services Assistant Secretary President, The One Group Services
Company Company; From June, 1995 to
3435 Stelzer Road November, 1997, Officer, The One
Columbus, Ohio 43219 Group Services Company; From
February, 1989 to present,
employee of BISYS Fund Services,
Inc. (FKA Winsbury Company)
William J. Tomko Treasurer From April, 1997 to present, Chief
BISYS Fund Services, Operating Officer, BISYS Fund
Inc. Services, Inc.; From April, 1987, to
3435 Stelzer Road 1997, April, 1997, employee,
Columbus, Ohio 43219 BISYS Fund Services, Inc.
Charles L. Booth Secretary From February, 1998, to present,
BISYS Fund Services, Chief Compliance Officer and
Inc. Vice President Fund Compliance
3435 Stelzer Road BISYS Fund Services, Inc.; From
Columbus, Ohio 43219 April, 1988, to February, 1998,
employee, BISYS Fund Services, Inc.
Alaina J. Metz Assistant Secretary From June 1995 to present,
BISYS Fund Services, Chief Administrator,
Inc. Administration and Regulatory
3435 Stelzer Road Services, BISYS Fund Services,
Columbus, Ohio 43219 Inc.; from May 1989 to June 1995,
Supervisor, Mutual Fund Legal
Department, Alliance Capital
Management.
</TABLE>
101
<PAGE> 459
INVESTMENT ADVISOR AND SUB-ADVISORS
BANC ONE INVESTMENT ADVISORS CORPORATION
Investment advisory services to each of the Trust's Funds are provided
by Banc One Investment Advisors. Banc One Investment Advisors makes the
investment decisions for the assets of the Funds (except for the International
Equity Index Fund and the High Yield Bond Fund which are sub-advised by Sub-
Advisors). In addition, Banc One Investment Advisors continuously reviews,
supervises and administers the Funds' investment program, subject to the
supervision of, and policies established by, the Trustees of the Trust. The
Trust's Shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of any bank affiliate of Banc One Investment
Advisors and are not insured by the FDIC or issued or guaranteed by the U.S.
government or any of its agencies.
Banc One Investment Advisors is an indirect, wholly-owned subsidiary of
BANK ONE CORPORATION, a bank holding company incorporated in the state of
Delaware. BANK ONE CORPORATION has affiliate banking organizations in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma,
Texas, Utah, West Virginia and Wisconsin. In addition, BANK ONE CORPORATION has
several affiliates that engage in data processing, venture capital, investment
and merchant banking, and other diversified services including trust management,
investment management, brokerage, equipment leasing, mortgage banking, consumer
finance, and insurance.
Banc One Investment Advisors represents a consolidation of the
investment advisory staffs of a number of bank affiliates of BANK ONE
CORPORATION, which have considerable experience in the management of open-end
management investment company portfolios, including One Group (formerly, The
One Group and the Helmsman Fund) since 1985.
Prior to January 2, 1996, investment advisory services were provided to
the predecessor Funds
102
<PAGE> 460
of the Louisiana Municipal Bond Fund, the Diversified Equity Fund, and the Small
Cap Growth (formerly the Gulf South Growth Fund), formerly Paragon Louisiana
Tax-Free Fund, Paragon Value Growth Fund and Paragon Gulf South Growth Fund,
respectively, by Premier Investment Advisors, LLP.
During the fiscal years ended June 30, 1998, 1997, and 1996, the Funds
of the Trust paid the following investment advisory fees to Banc One Investment
Advisors (except as noted above) and Banc One Investment Advisors voluntarily
waived investment advisory fees as follows:
103
<PAGE> 461
<TABLE>
<CAPTION>
ONE GROUP ADVISORY FEES--NET
FISCAL YEAR ENDED JUNE 30,
1998 1997 1996
---- ---- ----
FUND NET WAIVED NET WAIVED NET WAIVED
- ---- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $ 9,337,795 $2,237,340 $5,992,323 $2,742,727 $3,335,123 $2,120,534
Prime Money Market $ 9,806,764 $1,675,435 $7,824,731 $1,899,772 $5,939,373 $2,662,726
Municipal Money Market $ 1,491,141 $ 596,454 $1,241,937 $ 593,593 $1,111,463 $ 930,328
Ohio Municipal Money Market $ 252,818 $ 60,211 $ 231,786 $ 36,034 $ 171,609 $ 114,565
Equity Income $ 6,571,128 -0- $4,104,562 $ 0 $1,809,128 $ 70,594
Mid Cap Value $ 4,758,742 -0- $4,129,523 $ 0 $3,934,183 $ 61,237
Mid Cap Growth $ 6,492,467 -0- $4,511,169 $ 0 $3,688,445 $ 54,262
Equity Index $ 992,672 $1,985,360 $ 547,238 $1,094,476 $ 238,008 $ 638,315
Large Cap Value $ 5,638,325 -0- $4,726,413 $ 0 $3,763,553 $ 0
Balanced $ 1,178,256 $ 191,626 $ 684,481 $ 142,861 $ 306,083 $ 92,023
International Equity Index $ 2,373,749 -0- $2,201,616 $ 837 $1,279,277 $ 91,958
Large Cap Growth $12,023,999 -0- $7,948,260 $ 0 $5,235,736 $ 245,284
Short-Term Bond $ 1,879,523 $1,700,459 $1,830,204 $1,830.204 $1,330,873 $1,450,516
Intermediate Tax-Free Bond $ 1,904,783 $1,025,646 $1,235,203 $ 776,825 $ 629,789 $ 769,809
Municipal Income $ 2,184,870 $ 624,243 $1,314,694 $ 387,974 $ 714,573 $ 387,167
Ohio Municipal Bond $ 544,952 $ 517,943 $ 389,001 $ 391,781 $ 257,158 $ 328,794
Government Bond $ 3,714,960 $ 80,216 $3,098,420 $ 194,800 $2,182,543 $ 70,159
Ultra Short-Term Bond $ 424,770 $ 699,133 $ 117,314 $ 342,966 $ 29,293 $ 227,497
Treasury Only Money Market $ 518,513 -0- $ 385,087 $ 0 $ 287,729 $ 0
Government Money Market $ 1,735,256 -0- $ 848,690 $ 0 $ 612,362 $ 5,166
Kentucky Municipal Bond $ 469,392 $ 117,349 $ 270,459 $ 78,137 $ 108,684 $ 132,964
Institutional Prime
Money Market NA ## NA ## NA # NA # NA* NA*
Treasury Money Market NA ## NA ## NA # NA # NA* NA*
Tax-Exempt Money Market NA ## NA ## NA # NA # NA* NA*
Arizona Municipal Bond $ 1,007,240 $ 154,639 $ 390,737+++ $ 126,415+++ NA* NA*
Texas Tax-Free Bond NA ## NA # NA # NA* NA*
W. Virginia Municipal Bond $ 365,585 $ 103,485 $ 121,278+++ $ 66,525+++ NA* NA*
Louisiana Municipal Bond $ 572,161 $ 355,668 $ 683,535 $ 394,121 $ 207,766++ $ 103,883++
Diversified Equity $ 4,485,408 -0- $2,309,475 $ 69,333 $ 400,112++ $ 51,948++
Small Cap Growth $ 902,099 -0- $ 699,896 $ 30,410 $ 184,391++ $ 25,531++
High Yield Bond NA ## NA ## NA # NA # NA* NA*
Investor Growth $ 35,565 $ 21,362 $ 1,552 $ 6,244++++ NA* NA*
Investor Growth
& Income $ 49,435 $ 17,732 $ 2,046 $ 8,237++++ NA* NA*
Investor Aggressive Growth NA ## NA ## NA # NA # NA* NA*
Investor Conservative
Growth $ 4,622 $ 18,489 $ 683 $ 2,750++++ NA* NA*
Investor Balanced $ 53,241 $ 11,387 $ 3,107 $ 12,503++++ NA* NA*
Investor Fixed Income NA ## NA ## NA # NA # NA* NA*
Treasury & Agency Fund $ 232,442 $ 232,443 $ 99,224 $ 99,225+++ NA* NA*
</TABLE>
## As of June 30, 1998, the Fund had not commenced operations.
# As of June 30, 1997, the Fund had not commenced operations.
* As of June 30, 1996, the Fund had not commenced operations.
104
<PAGE> 462
++ Fees for the period from December 31, 1995 to June 30, 1996.
+++ Fees for the period from January 20, 1997 to June 30, 1997.
++++ Fees for the period from December 10, 1996 to June 30, 1997.
105
<PAGE> 463
All investment advisory services are provided to the Funds by Banc One
Investment Advisors pursuant to an investment advisory agreement dated January
11, 1993 (the "INVESTMENT ADVISORY AGREEMENT"). The Investment Advisory
Agreement (and the International Sub-Investment Advisory Agreement and the High
Yield Sub-Investment Advisory Agreement described immediately following,
collectively, the "ADVISORY AND SUB-ADVISORY AGREEMENTS") will continue in
effect as to a particular Fund from year to year, if such continuance is
approved at least annually by the Trust's Board of Trustees or by vote of a
majority of the outstanding Shares of such Fund (as defined under "ADDITIONAL
INFORMATION--Miscellaneous" in this Statement of Additional Information), and a
majority of the Trustees who are not parties to the respective investment
advisory agreements or interested persons (as defined in the Investment Company
Act of 1940) of any party to the respective investment advisory agreements by
votes cast in person at a meeting called for such purpose. The Advisory
Agreement and International Sub-Advisory Agreements were renewed by the Trust's
Board of Trustees at their quarterly meeting on August 20, 1998. The Advisory
and Sub-Advisory Agreements are terminable as to a particular Fund at any time
on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding Shares of that Fund, or by the Fund's Advisor or
Sub-Advisor as the case may be. The Advisory and Sub-Advisory Agreements also
terminate automatically in the event of any assignment, as defined in the 1940
Act.
The Advisory and Sub-Advisory Agreements each provide that the respective
Advisor or Sub-Advisor shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the performance
of the respective investment advisory agreements, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of Banc One Investment Advisors or Sub-Advisor in the
performance of its duties, or from reckless disregard by it of its duties and
obligations thereunder.
Goldman Sachs Asset Management, formerly the investment Sub-Advisor to the Ultra
Short-Term Bond Fund, received $26,251 in sub-advisory fees from Banc One
Investment Advisors for the fiscal year ended June 30, 1996.
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.
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.
<TABLE>
<CAPTION>
PREDECESSOR FUNDS' ADVISORY FEES--NET
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1998 1997 1996
---------------------- --------------------- ---------------------------
FUND 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.
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")
serves as investment Sub-Advisor to the International Equity Index Fund pursuant
to an agreement (the "INTERNATIONAL SUB-INVESTMENT ADVISORY AGREEMENT") with
Banc One Investment Advisors dated January 11, 1993. Independence International
is a wholly-owned subsidiary of John Hancock Asset Management, Inc. and an
indirect, wholly-owned subsidiary of John Hancock Mutual Life Insurance Company.
Boston International Advisors, Inc., the predecessor of Independence
International, received $212,352 in sub-advisory fees from Banc One Investment
Advisors for the fiscal year ended June 30, 1996; $315,098 in sub-advisory fees
from Banc One Investment Advisors for the fiscal
106
<PAGE> 464
year ended June 30, 1997; and $416,939 in sub-advisory fees from Banc One
Investment Advisors for the fiscal year ended June 30, 1998.
BANC ONE HIGH YIELD PARTNERS, LLC
Banc One High Yield Partners, LLC serves as investment Sub-Advisor to the High
Yield Bond Fund pursuant to an agreement with Banc One Investment Advisors (the
"HIGH YIELD INVESTMENT ADVISORY AGREEMENT"). The Sub-Advisor was formed in June,
1998 to provide investment advisory services related to high yield, high risk
assets to various clients, including the Fund. The Sub-Advisor is controlled by
Banc One Investment Advisors and Pacholder Associates, Inc., an investment
advisory firm which specializes in high yield, high risk, fixed income
securities. Banc One Investment Advisors, Pacholder Associates, Inc. or the
Sub-Advisor have limited experience in managing an open-end investment company
investing primarily in high yield, high risk bonds. For its services, the
Sub-Advisor is entitled to a fee, which is calculated daily and paid monthly by
Banc One Investment Advisors, equal to .70% of the Fund's average daily net
assets. The Sub-Advisor has voluntarily agreed to waive all or part of its fees.
This fee waiver is voluntary and may be terminated at any time.
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment Company Institute v.
Camp that the federal statute commonly referred to as the Glass-Steagall Act
prohibits a national bank from operating a Fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "BOARD") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision: (a) forbid a bank holding
company registered under the 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
107
<PAGE> 465
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 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
108
<PAGE> 466
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 Trust paid brokerage
commissions to Goldman for brokerage services provided as follows:
<TABLE>
<CAPTION>
FUND COMMISSIONS PAID
<S> <C>
Equity Income $ 5,750
Mid Cap Value $ 1,810
Mid Cap Growth $11,714
Equity Index $42,243
Large Cap Value $10,650
Balanced $ 9,602
Small Cap Growth $ 2,265
Diversified Equity $ 1,647
</TABLE>
During the Trust's fiscal year ended June 30, 1996, the percentage of the
Trust's aggregate brokerage commissions paid to Goldman was 1.26% and the
percentage of the Trust's aggregate dollar amount of transactions involving the
payment of commissions effected through Goldman was 1.47%.
In the fiscal years ended June 30, 1998, 1997, and 1996, each of the Funds of
the Trust (except for the Funds identified below as having fiscal years
previously ending December
109
<PAGE> 467
31st) that paid brokerage commissions and the amounts paid for each year were as
follows:
<TABLE>
<CAPTION>
THE ONE GROUP BROKERAGE COMMISSIONS
FISCAL YEAR ENDED JUNE 30,
- ---------------------------------------------------------------------------------------
FUND 1998 1997 1996
- ---- ---- ---- ----
- ---------------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C>
Equity Income $ 331,556 $ 395,450 $ 96,204
- ---------------------- -------------------- --------------------- ---------------------
Mid Cap Value $1,541,217 $1,570,859 $ 613,774
- ---------------------- -------------------- --------------------- ---------------------
Mid Cap Growth $2,455,346 $3,199,337 $2,798,442
- ---------------------- -------------------- --------------------- ---------------------
Equity Index $ 72,702 $ 162,178 $ 56,155
- ---------------------- -------------------- --------------------- ---------------------
Large Cap Value $ 722,191 $1,378,450 $2,126,632
- ---------------------- -------------------- --------------------- ---------------------
Balanced $ 154,837 $ 194,187 $ 61,678
- ---------------------- -------------------- --------------------- ---------------------
International Equity $ 514,660 $ 349,010 $ 176,140
Index
- ---------------------- -------------------- --------------------- ---------------------
Large Cap Growth $2,935,851 $1,285,883 $ 596,397
- ---------------------- -------------------- --------------------- ---------------------
Small Cap Growth $ 180,460 $ 194,127 $ 43,039
- ---------------------- -------------------- --------------------- ---------------------
Diversified Equity $ 763,394 $1,005,409 $ 224,373
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE ONE GROUP 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 $288,664 $225,448 $358,776
International
- ---------------------- -------------------- --------------------- ---------------------
Market Expansion $ 5,850 NA* NA*
Index
- ---------------------------------------------------------------------------------------
</TABLE>
* As December 31, 1997 and 1998, the Fund had not commenced operations.
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
110
<PAGE> 468
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.
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.
111
<PAGE> 469
The Trust paid fees for administrative services to The One Group Services
Company as Administrator; and to 440 Financial Management, as previous
Administrator of the Trust ("440"), for the fiscal years ended June 30, 1998,
1997, and 1996 as follows:
<TABLE>
<CAPTION>
ONE GROUP ADMINISTRATION FEES--NET
THE ONE GROUP FISCAL YEAR ENDED JUNE 30, 1998
SERVICES COMPANY BANC ONE INVESTMENT ADVISORS**
---------------- ------------------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $2,892,564 $570,303 $1,953,193 $ 0
Prime Money Market $2,909,462 $499,662 $1,964,556 $ 0
Municipal Money Market $ 545,873 $ 67,499 $ 363,608 $ 0
Ohio Municipal Money Market $ 57,990 $ 71,908 $ 39,212 $ 0
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*
Treasury Money Market NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 235,850 $ 27,440 $ 159,048 $ 0
Kentucky Municipal Bond $ 127,280 $ 0 $ 85,987 $ 0
Texas Tax-Free Bond NA* NA* NA* NA*
W. Virginia Municipal Bond $ 87,100 $ 24,557 $ 58,836 $ 0
Louisiana Municipal Bond $ 150,915 $ 0 $ 102,041 $ 0
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 Aggressive Growth NA* NA* NA* NA*
Investor Conservative Growth $ 0 $ 46,223 $ 0 $ 0
</TABLE>
112
<PAGE> 470
<TABLE>
<S> <C> <C> <C> <C>
Investor Balanced $ 0 $129,257 $ 0 $ 0
Investor Fixed Income NA* NA* NA* NA*
Treasury & Agency $ 41,644 $120,468 $ 27,972 $ 0
</TABLE>
* As of June 30, 1998, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
113
<PAGE> 471
<TABLE>
<CAPTION>
ONE GROUP ADMINISTRATION FEES--NET
THE ONE GROUP FISCAL YEAR ENDED JUNE 30, 1997
SERVICES COMPANY BANC ONE INVESTMENT ADVISORS**
---------------- ------------------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $4,041,160 $ 52,457 $ $ 0
Money Market
Prime Money Market $4,325,620 $268,513 $1,666,976 $ 0
Municipal Money Market $ 821,921 $ 45,236 $ 314,733 $ 0
Ohio Municipal Money Market $ 168,236 $ 79,377 $ 107,188 $ 0
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 $ 329,854 $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
Treasury Money Market NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 140,206 $ 49,819 $ 69,221 $ 0
Kentucky Municipal Bond $ 127,957 $ 0 $ 46,478 $ 0
Texas Tax-Free Bond NA* NA* NA* NA*
W. Virginia Municipal Bond $ 58,427 $ 10,580 $ 25,040 $ 0
Louisiana Municipal Bond $ 297,050 $ 0 $ 107,762 $ 0
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 Aggressive Growth NA* NA* NA* NA*
Investor Conservative Growth $ 0 $ 6,866 $ 0 $ 0
</TABLE>
114
<PAGE> 472
<TABLE>
<S> <C> <C> <C> <C>
Investor Balanced $ 0 $ 31,220 $ 0 $ 0
Investor Fixed Income NA* NA* NA* NA*
Treasury & Agency $ 13,891 $ 68,143 $ 29,765 $ 0
</TABLE>
* As of June 30, 1997, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
115
<PAGE> 473
<TABLE>
<CAPTION>
ONE GROUP ADMINISTRATION FEES--NET
THE ONE GROUP FISCAL YEAR ENDED JUNE 30, 1996
SERVICES BANC ONE INVESTMENT ADVISORS** 440***
FUND COMPANY
NET WAIVED NET WAIVED NET WAIVED
--- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $1,675,933 $ 23,824 $ 928,127 $ 0 $ 881,386 $ 19,060
Prime Money Market $2,490,499 $ 0 $1,463,271 $ 0 $1,611,838 $ 0
Municipal Money Market $ 504,611 $ 58,625 $ 340,160 $ 0 $ 328,817 $ 82,052
Ohio Municipal Money
Market $ 9,933 $ 87,195 $ 53,819 $ 0 $ 22,276 $ 39,800
Equity Income $ 286,663 $ 0 $ 151,456 $ 0 $ 136,804 $ 0
Mid Cap Value $ 543,544 $ 0 $ 321,420 $ 0 $ 357,658 $ 0
Mid Cap Growth $ 511,634 $ 0 $ 301,050 $ 0 $ 332,353 $ 0
Equity Index $ 219,301 $ 96,276 $ 165,797 $ 0 $ 52,623 $119,116
Large Cap Value $ 532,314 $ 0 $ 300,440 $ 0 $ 283,851 $ 32,509
Balanced $ 19,184 $ 48,482 $ 33,779 $ 0 $ 22,718 $ 11,794
International Equity
Index $ 307,633 $ 0 $ 171,529 $ 0 $ 172,763 $ 0
Large Cap Growth $ 778,543 $ 0 $ 441,303 $ 0 $ 457,430 $ 0
Short-Term Bond $ 471,594 $ 0 $ 275,961 $ 0 $ 301,887 $ 0
Intermediate Tax-Free
Bond $ 222,203 $ 0 $ 138,734 $ 0 $ 167,244 $ 0
Municipal Income $ 210,905 $ 43,781 $ 142,512 $ 0 $ 110,442 $ 43,233
Ohio Municipal Bond $ 81,876 $ 15,630 $ 57,825 $ 0 $ 55,179 $ 11,740
Government Bond $ 544,937 $ 6,947 $ 297,480 $ 0 $ 270,620 $ 12,171
Ultra Short-Term Bond $ 0 $ 50,706 $ 28,274 $ 0 $ 35,162
Treasury Only Money
Market $ 113,945 $ 0 $ 179,830 $ 0 $ 65,888 $ 0
Government Money Market $ 232,688 $ 0 $ 385,955 $ 0 $ 153,141 $ 131
Institutional Prime
Money Market NA* NA* NA* NA* NA* NA*
Treasury Money Market NA* NA* NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA* NA* NA*
Arizona Municipal Bond NA* NA* NA* NA* NA* NA*
Kentucky Municipal Bond $ 38,104 $ 1,196 $ 23,883 $ 0 $ 26,310 $ 2,256
Texas Tax-Free Bond NA* NA* NA* NA* NA* NA*
W. Virginia Municipal
Bond NA* NA* NA* NA* NA* NA*
Louisiana Municipal Bond $ 86,078 $ 0 $ 31,165+ $ 0 $ 0 $ 0
Diversified Equity $ 101,245 $ 0 $ 36,656+ $ 0 $ 0 $ 0
Small Cap Growth $ 47,011 $ 0 $ 17,021+ $ 0 $ 0 $ 0
High Yield Bond NA* NA* NA* NA* NA* NA*
Investor Growth NA* NA* NA* NA* NA* NA*
Investor Growth & Income NA* NA* NA* NA* NA* NA*
Investor Aggressive
Growth NA* NA* NA* NA* NA* NA*
Investor Conservative
Growth NA* NA* NA* NA* NA* NA*
Investor Balanced NA* NA* NA* NA* NA* NA*
Investor Fixed Income NA* NA* NA* NA* NA* NA*
Treasury & Agency NA* NA* NA* NA* NA* NA*
</TABLE>
* As of June 30, 1996, the Fund had not commenced operations.
** These were fees paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement for the period
from December 1, 1995 through June 30, 1996, and by 440 Financial Management for
the period June 30, 1995 to December 1, 1995.
*** These were fees paid from July 1, 1995 through early November 30, 1995.
+ These fees were paid from March 26, 1996 through June 30, 1996.
116
<PAGE> 474
Prior to the merger with the Funds, administrative services were provided to the
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*
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
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:
PREDECESSOR FUNDS -- ADMINISTRATION FEES*
FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND FCNIMCO
- ---- -------
<S> <C>
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
</TABLE>
* 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.
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.
117
<PAGE> 475
Unless sooner terminated, the Administration Agreement between the
Trust and The One Group Services Company will continue in effect through
November 30, 1999. 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.
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith, or negligence in
the performance of its duties, or from the reckless disregard by it of its
obligations and duties thereunder.
DISTRIBUTOR
The One Group Services Company serves as Distributor to each Fund of the Trust
pursuant to its Distribution Agreement with the Trust (the "DISTRIBUTION
AGREEMENT"). The Board of Trustees of the Trust approved The One Group Services
Company as the sole Distributor beginning November 1, 1995. Unless otherwise
terminated, the Distribution Agreement will continue in effect until October 31,
1999 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.
118
<PAGE> 476
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.
During the fiscal year ending June 30, 1998, the distribution fees paid by the
Class A, Class B, Class C and Service Class Shares (formerly Retirement Class
Shares) of the Trust to The One Group Services Company were as follows:
<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. $1,870,320 $ 1,370 $ 4 -
Prime Money Market One Group Ser. $1,336,837 $ 9,530 - -
Municipal Money Market One Group Ser. $ 243,989 - - -
Ohio Municipal Money Market One Group Ser. $ 91,966 - - -
Equity Income One Group Ser. $ 247,834 $1,218,721 $ 3,516 -
Mid Cap Value One Group Ser. $ 71,119 $ 253,701 - -
Mid Cap Growth One Group Ser. $ 168,985 $ 638,750 $ 1,384 -
Equity Index One Group Ser. $ 389,725 $2,521,768 $ 5,666 -
Large Cap Value One Group Ser. $ 41,564 $ 131,570 - -
Value One Group Ser. $ 100,049 $ 738,989 - -
International Equity Index One Group Ser. $ 41,768 $ 113,966 $ 154 -
Large Cap Growth One Group Ser. $ 395,550 $1,952,771 $ 1,498 -
Short-Term Bond One Group Ser. $ 44,939 $ 36,337 - -
Intermediate Tax-Free Bond One Group Ser. $ 27,396 $ 40,944 - -
Municipal Income One Group Ser. $ 176,867 $ 413,746 $ 6,903 -
Ohio Municipal Bond One Group Ser. $ 41,056 $ 170,689 - -
Government Bond One Group Ser. $ 82,779 $ 136,972 - -
Ultra Short-Term Bond One Group Ser. $ 91,457 $ 25,723 - -
Treasury Only Money Market One Group Ser. - - - -
Government Money Market One Group Ser. - - - -
Institutional Prime Money
Market* One Group Ser. - - - -
Kentucky Municipal Bond One Group Ser. $ 15,661 $ 32,901 - -
Treasury Money Market* One Group Ser.
Tax-Exempt Money Market* One Group Ser.
</TABLE>
119
<PAGE> 477
<TABLE>
<S> <C> <C> <C> <C> <C>
Arizona Municipal Bond One Group Ser. $ 3,070 $ 364 - -
Texas Tax-Free Bond* One Group Ser.
W. Virginia Municipal Bond One Group Ser. $ 3,233 $ 13,282 - -
Louisiana Municipal Bond One Group Ser. $ 121,555 $ 38,855 - -
Diversified Equity One Group Ser. $ 154,965 $ 160,647 $ 1,566 -
Small Cap Growth One Group Ser. $ 48,572 $ 55,214 $ 191 -
High Yield Bond* One Group Ser.
Investor Growth One Group Ser. $ 56,780 $ 326,605 $40,419 -
Investor Growth & Income One Group Ser. $ 45,993 $ 391,056 $24,289 -
Investor Aggressive Growth* One Group Ser.
Investor Conservative Growth One Group Ser. $ 12,778 $ 162,370 $19,234 -
Investor Balanced One Group Ser. $ 32,762 $ 296,604 $26,669 -
Investor Fixed Income* One Group Ser.
Treasury & Agency One Group Ser. $ 26,930 $ 29,440 - -
</TABLE>
* These Funds had not commenced operations as of June 30, 1998.
120
<PAGE> 478
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan and CDSC
Plan may be terminated with respect to the Class A Shares, Class B Shares, Class
C Shares or Service Class Shares of any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class A
Shares, Class B Shares, Class C Shares or Service Class Shares, respectively, of
that Fund. The Distribution Plan and CDSC Plan may be amended by vote of the
Trust's Board of Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for such purpose, except that any change in
the Distribution Plan or Class B Distribution Plan that would materially
increase the distribution fee with respect to the Class A Shares, Class B
Shares, Class C Shares or Service Class Shares of a Fund requires the approval
of that Fund's Class A, Class B, Class C or Service Class Shareholders,
respectively. The Trust's Board of Trustees will review on a quarterly and
annual basis written reports of the amounts received and expended under the
Distribution Plan (including amounts expended by the Distributor to
Participating Organizations pursuant to the Servicing Agreements entered into
under the Distribution Plan) indicating the purposes for which such expenditures
were made.
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.
121
<PAGE> 479
During the fiscal year ending December 31, 1998, the distribution fees
paid by the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
FUND SHAREHOLDER SERVICES FEES SHAREHOLDER SERVICES 12b-1 FEES SERVICE PLAN FEES
CLASS A FEES CLASS B CLASS B SERVICE 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>
CUSTODIAN AND TRANSFER AGENT
Cash and securities owned by the Funds of the Trust are held by State Street
Bank and Trust Company ("STATE STREET") as Custodian. State Street serves the
respective Funds as Custodian pursuant to a Custodian Agreement with the Trust
(the "CUSTODIAN AGREEMENT"). Under the Custodian Agreement, State Street (i)
maintains a separate account or accounts in the name of each Fund; (ii) makes
receipts and disbursements of money on behalf of each Fund; (iii) collects and
receives all income and other payments and distributions on account of the
Funds' portfolio securities; (iv) responds to correspondence from security
brokers and others relating to its duties; and (v) makes periodic reports to the
Trust's Board of Trustees concerning the Trust's operations. State Street may,
at its own expense, open and maintain a sub-custody account or accounts on
122
<PAGE> 480
behalf of the Trust, provided that State Street shall remain liable for the
performance of all of its duties under the Custodian Agreement.
Bank One Trust Company, N.A. serves as Sub-Custodian in connection with the
Trust's securities lending activities, pursuant to agreements between the Trust,
State Street and Bank One Trust Company. Bank One Trust Company receives a fee
paid by the Trust.
Rules adopted under the 1940 Act permit the Trust to maintain its securities and
cash in the custody of certain eligible banks and securities depositories. The
Trust intends to select foreign custodians or sub-custodians to maintain foreign
securities of the International 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.
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.
123
<PAGE> 481
EXPERTS
For all Funds other than the Predecessor Funds, the financial statements for
the fiscal year ended June 30, 1998 have been audited by PricewaterhouseCoopers
LLP, independent public accountants to the Trust, as indicated in their reports
with respect thereto, and are incorporated herein by reference in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
The financial statements for the predecessor funds of the Large Company Growth
Fund, Sun Eagle Intermediate Fixed Income Fund and Sun Eagle Equity Growth Fund,
respectively, for the fiscal year ended June 30, 1993 and for the period from
February 28, 1992 (commencement of operations of each Fund) to June 30, 1992,
were audited by the predecessor auditors for such Funds.
The financial statements for the predecessor Fund of the Kentucky Municipal Bond
Fund, the Trademark Kentucky Municipal Bond Fund, for the period from February
1, 1994 to January 19, 1995, and for the period from March 12, 1993
(commencement of operations) to January 31, 1994, were audited by the
predecessor auditors for such Funds.
The Financial Statements for the Predecessor Funds have been audited by Arthur
Andersen LLP, independent public accountants to such Funds for the period ended
December 31, 1998, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
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.
124
<PAGE> 482
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 Income Bond Fund;
16. The Short-Term Bond Fund;
17. The Intermediate Bond Fund;
18. The Government Bond Fund;
19. The Ultra Short-Term Bond Fund;
20. The High Yield Bond Fund;
21. The Investor Growth Fund;
22. The Investor Growth & Income Fund;
23. The Investor Aggressive Growth Fund;
24. The Investor Fixed Income Fund;
25. The Investor Conservative Growth Fund;
26. The Investor Balanced Fund;
27. The Municipal Income Fund;
28. The Intermediate Tax-Free Bond Fund;
29. The Ohio Municipal Bond Fund;
125
<PAGE> 483
30. The Texas Municipal Bond Fund;
31. The West Virginia Municipal Bond Fund;
32. The Kentucky Municipal Bond Fund;
33. The Louisiana Municipal Bond Fund;
34. The Arizona Municipal Bond Fund;
35. The Treasury Money Market Fund;
36. The Treasury Only Money Market Fund;
37. The Government Money Market Fund;
38. The Tax-Exempt Money Market Fund;
39. The Institutional Prime Money Market Fund;
40. The Treasury & Agency Fund;
41. The Small Cap Value Fund;
42. The Diversified Mid Cap Fund;
43. The Diversified International Fund;
44. The Market Expansion Index Fund;
45. The Bond Fund;
46. The Short-Term Municipal Bond Fund;
47. The Tax-Free Bond Fund;
48. The Michigan Municipal Bond Fund;
49. The Michigan Municipal Money Market Fund;
50. The Cash Management Money Market Fund;
51. The Treasury Cash Management Money Market Fund;
52. The Treasury Prime Cash Management Money Market Fund;
53. The U.S. Government Securities Cash Management Money Market Fund; and
54. The Municipal Cash Management Money Market Fund
The Funds of the Trust (other than the Institutional Money Market Funds and the
Money Market Funds) offer shares in four separate classes: Class I Shares, Class
A Shares, Class B and Class C Shares.1 The U.S. Treasury Securities Money Market
Fund and the Prime Money Market Fund offer Class I Shares, Class A Shares, Class
B Shares, Class C Shares, and Service Class Shares. The Institutional Money
Market Funds (other than the Cash Management Funds) offer only a single class of
shares. The Municipal Money Market Fund, the Ohio Municipal Money Market Fund,
and the Michigan Municipal Money Market Fund offer Class I, Class A, Class C,
and Service Class Shares. The Cash Management Funds offer Class A and Class I
Shares only. See the relevant Prospectus for those Funds for more details.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Prospectus and this Statement of Additional
Information, the Trust's Shares will be fully paid and non-assessable. In the
event of a liquidation or dissolution of the Trust, Shares of a Fund are
entitled to receive the assets available for distribution belonging to the Fund,
and a proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution.
1. Class C Shares are currently not available for purchase in all Funds of the
Trust.
126
<PAGE> 484
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding Shares of each Fund
affected by the matter. For purposes of determining whether the approval of a
majority of the outstanding Shares of a Fund will be required in connection with
a matter, a Fund will be deemed to be affected by a matter unless it is clear
that the interests of each Fund in the matter are identical, or that the matter
does not affect any interest of the Fund. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding Shares of such Fund. However, Rule 18f-2 also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts, and the election of Trustees may be effectively acted
upon by Shareholders of the Trust voting without regard to series.
Class A Shares, Class B Shares, Class C Shares and Service Class Shares of a
Fund have exclusive voting rights with respect to matters pertaining to the
Fund's Distribution Plan.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of beneficial interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, the Trust's Declaration of Trust
provides that Shareholders shall not be subject to any personal liability for
the obligations of the Trust, and that every written agreement, obligation,
instrument, or undertaking made by the Trust shall contain a provision to the
effect that the Shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any Shareholder held personally liable solely by reason of his being or having
been a Shareholder. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any Shareholder for
any act or obligation of the Trust, and shall satisfy any judgment thereon.
Thus, the risk of a Shareholder incurring financial loss on account of
Shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or agent of
the Trust shall be personally liable in connection with the administration or
preservation of the assets of the trust or the conduct of the Trust's business;
nor shall any Trustee, officer, or agent be personally liable to any person for
any action or failure to act except for his own bad faith, willful misfeasance,
gross negligence, or reckless disregard of his duties. The Declaration of Trust
also provides that all persons having any claim against the Trustees or the
Trust shall look solely to the assets of the trust for payment.
127
<PAGE> 485
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 The One Group.
Further information about the performance of the Predecessor Funds is contained
in the Pegasus Funds', Pegasus Money Market Funds and Pegasus Cash Management
Funds' Annual Report(s) to Shareholders. Copies of such reports 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
128
<PAGE> 486
the Tax-Exempt Money Market Fund, Treasury Money Market Fund, and Institutional
Prime Money Market Fund because those Funds had not commenced operations as of
June 30, 1998.
129
<PAGE> 487
<TABLE>
<CAPTION>
MONEY MARKET FUNDS
CLASS I SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
<S> <C> <C>
U.S. Treasury Securities Money Market 09/09/85 5.12%
Prime Money Market 08/01/85 5.22%
Municipal Money Market 06/04/87 3.15%
Ohio Municipal Money Market(1) 06/09/93 3.21%
<CAPTION>
CLASS I SHARES INCEPTION 7-DAY YIELD
DATE 12/31/98
<S> <C> <C>
Michigan Municipal Money Market 03/30/96 3.19%
<CAPTION>
CLASS A SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
<S> <C> <C>
U.S. Treasury Securities Money Market 02/18/92 4.87%
Prime Money Market 02/18/92 4.97%
Municipal Money Market 02/18/92 2.90%
Ohio Municipal Money Market(1) 01/26/93 2.96%
<CAPTION>
CLASS A SHARES INCEPTION 7-DAY YIELD
DATE 12/31/98
<S> <C> <C>
Michigan Municipal Money Market(1) 01/23/91 2.94%
<CAPTION>
INSTITUTIONAL SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
<S> <C> <C>
Treasury Only Money Market 04/16/93 5.04%
Government Money Market 06/14/93 5.56%
<CAPTION>
INSTITUTIONAL SHARES INCEPTION 7-DAY YIELD
DATE 12/31/98
<S> <C> <C>
Cash Management Money Market 07/30/92 4.89%
U.S Government Securities Cash Management Money Market 06/02/92 4.68%
Treasury Cash Management Money Market 09/12/97 4.53%
Treasury Prime Cash Management Money Market 03/22/95 4.19%
Municipal Cash Management Money Market(1) 08/18/97 3.27%
<CAPTION>
SERVICE SHARES INCEPTION 7-DAY YIELD
DATE 12/31/98
<S> <C> <C>
Cash Management Money Market 01/17/95 4.64%
U.S Government Securities Cash Management Money Market 01/17/95 4.43%
Treasury Cash Management Money Market 09/12/97 4.28%
Treasury Prime Cash Management Money Market 03/22/95 3.94%
Municipal Cash Management Money Market(1) 08/18/97 3.02%
<CAPTION>
CLASS B SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
<S> <C> <C>
U.S. Treasury Securities Money Market 11/01/96 4.12%
Prime Money Market 11/01/96 4.22%
</TABLE>
130
<PAGE> 488
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 because it had not commenced
operations as of June 30, 1998. 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.
131
<PAGE> 489
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELD
CLASS I SHARES 7 DAY
YIELD 28% TAX 39.6% TAX
----- ------- ---------
<S> <C> <C> <C>
Municipal Money Market 3.15% 4.38% 5.22%
Ohio Municipal Money Market 3.21% 4.46% 5.31%
Michigan Municipal Money Market* 3.19% 4.43% 5.28%
<CAPTION>
CLASS A SHARES 7 DAY
YIELD 28% TAX 39.6% TAX
----- ------- ---------
<S> <C> <C> <C>
Municipal Money Market 2.90% 4.03% 4.80%
Ohio Municipal Money Market 2.96% 4.11% 4.90%
Michigan Municipal Money Market* 2.94% 4.08% 4.87%
<CAPTION>
INSTITUTIONAL SHARES 7 DAY
YIELD 28% TAX 39.6% TAX
----- ------- ---------
<S> <C> <C> <C>
Municipal Cash Management Money Market* 3.27% 4.54% 5.41%
<CAPTION>
SERVICE SHARES 7 DAY
YIELD 28% TAX 39.6% TAX
----- ------- ---------
<S> <C> <C> <C>
Municipal Cash Management Money Market* 3.02% 4.19% 5.00%
</TABLE>
* Prior to the merger with the Fund, these Predecessor Funds 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%. No tax equivalent 30-day yield information is
available for the Texas Municipal Bond Fund.
132
<PAGE> 490
A Fund's respective cumulative total return and average annual total
return was determined by calculating the change in the value of a hypothetical
$1,000 investment in a particular class of the Fund for each of the periods
shown. Cumulative total return for a particular class of a Fund is computed by
determining the rate of return over the applicable period that would equate the
initial amount invested to the ending redeemable value of the investment. The
cumulative return is calculated as the total dollar increase or decrease in the
value of an account assuming reinvestment of all distributions divided by the
original initial investment. The average annual return for a particular class of
a Fund is computed by determining the average annual compounded rate of return
over the applicable period that would equate the initial amount invested to the
ending redeemable value of the investment. The ending redeemable value includes
dividends and capital gain distributions reinvested at net asset value. The
resulting percentages indicated the positive or negative investment results that
an investor would have experienced from changes in share price and reinvestment
of dividends and capital gains distributions.
Performance information showing a Fund's and/or particular Class's distribution
rate may be presented from time to time in advertising and sales literature
regarding the Bond Funds and Equity Funds. The distribution rate is calculated
as follows:
distribution yield = a/(b) x 365
-----------
c
In the formula, "a" represents dividends distributed by a particular class
during that period; "b" represents month end offer price or net asset value for
a particular class; "c" represents the number of days in the period being
calculated. "365" is the number of days in a year, used to annualize the
distribution yield.
Performance will fluctuate from time to time and is not necessarily
representative of future results. Accordingly, a Fund's performance may not
provide for comparison with bank deposits or other investments that pay a fixed
return for a stated period of time. Performance is a function of a Fund's
quality, composition, and maturity, as well as expenses allocated to the Fund.
Fees imposed upon customer accounts at a bank, with regard to Class I Shares and
Service Class Shares, or a Participating Organization, with regard to Class A
and Class B Shares, will reduce a Fund's effective yield to customers.
Performance data for the Funds through June 30, 1998 (calculated as described
above) and for the Predecessor Funds through December 31, 1998 is as follows:
133
<PAGE> 491
CLASS I SHARES
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 09/04/90 6.59% 6.16% 5.41% - 7.03% 5.75%
Intermediate Tax-Free(2) 09/04/90 7.74% 6.96% 5.46% - 6.95% 4.15%
Ohio Municipal Bond(2) 07/02/91 7.13% 6.68% 5.20% - 6.84% 4.19%
Municipal Income(2) 02/09/93 8.09% 7.03% 5.76% - 5.92% 4.76%
Government Bond 02/08/93 10.81% 7.54% 6.27% - 6.48% 5.88%
Ultra Short-Term Bond 02/02/93 6.00% 6.25% 5.20% - 5.18% 5.85%
Kentucky Municipal Bond(2) 03/12/93 7.11% 6.73% 5.40% - 5.52% 3.91%
Louisiana Municipal Bond(2) 12/29/89 6.62% 6.27% 5.26% - 6.81% 3.90%
West Virginia Municipal Bond(1),(2) 12/31/83 7.36% 6.43% 5.62% 6.69% 7.39% 4.13%
Arizona Municipal Bond(2) 11/30/79 6.58% 5.95% 5.28% 7.01% 7.34% 3.82%
Treasury & Agency(1) 04/30/88 7.91% 6.28% 6.30% 7.42% 7.39% 5.37%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income Bond(4) 03/05/93 7.82% 6.58% 7.10% NA 6.74% 5.41%
Intermediate Bond(5) 12/31/83 7.62% 7.25% 6.67% 8.30% 8.80% 6.14%
Bond(5) 12/31/83 8.17% 7.72% 7.54% 9.32% 10.00% 6.21%
Short-Term Municipal Bond(5) 12/31/83 5.01% 4.49% 4.11% 5.56% 6.00% 3.18%
Tax-Free Bond(6) 03/01/88 6.01% 6.34% 6.73% 8.46% 8.44% 3.83%
Michigan Municipal Bond(2) 02/01/93 5.94% 6.24% 5.73% NA 6.61% 4.00%
<CAPTION>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value 03/02/89 28.27% 22.92% 17.52% - 14.11% 0.77%
Equity Income 07/02/87 23.18% 26.16% 20.21% 16.29% 13.99% 1.27%
Equity Index 07/02/91 29.73% 29.79% 22.58% - 19.64% 1.17%
Large Cap Value 03/01/91 21.46% 20.28% 16.88% - 14.68% 1.08%
Mid Cap Growth 03/02/89 31.11% 26.11% 19.12% - 18.35% -0.38%
International Equity Index(3) 10/28/92 9.54% 11.78% 10.93% - 12.84% NA
</TABLE>
134
<PAGE> 492
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced 04/05/93 22.12% 18.97% 14.11% - 13.71% 2.70%
Large Cap Growth 02/28/92 35.75% 28.48% 22.79% - 19.88% 0.09%
Small Cap Growth 07/01/91 23.58% 19.36% 14.55% - 17.10% 0.10%
Diversified Equity 12/29/89 32.26% 28.33% 19.63% - 17.91% 0.48%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value(4)(5) 06/30/72 (4.11)% 16.30% 13.37% 16.04% 10.13% NA
Diversified Mid Cap(5) 12/31/83 4.61% 18.51% 14.15% 15.71% 14.59% NA
Diversified International(3)(5) 09/30/86 16.43% 9.28% 7.78% 6.60% 9.35% NA
Market Expansion Index(5) 12/31/85 13.63% 21.58% 18.05% 15.31% 13.95% NA
<CAPTION>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 12/10/96 12.73% - - - 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>
135
<PAGE> 493
CLASS A SHARES
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 02/18/92 6.32% 5.88% 5.13% - 5.86% 5.49%
With Sales Charge 3.16% 4.80% 4.49% - 5.35%
Intermediate Tax-Free(2) 02/18/92 7.50% 6.71% 5.22% - 6.08% 3.73%
With Sales Charge 2.70% 5.09% 4.26% - 5.32%
Ohio Municipal Bond(2) 02/18/92 6.87% 6.42% 4.97% - 6.30% 3.94%
With Sales Charge 2.10% 4.80% 4.01% - 5.53%
Municipal Income(2) 02/23/93 7.84% 6.80% 5.57% - 5.67% 4.51%
With Sales Charge 2.94% 5.17% 4.59% - 4.77%
Government Bond 03/05/93 10.54% 7.28% 5.98% - 5.95% 5.63%
With Sales Charge 5.53% 5.65% 5.01% - 5.03%
Ultra Short-Term Bond 03/10/93 5.75% 6.05% 4.98% - 4.97% 5.56%
With Sales Charge 2.52% 5.00% 4.34% - 4.37%
Kentucky Municipal Bond(2) 01/20/95 6.86% 6.34% 5.17% - 5.30% 3.49%
With Sales Charge 2.06% 4.72% 4.20% - 4.39%
Louisiana Municipal Bond(2) 12/29/89 6.35% 6.07% 5.14% - 6.74% 3.65%
With Sales Charge 1.53% 4.47% 4.18% - 6.17%
West Virginia Municipal Bond(1,2) 01/21/97 6.98% 6.27% 5.42% 6.45% 7.15% 3.88%
With Sales Charge 2.16% 4.66% 4.45% 5.96% 6.82%
Arizona Municipal Bond(1,2) 01/21/97 6.30% 5.23% 4.72% 6.60% 6.99% 3.41%
With Sales Charge 1.52% 3.61% 3.76% 6.10% 6.73%
Treasury & Agency(1) 01/21/97 8.10% 6.22% 6.16% 7.21% 7.18% 4.96%
With Sales Charge 4.85% 5.14% 5.53% 6.89% 6.86%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Bond(5) 12/31/83 7.92% 7.50% 7.41% 9.26% 9.95% 5.68%
With Sales Charge 3.06% 5.86% 6.43% 8.76% 9.62%
Income Bond(4) 03/05/93 7.44% 6.23% 6.83% -- 6.51% 5.00%
With Sales Charge 4.22% 5.16% 6.18% -- 5.95%
Intermediate Bond(5) 12/31/83 7.37% 7.01% 6.53% 8.22% 8.75% 5.70%
With Sales Charge 4.15% 5.93% 5.88% 7.90% 8.53%
Short-Term Municipal Bond(5) 12/31/83 4.66% 4.20% 3.83% 5.28% 5.73% 2.99%
With Sales Charge 3.61% 3.85% 3.62% 5.18% 5.66%
Tax-Free Bond(6) 03/01/88 5.74% 6.05% 6.45% 8.19% 8.13% 3.41%
With Sales Charge .98% 4.44% 5.47% 7.69% 7.68%
</TABLE>
136
<PAGE> 494
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Michigan Municipal Bond(2) 02/01/93 5.61% 6.00% 5.59% -- 6.49% 3.50%
With Sales Charge 0.86% 4.39% 4.62% -- 5.67%
</TABLE>
137
<PAGE> 495
<TABLE>
<CAPTION>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value 02/18/92 27.90% 22.58% 17.27% - 15.79% .53%
With Sales Charge 22.13% 20.72% 16.19% - 14.96%
Equity Income 02/18/92 22.91% 25.82% 19.89% - 17.43% .99%
With Sales Charge 17.39% 23.91% 18.79% - 16.59%
Equity Index 02/18/92 29.33% 29.42% 22.29% - 19.44% .93%
With Sales Charge 23.49% 27.45% 21.17% - 18.58%
Large Cap Value 02/18/92 21.14% 20.00% 16.66% - 14.00% .82%
With Sales Charge 15.69% 18.16% 15.59% - 13.17%
Mid Cap Growth 02/18/92 30.95% 25.88% 18.85% - 15.87% NA
With Sales Charge 25.07% 23.95% 17.76% - 15.03%
International Equity Index(3) 04/23/93 9.34% 11.60% 10.70% - 10.21% NA
With Sales Charge 4.40% 9.89% 9.68% - 9.23%
Balanced 04/02/93 21.71% 18.64% 13.82% - 13.40% 2.47%
With Sales Charge 16.25% 16.82% 12.78% - 12.41%
Large Cap Growth 02/22/94 35.43% 28.01% - - 23.70% NA
With Sales Charge 29.33% 26.07% - - 22.39%
Small Cap Growth 07/01/91 23.28% 19.14% 14.42% - 17.01% NA
With Sales Charge 17.69% 17.32% 13.37% - 16.25%
Diversified Equity 12/29/89 31.96% 31.96% 19.48% - 17.82% 0.24%
With Sales Charge 26.04% 26.11% 18.38% - 17.19%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value(4)(5) 06/30/72 (4.29)% 15.78% 12.88% 15.49% 9.57% NA
With Sales Charge (9.07)% 13.82% 11.72% 14.90% 9.36% NA
Diversified Mid Cap(5) 12/31/83 4.30% 18.45% 14.00% 15.63% 14.54% NA
With Sales Charge (0.91)% 16.44% 12.84% 15.04% 14.15% NA
Diversified International(3)(5) 04/30/86 16.12% 8.98% 7.60% 6.52% 9.29% NA
With Sales Charge 10.32% 7.14% 6.50% 5.97% 8.84% NA
Market Expansion Index(5) 12/31/85 13.40% 21.30% 17.77% 15.03% 13.68% NA
With Sales Charge 10.00% 20.08% 17.05% 14.68% 13.41% NA
<CAPTION>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 12/10/96 12.38% - - - 11.56% NA
With Sales Charge 7.29% - - - 8.31% NA
Investor Balanced 12/10/96 16.62% - - - 16.29% NA
With Sales Charge 11.39% - - - 12.90% NA
</TABLE>
138
<PAGE> 496
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Growth & Income 12/10/96 20.18% - - - 20.73% NA
With Sales Charge 14.76% - - - 17.21% NA
Investor Growth 12/10/96 23.44% - - - 23.78% NA
With Sales Charge 17.87% - - - 20.17% NA
</TABLE>
139
<PAGE> 497
<TABLE>
<CAPTION>
CLASS B SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 01/14/94 5.98% 5.33% - - 4.75% 4.99%
With Sales Charge 2.98% 5.03% - - 4.75%
Intermediate Tax-Free(2) 01/14/94 6.81% 6.03% - - 4.28% 3.25%
With Sales Charge 2.81% 5.13% - - 3.89%
Ohio Municipal Bond(2) 01/14/94 6.20% 5.75% - - 4.05% 3.29%
With Sales Charge 2.20% 4.85% - - 3.66%
Municipal Income(2) 01/14/94 7.04% 6.08% - - 4.85% 3.86%
With Sales Charge 3.04% 5.18% - - 4.47%
Government Bond 01/14/94 9.86% 6.61% - - 5.70% 4.98%
With Sales Charge 5.86% 5.72% - - 5.33%
Ultra Short-Term Bond 01/14/94 5.32% 5.39% - - 4.66% 5.09%
With Sales Charge 2.32% 5.09% - - 4.66%
Intermediate Bond 11/30/94 7.78% 6.23% - - 7.59% 5.00%
With Sales Charge 3.78% 5.33% - - 6.90%
Kentucky Municipal Bond(2) 03/16/95 6.20% 5.72% - - 6.04% 3.01%
With Sales Charge 2.20% 4.82% - - 5.23%
Louisiana Municipal Bond(2) 09/16/94 5.69% 5.39% - - 5.57% 3.00%
With Sales Charge 1.69% 4.48% - - 4.88%
West Virginia Municipal Bond(1,2) 12/31/83 6.57% 5.63% 4.76% 5.79% 6.47% 3.23
With Sales Charge 2.57% 4.73% 4.59% 5.79% 6.47%
Arizona Municipal Bond(1,2) 11/30/79 2.67% 3.48% 3.41% 5.60% 6.13% 2.93
With Sales Charge (1.33)% 2.53% 3.24% 5.60% 6.13%
Treasury & Agency(1) 04/30/88 7.33% 5.60% 5.59% 6.66% 6.63% 4.62
With Sales Charge 4.33% 5.30% 5.59% 6.66% 6.63%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Bond(5) 12/31/83 7.16% 7.01% 7.12% 9.10% 9.84% 5.18%
With Sales Charge 3.16% 6.12% 6.97% 9.10% 9.84%
Income Bond(4) 03/05/93 6.74% 5.48% 6.30% -- 6.05% 4.38%
With Sales Charge 3.74% 4.88% 6.30% -- 6.05%
Intermediate Bond(5) 12/31/83 6.44% 6.45% 6.18% 8.05% 8.64% 5.19%
With Sales Charge 3.44% 5.86% 6.18% 8.05% 8.64%
</TABLE>
140
<PAGE> 498
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Municipal Bond(5) 12/31/83 4.21% 4.07% 3.75% 5.24% 5.69% 2.17%
With Sales Charge 3.21% 4.07% 3.75% 5.24% 5.69%
Tax-Free Bond(6) 04/04/95 4.98% 5.25% -- -- 6.52% 2.83%
With Sales Charge 0.98% 4.34% -- -- 5.84%
Michigan Municipal Bond 02/01/93 4.92% 5.37% 5.21% -- 6.17% 3.00%
With Sales Charge .92% 4.46% 5.04% -- 6.04%
</TABLE>
141
<PAGE> 499
<TABLE>
<CAPTION>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value 01/14/94 26.97% 21.67% - - 16.38% NA
With Sales Charge 22.97% 20.99% - - 16.12%
Equity Income 01/14/94 21.97% 24.92% - - 20.06% .30%
With Sales Charge 17.97% 24.28% - - 19.82%
Equity Index 01/14/94 28.47% 28.43% - - 22.74% .21%
With Sales Charge 24.47% 27.82% - - 22.51%
Large Cap Value 01/14/94 20.18% 19.19% - - 16.80% .10%
With Sales Charge 16.18% 18.48% - - 16.54%
Mid Cap Growth 01/14/94 29.79% 24.89% - - 18.09% NA
With Sales Charge 25.79% 24.25% - - 17.84%
International Equity Index(3) 01/14/94 8.48% 10.59% - - 8.53% NA
With Sales Charge 4.48% 9.76% - - 8.19%
Balanced 01/14/94 20.95% 17.84% - - 13.63% 1.73%
With Sales Charge 16.95% 17.12% - - 13.34%
Large Cap Growth 01/14/94 34.39% 27.25% - - 22.49% NA
With Sales Charge 30.39% 26.63% - - 22.26%
Small Cap Growth 09/09/94 22.24% 18.23% - - 15.88% NA
With Sales Charge 18.24% 17.51% - - 15.35%
Diversified Equity 09/09/94 30.89% 27.05% - - 23.28% NA
With Sales Charge 26.89% 26.43% - - 22.84%
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value(4)(5) 06/30/72 (5.11)% 15.12% 12.30% 15.15% 9.46% NA
With Sales Charge (8.77)% 14.36% 12.17% 15.19% 9.46% NA
Diversified Mid Cap(5) 12/31/83 3.79% 18.11% 13.80% 15.53% 14.49% NA
With Sales Charge 0.17% 17.39% 13.68% 15.53% 14.49% NA
Diversified International 04/30/86 15.43% 8.14% 7.11% 6.27% 9.10% NA
With Sales Charge 11.43% 7.28% 6.96% 6.27% 9.10% NA
Market Expansion Index 12/31/85 12.79% 21.13% 17.64% 14.96% 13.61% NA
With Sales Charge 9.79% 20.67% 17.64% 14.96% 13.61% NA
</TABLE>
142
<PAGE> 500
FUNDS OF FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 12/10/96 11.53% 10.90%
With Sales Charge 7.53% NA NA NA 8.46% NA
Investor Balanced 12/10/96 15.85% 15.67%
With Sales Charge 11.85% NA NA NA 13.28% NA
Investor Growth & Income 12/10/96 19.13% 19.72%
With Sales Charge 15.13% NA NA NA 17.38% NA
Investor Growth 12/10/96 22.52% NA NA NA 23.91% NA
With Sales Charge 18.52% 21.61%
</TABLE>
143
<PAGE> 501
<TABLE>
<CAPTION>
CLASS C SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Income(2)) 11/04/97 - - - - 8.28% 3.86%
With Sales Charge 7.28%
</TABLE>
144
<PAGE> 502
<TABLE>
<CAPTION>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income 11/04/97 - - - - 16.57% 0.31%
With Sales Charge 15.57%
Equity Index 11/04/97 - - - - 21.07% 0.20%
With Sales Charge 20.07%
Mid Cap Growth 11/04/97 - - - - 14.27% NA
With Sales Charge 13.27%
International Equity Index(3) 11/04/97 - - - - 16.34% NA
With Sales Charge 15.34%
Large Cap Growth 11/04/97 - - - - 27.63% NA
With Sales Charge 26.63%
Small Cap Growth 11/04/97 - - - - 3.08% NA
With Sales Charge 2.16%
Diversified Equity 11/04/97 - - - - 20.87% NA
With Sales Charge 19.87%
<CAPTION>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -----------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 07/01/97 NA NA NA NA 11.48 NA
With Sales Charge 10.48
</TABLE>
145
<PAGE> 503
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Balanced 07/01/97 NA NA NA NA 15.66 NA
With Sales Charge 14.66
Investor Growth & Income 07/01/97 NA NA NA NA 19.08 NA
With Sales Charge 18.08
Investor Growth 07/01/97 NA NA NA NA 22.42 NA
With Sales Charge 21.42
</TABLE>
146
<PAGE> 504
(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 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 Market Expansion Index Fund prior to July 31, 1998 is represented by
the performance of a common trust fund managed by FCNIMCO 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 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.
(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
147
<PAGE> 505
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 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
148
<PAGE> 506
of inflation. It indicates the cost fluctuations of a representative group
of consumer goods. It does not represent a return on investment.
THE EQUITY, BOND AND MUNICIPAL BOND FUNDS AND THE FUNDS OF FUNDS may quote
actual total return performance from time to time in advertising and other
types of literature compared to results reported by the Dow Jones
Industrial Average.
The Dow Jones Industrial Average is an industry-accepted unmanaged index of
generally conservative securities used for measuring general market
performance. The performance reported will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The index
does not take into account any brokerage commissions or other fees.
Comparative information on the Consumer Price Index may also be included.
The Equity Funds, the Bond Funds, the Municipal Bond Funds and the Funds of
Funds may also promote the yield and/or total return performance and use
comparative performance information computed by and available from certain
industry and general market research and publications, such as Lipper
Analytical Services, Inc.; they may also use indices such as the Standard &
Poor's 400 Composite Stock Index, the Standard & Poor's 500 Composite Stock
Index, the Standard & Poor's 600 Composite Stock Index, the Russell 2000,
or the Morgan Stanley International European, Asian and Far East Gross
Domestic Product Index for performance comparison. Statistical and
performance information compiled and maintained by CDA Technologies, Inc.
and Interactive Data Corporation may also be used.
THE BOND FUNDS, THE FUNDS OF FUNDS AND THE 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 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.
149
<PAGE> 507
MISCELLANEOUS
The Trust is not required to hold a meeting of Shareholders for the purpose of
electing Trustees except that (i) the Trust is required to hold a Shareholders'
meeting for the election of Trustees at such time as less than a majority of the
Trustees holding office have been elected by Shareholders and (ii) if, as a
result of a vacancy on the Board of Trustees, less than two-thirds of the
Trustees holding office have been elected by the Shareholders, that vacancy may
only be filled by a vote of the Shareholders. In addition, Trustees may be
removed from office by a written consent signed by the holders of Shares
representing two-thirds of the outstanding Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of Shares representing not less than 20% of the outstanding Shares
of the Trust. Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
As used in the Trust's Prospectuses and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Trust upon the issuance or sale of Shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of the Trust not readily identified as
belonging to a particular Fund that are allocated to that Fund by the Trust's
Board of Trustees. The Board of Trustees may allocate such general assets in any
manner it deems fair and equitable. It is anticipated that the factor that will
be used by the Board of Trustees in making allocations of general assets to
particular Funds will be the relative net asset values of the respective Funds
at the time of allocation. Assets belonging to a particular Fund are charged
with the direct liabilities and expenses in respect of that Fund, and with a
share of the general liabilities and expenses of the Trust not readily
identified as belonging to a particular Fund that are allocated to that Fund in
proportion to the relative net asset values of the respective Funds at the time
of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Trust to particular Funds will be determined by
the Board of Trustees of the Trust and will be in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Trust as to the timing of the allocation of general liabilities and expenses and
as to the timing and allocable portion of any general assets with respect to a
particular Fund are conclusive. For information regarding the allocations of
Class Expenses to particular classes of a Fund, see the respective Prospectus of
the Fund under "MANAGEMENT-Expenses."
As used in the Trust's Prospectuses and in this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of the Trust, a
particular Fund, or a particular class of Shares of a Fund, means the
affirmative vote of the lesser of (a) more than 50% of the outstanding Shares of
the Trust, such Fund, or such class of Shares of such Fund, or (b) 67% or more
of the Shares of the Trust, such Fund, or such class of Shares of such Fund
present at a meeting at which the holders of more than 50% of the outstanding
Shares of the Trust, such Fund, or such class of Shares of such Fund are
represented in person or by proxy.
150
<PAGE> 508
The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Trust.
The Prospectus and this Statement of Additional Information omit certain of the
information contained in the Registration Statement filed with the Securities
and Exchange Commission. Copies of such information may be obtained from the
Commission upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an offering
of the securities herein described in any State in which such offering may not
lawfully be made. No salesman, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectus and Statement of Additional Information.
As of December 1, 1998, 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:
151
<PAGE> 509
<TABLE>
<CAPTION>
FUND PERCENT OF
BENEFICIAL
FUND OWNERSHIP
<S> <C>
Large Cap Growth Fund 85.41%
Mid Cap Value Fund 83.68%
Mid Cap Growth Fund 73.87%
Income Bond Fund 86.00%
Intermediate Tax-Free Bond Fund 97.95%
Prime Money Market Fund 44.10%
U.S. Treasury Securities Money Market Fund 19.65%
Municipal Money Market Fund 74.39%
Equity Income Fund 87.28%
Equity Index Fund 72.86%
Large Cap Value Fund 84.42%
Ohio Municipal Bond Fund 93.95%
Short-Term Bond Fund 86.92%
International Equity Index Fund 86.97%
Balanced Fund 79.89%
Ohio Municipal Money Market Fund 66.75%
Municipal Income 97.34%
Kentucky Municipal Bond Fund 92.67%
Government Bond Fund 87.45%
Ultra Short-Term Bond Fund 72.44%
Louisiana Municipal Bond Fund 89.25%
Diversified Equity Fund 79.44%
Small Cap Growth Fund 77.90%
Intermediate Bond Fund 88.34%
Arizona Municipal Bond Fund 94.78%
West Virginia Municipal Bond Fund 98.54%
Investor Growth Fund 44.00%
Investor Growth & Income Fund 60.90%
Investor Balanced Fund 94.01%
Investor Conservative Growth Fund 65.32%
Treasury Only Money Market Fund 30.79%
Government Money Market Fund 13.43%
Treasury & Agency Fund 97.79%
High Yield Bond Fund 1.14%
</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 U.S. Treasury Securities Money Market Fund, and the High
Yield Bond Fund) under the Investment Company Act of 1940.
In addition, as of December 1, 1998, the following persons were the beneficial
owners of more than 25% of the outstanding Shares of the following class of
Shares of the following Funds:
<TABLE>
<CAPTION>
25% SHAREHOLDERS
----------------
NAME PERCENTAGE OF TYPE OF
AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C>
</TABLE>
152
<PAGE> 510
<TABLE>
<S> <C> <C> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal Bond 26.21% Record
FOR THOMAS A BRAND & REV TRUST Fund
PO Box 92956 Class A
Chicago, IL 60675-2956
Dean Witter For The Benefit Of Arizona Municipal Bond 32.02% Record
Charles Stoddard & Fund
P.O. Box 250 -Church Street Station Class B
New York, NY 10008-0250
Strafe & Co Arizona Municipal Bond 99.79% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO BOX 710211
Columbus, OH 43271-0211
Strafe & Co Large Cap Growth Fund 89.31% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co Mid Cap Value
BOIA - One Group Operations Fund 86.93% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
Banc One Securities Corp FBO Mid Cap Growth Fund 83.94% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Cash Mid Cap Growth Fund 84.32% Record
BOIA - One Group Operations Class I
1111 POLARIS PARKWAY
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co Income Bond Fund 88.46% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
153
<PAGE> 511
<TABLE>
<S> <C> <C> <C>
Strafe & Co Intermediate Tax-Free Fund 99.46% Record
BOIA _ One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dean Witter FBO Prime Money Market Fund 57.58% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market Fund 30.84% Record
Fbo Bank One Corporate Sweep Class A
3435 STELZER ROAD STE 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 91.10% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Dean Witter For the Benefit Of US Treasury Securities 50.63% Record
Martin Homes Inc Prof Shar Pln Money Market Fund
PO Box 250 Church Street Station Class C
New York, NY 10008-0250
Strafe & Co (N) US Treasury Securities 86.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Dean Witter FBO Municipal Money Market 44.38% Record
Banc One Securities Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co Municipal Money Market 95.68% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
Dean Witter For The Benefit Of Equity Income Fund 68.69% Record
McKee Char TR/Lynn A Hammond & Class C
Clare W White Co-TTEES
Church St Station - PO Box 250
New York NY 10013-0250
</TABLE>
154
<PAGE> 512
<TABLE>
<S> <C> <C> <C>
Strafe & Co Equity Income Fund 92.60% 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 35.89% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 61.27% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 86.94% 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 32.61% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Cap Value Fund 86.94% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Ohio Municipal Bond Fund 98.70% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp Fbo International Equity 60.15% Record
The One Investment Solution Index Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Strafe & Co.
BOIA - One Group Operations International Equity 88.52% Record
1111 Polaris Parkway Index Fund
PO Box 710211 Class I
Columbus OH 43271-0211
</TABLE>
155
<PAGE> 513
<TABLE>
<S> <C> <C> <C>
Strafe & Co.
BOIA - One Group Operations Short-Term Bond Fund 90.40% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co.
BOIA - One Group Operations Louisiana Municipal Bond 96.91% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Banc One Securities Corp Fbo Value Growth Fund 82.92% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co.
BOIA - One Group Operations Value Growth Fund 81.54% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Small Cap Growth Fund 78.04% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Balanced Fund 90.92% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
FCC Pension Balanced Fund 33.90% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter FBO Ohio Municipal Money 99.10% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co.
BOIA - One Group Operations Ohio Municipal Money 95.04% Record
1111 Polaris Parkway Market Fund
</TABLE>
156
<PAGE> 514
<TABLE>
<S> <C> <C> <C>
PO Box 710211 Class I
Columbus OH 43271-0211
Banc One Securities Corp FBO Municipal Income Fund 40.70% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO
The One Investment Solution Municipal Income Fund 51.03% Record
733 Greencrest Dr Class C
Westerville OH 43081-4903
Strafe & Co. Municipal Income Fund 99.16% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co.
BOIA - One Group Operations Kentucky Municipal Bond 93.42% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Dean Witter For The Benefit Of West Virginia Municipal 41.41% Record
Balzout Inc DBA S&E Printing Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. West Virginia Municipal 98.77% Record
BOIA - One Group Operations Bond Fund Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Government Bond Fund 89.08% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Ultra Short Term Income 87.99% Record
7BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
157
<PAGE> 515
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp FBO Intermediate Bond Fund 53.06% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 42.04% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 91.03% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Growth Fund 66.42% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Growth & Income 81.44% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Balanced Fund 82.93% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Conservative 84.16% Record
BOIA - One Group Operations Growth Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
158
<PAGE> 516
<TABLE>
<S> <C> <C> <C>
Strafe & Co. Treasury & Agency Fund 99.86% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Treasury Only Money 79.18% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. US Government Money 80.32% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Services Company High Yield Bond Fund 87.47% Record
C/O Fund Administration Class A
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Services Company High Yield Bond Fund 86.96% Record
C/O Fund Administration Class B
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth & Income Fund High Yield Bond Fund 52.67% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund High Yield Bond Fund 46.71% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
</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.
THE TABLE BELOW INDICATES RECORD AND BENEFICIAL OWNERS OF OVER 5% OF
ANY CLASS OF SHARES OF ANY FUND OF THE TRUST.
<TABLE>
<S> <C> <C> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal Bond 26.21% Record
FOR THOMAS A BRAND & REV TRUST Fund
</TABLE>
159
<PAGE> 517
<TABLE>
<S> <C> <C> <C>
PO BOX 92956 Class A
Chicago, IL 60675-2956
Dean Witter Reynolds Arizona Municipal Bond 22.10% Record
FBO Theodore Cesarano Fund
4617 E. Bernell Road Class A
Phoenix, AZ 85028-5520
Dean Witter for the Benefit of Arizona Municipal Bond 11.29% Record
Elizabeth Ryan Miller Fund
4140 N 49th Way Class A
Church St Station - P.O. Box 250
New York, NY 10013-0250
GUST TRUST UNDER AGREEMENT 1/17 Arizona Municipal Bond 9.53% Record
Devens Gust & Mary Elizabeth Gust Fund
Co-Trustees KY 40207-2626 Class A
P.O. Box 25
Mule Creek, NM 88051-0025
Dean Witter For The Benefit Of Arizona Municipal Bond 7.89% Record
The David B & Frances L Hartline Fund
PO BOX 250 CHURCH STREET STATION Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 6.13% Record
William J Lofy Trust Fund
PO BOX 250 CHURCH STREET STATION Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 32.02% Record
Charles Stoddard & Fund
P.O. Box 250 -Church Street Station Class B
New York, NY 10008-0250
Carolyn S Ward Record
James D Ward JT TEN Arizona Municipal Bond 20.91%
825 W Annandale Fund
Tucson, AZ 85737-6923 Class B
</TABLE>
160
<PAGE> 518
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Arizona Municipal Bond 16.91% Record
Eugene B Debuck Fund
4550 North Flowing Wells #90 Class B
Church St Station - P.O. Box 250
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 13.48% Record
Marshall L Silverstein Trust Fund
P.O. Box 250 Church Street Station Class B
New York, NY 10008-0250
Scottsdale, AZ 85258-1618
Dean Witter For The Benefit Of Arizona Municipal Bond 8.31% Record
Pete R Samorano & Fund
P.O. Box 250 Church Street Station Class B
New York, NY 10008-0250
Strafe & Co Arizona Municipal Bond 99.79% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
Dean Witter For The Benefit Of Large Cap Growth Fund 14.69% Record
Selma J Berry & Class C
Colin G Berry JTTEN
Church St Station - PO Box 250
New York, NY 10008-0250
Dean Witter Reynolds Cust For Large Cap Growth Fund 9.85% Record
Alvin B Wesneski Class C
P.O. Box 250 Church Street Station
New York, NY 10008-0250
DWR Cust For Dr. Barbara S Isaacs Large Cap Growth Fund 5.54% Record
FBO BARBARA S ISAACS Class C
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Strafe & Co Large Cap Growth Fund 89.31% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Bank One Corporation Large Cap Growth Fund 11.45% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
161
<PAGE> 519
<TABLE>
<S> <C> <C> <C>
Banc One Sec Svgs Plan Large Cap Growth Fund 10.42% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co
BOIA - One Group Operations Mid Cap Value Fund 86.93% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
Bank One Corporation Mid Cap Value Fund 12.86% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
The One Group Investor Growth Fund Mid Cap Value Fund 5.12% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus, OH 43219-6004
Banc One Securities Corp FBO Mid Cap Growth Fund 16.27% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville, OH 43081-4903
Invesco Trust Co TTEE Mid Cap Growth Fund 5.86% Record
T D Williamson, Inc Thrift Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
Banc One Securities Corp FBO Mid Cap Growth Fund 83.94% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Cash Mid Cap Growth Fund 84.32% Record
BOIA - One Group Operations Class I
1111 POLARIS PARKWAY
PO Box 710211
Columbus, OH 43271-0211
BANK ONE CORPORATION Mid Cap Growth Fund 9.64% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Income Bond Fund 11.34% Record
Alpert Corp Money Purchase Plan Class A
Steven Kurtz TTEE
5 World Trade Center 6th Floor
New York, NY 10048-0205
Strafe & Co Income Bond Fund 88.46% Record
BOIA - One Group Operations Class I
</TABLE>
162
<PAGE> 520
<TABLE>
<S> <C> <C> <C>
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dean Witter for the Benefit of Intermediate Tax-Free Fund 6.58% Record
Jerome Kearns & Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
J Noland Singletary Intermediate Tax-Free Fund 6.12% Beneficial
7350 Bocage Blvd Class A
Baton Rouge LA 70809-1138
Dean Witter For The Benefit Of Intermediate Tax-Free Fund 5.34% Record
Leon Morgan Trust Class B
C/O Leon Morgan TTEE
Church St Station - PO Box 250
New York, NY 10013-0250
Strafe & Co Intermediate Tax-Free Fund 99.46% Record
BOIA _ One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dean Witter FBO Prime Money Market Fund 57.58% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market Fund 30.84% Record
Fbo Bank One Corporate Sweep Class A
3435 Stelzer Road Ste 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 91.10% 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 7.48% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
BISYS Fund Services Inc US Treasury Securities 22.46% Record
Fbo Bank One Corporate Sweep Money Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
</TABLE>
163
<PAGE> 521
<TABLE>
<S> <C> <C> <C>
National Financial Services Corp US Treasury Securities 21.83% Record
Fbo Our Customers Money Market Fund
200 Liberty St World Financial CT Class A
New York, NY 10281-1003
BISYS Fund Services Inc US Treasury Securities 19.54% Record
Fbo Bank One Securities Money Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
Dean Witter FBO US Treasury Securities 18.07% Record
Banc One Securities Money Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc US Treasury Securities 15.08% Record
Fbo Bank One Texas Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
NFSC FEBO #093-954381 US Treasury Securities 8.12% Record
Chung Shing Chiang Money Market Fund
3337 Somerset Class B
New Orleans, LA 70131-5361
Dean Witter For the Benefit Of US Treasury Securities 8.01% Record
Mary Sue Gilpin Money Market Fund
413 Dunmoreland Circle Class B
5 World Trade Center, 6th Floor
New York, NY 10048-0205
NFSC FEBO #AFL-668885 US Treasury Securities 7.27% Record
FNBC Cust Collateral Acct FBO Money Market Fund
Sterling H Smith Class B
Carolyn S Smith
PO Box 493
Amite, LA 70422
State Street Bank & Trust Co US Treasury Securities 5.84% Record
Sep IRA Jeffrey S Lux Money Market Fund
2220 Justice Street Class B
Monroe, LA 71201-3620
Dean Witter For the Benefit Of US Treasury Securities 5.10% Record
Carmen T Teller and Money Market Fund
PO Box 250 Church Street Station Class B
New York, NY 10008-0250
</TABLE>
164
<PAGE> 522
<TABLE>
<S> <C> <C> <C>
Dean Witter For the Benefit Of US Treasury Securities 50.63% Record
Martin Homes Inc Prof Shar Pln Money Market Fund
PO Box 250 Church Street Station Class C
New York, NY 10008-0250
Evelyn C Balser US Treasury Securities 15.99% Beneficial
Raymond F Balser JT TEN Money Market Fund
191 Brigham Hill Rd Class C
North Grafton, MA 01536-1117
Dean Witter Reynolds Cust For US Treasury Securities 12.79% Record
Paul E Puckett Money Market Fund
PO Box 250 Church Street Station Class C
New York, NY 10008-0250
Dean Witter For The Benefit Of US Treasury Securities 7.66% Record
Osareni Christopher Ogiesoba & Margaret Iyobosa Money Market Fund
Ogiesoba JTTE Class C
Church Street Station - PO Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of US Treasury Securities 7.52% Record
Steven R Swift & Money Market Fund
PO Box 250 - Church Street Station Class C
New York, NY 10008-0250
Strafe & Co (N) US Treasury Securities 86.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Company NA US Treasury Securities 13.70% Record
Omnibus-Corporate Cash Sweep AC Money Market Fund
Attn: Cash Management DB3 Class I
235 W Schrock Rd
Westerville OH 43081-2874
Dean Witter FBO Municipal Money Market 44.38% Record
Banc One Securities Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc Municipal Money Market 24.62% Record
FBO Bank One Corporate Sweep Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
</TABLE>
165
<PAGE> 523
<TABLE>
<S> <C> <C> <C>
National Financial Services Corp Municipal Money Market 24.08% Record
FBO Our Customers Fund
200 Liberty St World Financial Ct Class A
New York, NY 10281-1003
Strafe & Co Municipal Money Market 95.68% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
DC Livestock Co Ltd Part Yea Municipal Money Market 5.46% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Dean Witter For The Benefit Of Equity Income Fund 68.69% Record
McKee Char TR/Lynn A Hammond & Class C
Clare W White Co-TTEES
Church St Station - PO Box 250
New York NY 10013-0250
UMB Bank Cust Fbo Equity Income Fund 6.92% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
VISTA CA 92083-7952
Dean Witter For The Benefit Of Equity Income Fund 5.68% Record
Williams Brother Construction Class C
Inc 401(K) PSP Thomas J Williams
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co Equity Income Fund 92.60% 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 35.89% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 61.27% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
166
<PAGE> 524
<TABLE>
<S> <C> <C> <C>
Strafe & Co. Equity Index Fund 86.94% 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 32.61% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Cap Value Fund 86.94% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Corporation Large Cap Value Fund 23.00% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Ohio Municipal Bond Fund 5.74% Record
Vivian R Sauls Class A
519 Chapel Rd
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Ohio Municipal Bond Fund 98.70% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NES Group Inc Corp Investmt Act Ohio Municipal Bond Fund 6.90% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Firstar Trust Co TTEE International Equity 18.65% Record
FBO Milwaukee Foundation - Equit Index Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
Banc One Securities Corp Fbo International Equity 60.15% Record
The One Investment Solution Index Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Dean Witter For The Benefit Of International Equity 14.98% Record
Robert M Lynch & Index Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
</TABLE>
167
<PAGE> 525
<TABLE>
<S> <C> <C> <C>
UMB Bank Cust FBO International Equity 9.95% Record
Doris Erickson 403B Index Fund
233 Hedstrom Dr Class C
Buffalo NY 14226-3434
Dean Witter For The Benefit Of International Equity 5.65% Record
John S Wagner & Index Fund
PO Box 250 Church Street Station Class C
NEW YORK, NY 1008-0250
Strafe & Co.
BOIA - One Group Operations International Equity 88.52% Record
1111 Polaris Parkway Index Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Bank One Corporation International Equity 14.86% Beneficial
100 E Broad Street Index Fund
Columbus, OH 43215-3607 Class I
Wallace & Co Short-Term Bond Fund 6.74% Record
PO Box 21119 Class A
Shreveport LA 71152-0001
Strafe & Co.
BOIA - One Group Operations Short-Term Bond Fund 90.40% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co.
BOIA - One Group Operations Louisiana Municipal Bond 96.91% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Banc One Securities Corp Fbo Diversified Equity Fund 21.51% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Diversified Equity Fund 82.92% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co.
BOIA - One Group Operations Diversified Equity Fund 81.54% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
168
<PAGE> 526
<TABLE>
<S> <C> <C> <C>
The One Group Investor Growth & Income Fund
C/O Mark Redman Diversified Equity Fund 5.39% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund
C/O Mark Redman Diversified Equity Fund 5.35% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
Melvin Skol Small Cap Growth Fund 19.50% Beneficial
2811 Scley St Class C
Erie, PA 16508-1719
Dean Witter For The Benefit Of Small Cap Growth Fund 16.01% Record
Robert Kennedy and Class C
Annemarie Kennedy Reisinger JTT
Church St Station - PO Box 250
New York, NY 10013-0250
Judith M Torrico Small Cap Growth Fund 11.93% Beneficial
101 Nicholson St Class C
Buffalo, NY 14214-1128
State Street Bank & Trust Co Small Cap Growth Fund 7.60% Record
Cust for the IRA of Class C
Linda L Cole
14 Penguin Ct
Woodlands TX 77380-1827
Dean Witter For The Benefit Of Small Cap Growth Fund 5.01% Record
Wells Pickney & McHugh Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Small Cap Growth Fund 78.04% 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 9.45% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
169
<PAGE> 527
<TABLE>
<S> <C> <C> <C>
Firstar Trust Company Small Cap Growth Fund 5.57% Record
FBO Milwaukee Foundation Class I
PO Box 1787
Milwaukee WI 53201-1787
The One Group Investor Growth & Income Fund Small Cap Growth Fund 5.33% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
Strafe & Co.
BOIA - One Group Operations Balanced Fund 90.92% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
FCC Pension Balanced Fund 33.90% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter FBO Ohio Municipal Money 99.10% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co.
BOIA - One Group Operations Ohio Municipal Money 95.04% Record
1111 Polaris Parkway Market Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Douglas Peacock Ohio Municipal Money 11.65% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Henny Penny Corp Money Mkt Acct Ohio Municipal Money 10.32% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Elizabeth Bertschy Ohio Municipal Money 5.40% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Banc One Securities Corp FBO Municipal Income Fund 40.70% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
170
<PAGE> 528
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp FBO Municipal Income Fund 51.03% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Municipal Income Fund 6.48% Record
Roberta A Silberstein 1984 Class C
Church St Station - PO Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of Municipal Income Fund 6.47% Record
Gary R Duckert & Class C
PO Box 250 Church Street Station
New York, NY 10008-0250
Strafe & Co. Municipal Income Fund 99.16% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Dean Witter For The Benefit Of Kentucky Municipal Bond 11.89% Record
Gary Osswald Fund
PO Box 250 Church Street Station Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Kentucky Municipal Bond 6.44% Record
Karrick Scott Collins Trust Fund
Karrick Scott Collins TTEE Class A
Church St Station - PO Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of Kentucky Municipal Bond 5.05% Record
Joan H Willetts & First Federal Fund
PO Box 250 Church Street Station Class B
New York, NY 10008-0250
Strafe & Co.
BOIA - One Group Operations Kentucky Municipal Bond 93.42% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Dean Witter For The Benefit Of West Virginia Municipal 41.41% Record
Balzout Inc DBA S&E Printing Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
</TABLE>
171
<PAGE> 529
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of West Virginia Municipal 11.26% Record
Stephen A Lewis Bond Fund Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 8.38% Record
James F Duncan Bond Fund Class A
PO Box 250 Church Street Station
NEW YORK NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 8.21% Record
Sally L Wilson Trust Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 7.01% Record
Charleston Concrete Floor Co Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.42% Record
James Henry Dean & Bond Fund Class A
Anna K Dean JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.21% Record
C Carl Tully Bond Fund Class A
4530 Spring Hill
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 5.18% Record
R Clark Morton Bond Fund Class A
129 Elm Street
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 12.09% Record
Katherine Poe Bond Fund Class B
606 River Lane
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 6.32% Record
Charleston Concrete Floor CO Bond Fund Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. West Virginia Municipal 98.77% Record
</TABLE>
172
<PAGE> 530
<TABLE>
<S> <C> <C> <C>
BOIA - One Group Operations Bond Fund Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Government Bond Fund 89.08% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Dean Witter For The Benefit Of Ultra Short-Term Bond 22.40% Record
Samaritan Health Plan Fund
PO Box 250 Church Street Station Class A
New York NY 10008-0250
Investment Company Institute Ultra Short-Term Bond 9.29% Beneficial
1401 H St NW Fund
Washington DC 20005-2110 Class A
Dean Witter For The Benefit Of Ultra Short-Term Bond 6.11% Record
Genesis Health Care System Fund
800 Forest Avenue Class A
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond 5.93% Record
Obleness Memorial Hospital Fund
C/O Donald E Reuter Class A
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond 5.54% Record
Asher Land & Mineral LTD Fund
PO Box 463 Class A
Pineville, KY 40977-0463
Dean Witter For The Benefit Of Ultra Short-Term Bond 5.24% Record
Thomas Electric Inc Fund
7601 N 74th Avenue Class A
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of Ultra Short-Term Bond 8.09% Record
Jeanette P Reilly Revocable Trust Fund
PO Box 250 Church Street Station Class B
New York NY 10008-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond 7.86% Record
Samuel D Goldberg Fund
</TABLE>
173
<PAGE> 531
<TABLE>
<S> <C> <C> <C>
PO Box 250 Church Street Station Class B
New York NY 10008-0250
Strafe & Co. Ultra Short-Term Bond 87.99% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Intermediate Bond Fund 53.06% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 42.04% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Intermediate Bond Fund 7.60% Record
Dennis J Furlong & Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Intermediate Bond Fund 6.19% Record
Williams Brother Construction Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Intermediate Bond Fund 91.03% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One TTEE Investor Growth Fund 5.72% Record
Harrison Holding Corp 401K Class A
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Dean Witter For The Benefit Of Investor Growth Fund 5.28% Record
William D Robertson DDS PSP Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Investor Growth Fund 66.42% Record
BOIA - One Group Operations Class I
</TABLE>
174
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<TABLE>
<S> <C> <C> <C>
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Grwth Investor Growth Fund 19.20% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Bank One TTEE Investor Growth Fund 12.28% Record
Brillion Iron Works P/S Class I
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Virginia R Corrin Investor Growth Fund 9.01% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Investor Growth & Income 8.14% Record
St Mary's Educational Endowment Foundation Fund
Church St Station PO Box 250 Class C
New York NY 10013-0250
Dean Witter For The Benefit Of Investor Growth & Income 7.44% Record
Milo L Meacham Jr Fund
PO Box 250 Church Street Station Class C
New York NY 10008-0250
Strafe & Co. Investor Growth & Income 81.44% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Revco D.S., Inc. Serp - Trust A Investor Growth & Income 14.30% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Sec Svgs Plan Investor Growth & Income 13.65% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Institutional Trust Co TTEE Investor Balanced Fund 8.62% Record
PBC Industrial Supplies Inc Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
</TABLE>
175
<PAGE> 533
<TABLE>
<S> <C> <C> <C>
6.71% Record
Dean Witter For The Benefit Of Investor Balanced Fund
Joseph A Hess Class C
IRA Standard Dated 11/18/97
Church St Station - PO Box 250
New York NY 10013-0250
State Street Bank & Trust Co Investor Balanced Fund 6.46% Record
Cust For The IRA Rollover Of Class C
George L Allison
768 E Indiana Ave
Spencer IN 47460-1538
Dean Witter For The Benefit Of Investor Balanced Fund 6.23% Record
James B White & Class C
Norma J White JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Investor Balanced Fund 82.93% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Kenosha Carpenters #161 Pens-Mgd Investor Balanced Fund 8.10% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Centennial Liquor Retirement Plan Investor Balanced Fund 7.81% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Affiliated MPP Investor Balanced Fund 6.51% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Investor Conservative 11.63% Record
Paavo Ensio & Growth Fund
PO Box 250 Church Street Station Class A
New York NY 10008-0250
DWR Cust For Central Blueprint Co Investor Conservative 6.04% Record
FBO Plan Administrator Growth Fund
VIP Plus PFT Sharing DTD 09/26/97 Class C
Church Street Station - PO Box 250
New York NY 10013-0250
</TABLE>
176
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<TABLE>
<S> <C> <C> <C>
84.16% Record
Strafe & Co. Investor Conservative
BOIA - One Group Operations Growth Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Con Grwth Investor Conservative 17.69% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Kenosha Carpenters #161 Pens-Mgd Investor Conservative 14.40% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Shelly & Sands MPP Investor Conservative 5.03% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Dean Witter For The Benefit Of Treasury & Agency Fund 8.82% Record
Billy J Eisenhour Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Treasury & Agency Fund 6.54% Record
Maricopa County Municipal Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Treasury & Agency Fund 99.86% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Treasury Only Money 79.18% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
MEC Qualified Treasury Only Money 13.07% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607
BISYS Fund Services Inc Treasury Only Money 9.71% Record
FBO Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
</TABLE>
177
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<TABLE>
<S> <C> <C> <C>
State Compensation Treasury Only Money 6.05% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607
Strafe & Co. US Government Money 80.32% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Texas NA US Government Money 8.72% Beneficial
1717 Main St Market Fund
Dallas TX 75201-4605
BWC - Miller Anderson US Government Money 8.14% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607
BISYS Fund Services Inc US Government Money 5.56% Record
FBO Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BWC - Hyperion Capital US Government Money 5.26% Beneficial
100 E BROAD STREET Market Fund
Columbus, OH 43215-3607
The One Group Services Company High Yield Bond Fund 87.47% Record
C/O Fund Administration Class A
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Services Company High Yield Bond Fund 86.96% Record
C/O Fund Administration Class B
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth & Income Fund High Yield Bond Fund 52.67% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund High Yield Bond Fund 46.71% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
178
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<TABLE>
<S> <C> <C> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal Bond 26.21% Record
F0R THOMAS A BRAND & REV TRUST Fund
PO BOX 92956 Class A
Chicago, IL 60675-2956
Dean Witter Reynolds Arizona Municipal Bond 22.10% Record
FBO Theodore Cesarano Fund
4617 E. Bernell Road Class A
Phoenix, AZ 85028-5520
Dean Witter for the Benefit of Arizona Municipal Bond 11.29% Record
Elizabeth Ryan Miller Fund
4140 N 49th Way Class A
Church St Station - P.O. Box 250
New York, NY 10013-0250
GUST TRUST UNDER AGREEMENT 1/17 Arizona Municipal Bond 9.53% Record
Devens Gust & Mary Elizabeth Gust Fund
Co-Trustees KY 40207-2626 Class A
P.O. Box 25
Mule Creek, NM 88051-0025
Dean Witter For The Benefit Of Arizona Municipal Bond 7.89% Record
The David B & Frances L Hartline Fund
PO BOX 250 CHURCH STREET STATION Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 6.13% Record
William J Lofy Trust Fund
PO BOX 250 CHURCH STREET STATION Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 32.02% Record
Charles Stoddard & Fund
P.O. Box 250 -Church Street Station Class B
New York, NY 10008-0250
Carolyn S Ward Record
James D Ward JT TEN Arizona Municipal Bond 20.91%
825 W Annandale Fund
Tucson, AZ 85737-6923 Class B
</TABLE>
179
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<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Arizona Municipal Bond 16.91% Record
Eugene B Debuck Fund
4550 North Flowing Wells #90 Class B
Church St Station - P.O. Box 250
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond 13.48% Record
Marshall L Silverstein Trust Fund
P.O. Box 250 Church Street Station Class B
New York, NY 10008-0250
Scottsdale, AZ 85258-1618
Dean Witter For The Benefit Of Arizona Municipal Bond 8.31% Record
Pete R Samorano & Fund
P.O. Box 250 Church Street Station Class B
New York, NY 10008-0250
Strafe & Co Arizona Municipal Bond 99.79% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
Dean Witter For The Benefit Of Large Cap Growth Fund 14.69% Record
Selma J Berry & Class C
Colin G Berry JTTEN
Church St Station - PO Box 250
New York, NY 10008-0250
Dean Witter Reynolds Cust For Large Cap Growth Fund 9.85% Record
Alvin B Wesneski Class C
P.O. Box 250 Church Street Station
New York, NY 10008-0250
DWR Cust For Dr. Barbara S Isaacs Large Cap Growth Fund 5.54% Record
FBO BARBARA S ISAACS Class C
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Strafe & Co Large Cap Growth Fund 89.31% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
BANK ONE CORPORATION Large Cap Growth Fund 11.45% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
180
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<TABLE>
<S> <C> <C> <C>
Banc One Sec Svgs Plan Large Cap Growth Fund 10.42% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co
BOIA - One Group Operations Mid Cap Value Fund 86.93% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
BANK ONE CORPORATION Mid Cap Value Fund 12.86% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
The One Group Investor Growth Fund Mid Cap Value Fund 5.12% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus, OH 43219-6004
Banc One Securities Corp FBO Mid Cap Growth Fund 16.27% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville, OH 43081-4903
Invesco Trust Co TTEE Mid Cap Growth Fund 5.86% Record
T D Williamson, Inc Thrift Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
Banc One Securities Corp FBO Mid Cap Growth Fund 83.94% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Cash Mid Cap Growth Fund 84.32% Record
BOIA - One Group Operations Class I
1111 POLARIS PARKWAY
PO Box 710211
Columbus, OH 43271-0211
BANK ONE CORPORATION Mid Cap Growth Fund 9.64% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Income Bond Fund 11.34% Record
Alpert Corp Money Purchase Plan Class A
Steven Kurtz TTEE
5 World Trade Center 6th Floor
New York, NY 10048-0205
Strafe & Co Income Bond Fund 88.46% Record
BOIA - One Group Operations Class I
</TABLE>
181
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<TABLE>
<S> <C> <C> <C>
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dean Witter for the Benefit of Intermediate Tax-Free Fund 6.58% Record
Jerome Kearns & Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
J Noland Singletary Intermediate Tax-Free Fund 6.12% Beneficial
7350 Bocage Blvd Class A
Baton Rouge LA 70809-1138
Dean Witter For The Benefit Of Intermediate Tax-Free Fund 5.34% Record
Leon Morgan Trust Class B
C/O Leon Morgan TTEE
Church St Station - PO Box 250
New York, NY 10013-0250
Strafe & Co Intermediate Tax-Free Fund 99.46% Record
BOIA _ One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dean Witter FBO Prime Money Market Fund 57.58% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market Fund 30.84% Record
Fbo Bank One Corporate Sweep Class A
3435 Stelzer Road Ste 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 91.10% 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 7.48% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
BISYS Fund Services Inc US Treasury Securities 22.46% Record
Fbo Bank One Corporate Sweep Money Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
</TABLE>
182
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<TABLE>
<S> <C> <C> <C>
National Financial Services Corp US Treasury Securities 21.83% Record
Fbo Our Customers Money Market Fund
200 Liberty St World Financial CT Class A
New York, NY 10281-1003
BISYS Fund Services Inc US Treasury Securities 19.54% Record
Fbo Bank One Securities Money Market Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
Dean Witter FBO US Treasury Securities 18.07% Record
Banc One Securities Money Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc US Treasury Securities 15.08% Record
Fbo Bank One Texas Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
NFSC FEBO #093-954381 US Treasury Securities 8.12% Record
Chung Shing Chiang Money Market Fund
3337 Somerset Class B
New Orleans, LA 70131-5361
Dean Witter For the Benefit Of US Treasury Securities 8.01% Record
Mary Sue Gilpin Money Market Fund
413 Dunmoreland Circle Class B
5 World Trade Center, 6th Floor
New York, NY 10048-0205
NFSC FEBO #AFL-668885 US Treasury Securities 7.27% Record
FNBC Cust Collateral Acct FBO Money Market Fund
Sterling H Smith Class B
Carolyn S Smith
PO Box 493
Amite, LA 70422
State Street Bank & Trust Co US Treasury Securities 5.84% Record
Sep IRA Jeffrey S Lux Money Market Fund
2220 Justice Street Class B
Monroe, LA 71201-3620
Dean Witter For the Benefit Of US Treasury Securities 5.10% Record
Carmen T Teller and Money Market Fund
PO Box 250 Church Street Station Class B
New York, NY 10008-0250
</TABLE>
183
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<TABLE>
<S> <C> <C> <C>
Dean Witter For the Benefit Of US Treasury Securities 50.63% Record
Martin Homes Inc Prof Shar Pln Money Market Fund
PO Box 250 Church Street Station Class C
New York, NY 10008-0250
Evelyn C Balser US Treasury Securities 15.99% Beneficial
Raymond F Balser JT TEN Money Market Fund
191 Brigham Hill Rd Class C
North Grafton, MA 01536-1117
Dean Witter Reynolds Cust For US Treasury Securities 12.79% Record
Paul E Puckett Money Market Fund
PO Box 250 Church Street Station Class C
New York, NY 10008-0250
</TABLE>
184
<PAGE> 542
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of US Treasury Securities 7.66% Record
Osareni Christopher Ogiesoba & Money Market Fund
Margaret Iyobosa Ogiesoba JTTE Class C
Church Street Station - PO Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of US Treasury Securities 7.52% Record
Steven R Swift & Money Market Fund
PO Box 250 - Church Street Station Class C
New York, NY 10008-0250
Strafe & Co (N) US Treasury Securities 86.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Company NA US Treasury Securities 13.70% Record
Omnibus-Corporate Cash Sweep AC Money Market Fund
Attn: Cash Management DB3 Class I
235 W Schrock Rd
Westerville OH 43081-2874
Dean Witter FBO Municipal Money Market 44.38% Record
Banc One Securities Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc Municipal Money Market 24.62% Record
FBO Bank One Corporate Sweep Fund
3435 Stelzer Road Suite 1000 Class A
Columbus OH 43219-6004
National Financial Services Corp Municipal Money Market 24.08% Record
FBO Our Customers Fund
200 Liberty St World Financial Ct Class A
New York, NY 10281-1003
Strafe & Co Municipal Money Market 95.68% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
DC Livestock Co Ltd Part Yea Municipal Money Market 5.46% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
</TABLE>
185
<PAGE> 543
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Equity Income Fund 68.69% Record
McKee Char TR/Lynn A Hammond & Class C
Clare W White Co-TTEES
Church St Station - PO Box 250
New York NY 10013-0250
UMB Bank Cust Fbo Equity Income Fund 6.92% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
VISTA CA 92083-7952
Dean Witter For The Benefit Of Equity Income Fund 5.68% Record
Williams Brother Construction Class C
Inc 401(K) PSP Thomas J Williams
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co Equity Income Fund 92.60% 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 35.89% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 61.27% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 86.94% 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 32.61% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Cap Value Fund 86.94% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
186
<PAGE> 544
<TABLE>
<S> <C> <C> <C>
BANK ONE CORPORATION Large Cap Value Fund 23.00% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Ohio Municipal Bond Fund 5.74% Record
Vivian R Sauls Class A
519 Chapel Rd
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Ohio Municipal Bond Fund 98.70% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NES Group Inc Corp Investmt Act Ohio Municipal Bond Fund 6.90% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Firstar Trust Co TTEE International Equity 18.65% Record
FBO Milwaukee Foundation - Equit Index Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
Banc One Securities Corp Fbo International Equity 60.15% Record
The One Investment Solution Index Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Dean Witter For The Benefit Of International Equity 14.98% Record
Robert M Lynch & Index Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
UMB Bank Cust FBO International Equity 9.95% Record
Doris Erickson 403B Index Fund
233 Hedstrom Dr Class C
Buffalo NY 14226-3434
Dean Witter For The Benefit Of International Equity 5.65% Record
John S Wagner & Index Fund
PO Box 250 Church Street Station Class C
NEW YORK, NY 1008-0250
Strafe & Co.
BOIA - One Group Operations International Equity 88.52% Record
1111 Polaris Parkway Index Fund
PO Box 710211 Class I
Columbus OH 43271-0211
</TABLE>
187
<PAGE> 545
<TABLE>
<S> <C> <C> <C>
BANK ONE CORPORATION International Equity 14.86% Beneficial
100 E Broad Street Index Fund
Columbus, OH 43215-3607 Class I
Wallace & Co Short-Term Bond Fund 6.74% Record
PO Box 21119 Class A
Shreveport LA 71152-0001
Strafe & Co.
BOIA - One Group Operations Short-Term Bond Fund 90.40% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co.
BOIA - One Group Operations Louisiana Municipal Bond 96.91% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Banc One Securities Corp Fbo Value Growth Fund 21.51% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Value Growth Fund 82.92% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co.
BOIA - One Group Operations Value Growth Fund 81.54% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
The One Group Investor Growth & Income Fund
C/O Mark Redman Value Growth Fund 5.39% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund
C/O Mark Redman Value Growth Fund 5.35% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
188
<PAGE> 546
<TABLE>
<S> <C> <C> <C>
Melvin Skol Small Cap Growth Fund 19.50% Beneficial
2811 Scley St Class C
Erie, PA 16508-1719
Dean Witter For The Benefit Of Small Cap Growth Fund 16.01% Record
Robert Kennedy and Class C
Annemarie Kennedy Reisinger JTT
Church St Station - PO Box 250
New York, NY 10013-0250
Judith M Torrico Small Cap Growth Fund 11.93% Beneficial
101 Nicholson St Class C
Buffalo, NY 14214-1128
State Street Bank & Trust Co Small Cap Growth Fund 7.60% Record
Cust for the IRA of Class C
Linda L Cole
14 Penguin Ct
Woodlands TX 77380-1827
Dean Witter For The Benefit Of Small Cap Growth Fund 5.01% Record
Wells Pickney & McHugh Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Small Cap Growth Fund 78.04% 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 9.45% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
Firstar Trust Company Small Cap Growth Fund 5.57% Record
FBO Milwaukee Foundation Class I
PO Box 1787
Milwaukee WI 53201-1787
The One Group Investor Growth & Income Fund Small Cap Growth Fund 5.33% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
189
<PAGE> 547
<TABLE>
<S> <C> <C> <C>
Strafe & Co.
BOIA - One Group Operations Balanced Fund 90.92% Record
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
FCC Pension Balanced Fund 33.90% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter FBO Ohio Municipal Money 99.10% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co.
BOIA - One Group Operations Ohio Municipal Money 95.04% Record
1111 Polaris Parkway Market Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Douglas Peacock Ohio Municipal Money 11.65% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Henny Penny Corp Money Mkt Acct Ohio Municipal Money 10.32% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Elizabeth Bertschy Ohio Municipal Money 5.40% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607 Class I
Banc One Securities Corp FBO Municipal Income Fund 40.70% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 51.03% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Municipal Income Fund 6.48% Record
Roberta A Silberstein 1984 Class C
Church St Station - PO Box 250
New York, NY 10013-0250
</TABLE>
190
<PAGE> 548
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Municipal Income Fund 6.47% Record
Gary R Duckert & Class C
PO Box 250 Church Street Station
New York, NY 10008-0250
Strafe & Co. Municipal Income Fund 99.16% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Dean Witter For The Benefit Of Kentucky Municipal Bond 11.89% Record
Gary Osswald Fund
PO Box 250 Church Street Station Class A
New York, NY 10008-0250
Dean Witter For The Benefit Of Kentucky Municipal Bond 6.44% Record
Karrick Scott Collins Trust Fund
Karrick Scott Collins TTEE Class A
Church St Station - PO Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of Kentucky Municipal Bond 5.05% Record
Joan H Willetts & First Federal Fund
PO Box 250 Church Street Station Class B
New York, NY 10008-0250
Strafe & Co.
BOIA - One Group Operations Kentucky Municipal Bond 93.42% Record
1111 Polaris Parkway Fund
PO Box 710211 Class I
Columbus OH 43271-0211
Dean Witter For The Benefit Of West Virginia Municipal 41.41% Record
Balzout Inc DBA S&E Printing Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 11.26% Record
Stephen A Lewis Bond Fund Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 8.38% Record
James F Duncan Bond Fund Class A
PO Box 250 Church Street Station
NEW YORK NY 10008-0250
</TABLE>
191
<PAGE> 549
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of West Virginia Municipal 8.21% Record
Sally L Wilson Trust Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 7.01% Record
Charleston Concrete Floor Co Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.42% Record
James Henry Dean & Bond Fund Class A
Anna K Dean JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.21% Record
C Carl Tully Bond Fund Class A
4530 Spring Hill
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 5.18% Record
R Clark Morton Bond Fund Class A
129 Elm Street
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 12.09% Record
Katherine Poe Bond Fund Class B
606 River Lane
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 6.32% Record
Charleston Concrete Floor CO Bond Fund Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. West Virginia Municipal 98.77% Record
BOIA - One Group Operations Bond Fund Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Government Bond Fund 89.08% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
192
<PAGE> 550
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 22.40% Record
Samaritan Health Plan Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Investment Company Institute Ultra Short-Term Bond Fund 9.29% Beneficial
1401 H St NW Class A
Washington DC 20005-2110
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 6.11% Record
Genesis Health Care System Class A
800 Forest Avenue
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 5.93% Record
Obleness Memorial Hospital Class A
C/O Donald E Reuter
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 5.54% Record
Asher Land & Mineral LTD Class A
PO Box 463
Pineville, KY 40977-0463
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 5.24% Record
Thomas Electric Inc Class A
7601 N 74th Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 8.09% Record
Jeanette P Reilly Revocable Trust Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Ultra Short-Term Bond Fund 7.86% Record
Samuel D Goldberg Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Ultra Short-Term Bond Fund 87.99% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
193
<PAGE> 551
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp FBO Intermediate Bond Fund 53.06% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 42.04% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Intermediate Bond Fund 7.60% Record
Dennis J Furlong & Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Intermediate Bond Fund 6.19% Record
Williams Brother Construction Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Intermediate Bond Fund 91.03% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One TTEE Investor Growth Fund 5.72% Record
Harrison Holding Corp 401K Class A
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Dean Witter For The Benefit Of Investor Growth Fund 5.28% Record
William D Robertson DDS PSP Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Investor Growth Fund 66.42% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Grwth Investor Growth Fund 19.20% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
194
<PAGE> 552
<TABLE>
<S> <C> <C> <C>
Bank One TTEE Investor Growth Fund 12.28% Record
Brillion Iron Works P/S Class I
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Virginia R Corrin Investor Growth Fund 9.01% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Investor Growth & Income 8.14% Record
St Mary's Educational Endowment Foundation Fund
Church St Station PO Box 250 Class C
New York NY 10013-0250
Dean Witter For The Benefit Of Investor Growth & Income 7.44% Record
Milo L Meacham Jr Fund
PO Box 250 Church Street Station Class C
New York NY 10008-0250
Strafe & Co. Investor Growth & Income 81.44% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Revco D.S., Inc. Serp - Trust A Investor Growth & Income 14.30% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Sec Svgs Plan Investor Growth & Income 13.65% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Institutional Trust Co TTEE Investor Balanced Fund 8.62% Record
PBC Industrial Supplies Inc Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
Dean Witter For The Benefit Of Investor Balanced Fund 6.71% Record
Joseph A Hess Class C
IRA Standard Dated 11/18/97
Church St Station - PO Box 250
New York NY 10013-0250
State Street Bank & Trust Co Investor Balanced Fund 6.46% Record
Cust For The IRA Rollover Of Class C
George L Allison
768 E Indiana Ave
Spencer IN 47460-1538
</TABLE>
195
<PAGE> 553
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Investor Balanced Fund 6.23% Record
James B White & Class C
Norma J White JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Investor Balanced Fund 82.93% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Kenosha Carpenters #161 Pens-Mgd Investor Balanced Fund 8.10% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Centennial Liquor Retirement Plan Investor Balanced Fund 7.81% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Affiliated MPP Investor Balanced Fund 6.51% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Investor Conservative 11.63% Record
Paavo Ensio & Growth Fund
PO Box 250 Church Street Station Class A
New York NY 10008-0250
DWR Cust For Central Blueprint Co Investor Conservative 6.04% Record
FBO Plan Administrator Growth Fund
VIP Plus PFT Sharing DTD 09/26/97 Class C
Church Street Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Investor Conservative 84.16% Record
BOIA - One Group Operations Growth Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Con Grwth Investor Conservative 17.69% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
</TABLE>
196
<PAGE> 554
<TABLE>
<S> <C> <C> <C>
Kenosha Carpenters #161 Pens-Mgd Investor Conservative 14.40% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Shelly & Sands MPP Investor Conservative 5.03% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Dean Witter For The Benefit Of Treasury & Agency Fund 8.82% Record
Billy J Eisenhour Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Treasury & Agency Fund 6.54% Record
Maricopa County Municipal Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Treasury & Agency Fund 99.86% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Treasury Only Money 79.18% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
MEC Qualified Treasury Only Money 13.07% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607
BISYS Fund Services Inc Treasury Only Money 9.71% Record
FBO Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
State Compensation Treasury Only Money 6.05% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607
Strafe & Co. US Government Money 80.32% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
197
<PAGE> 555
<TABLE>
<S> <C> <C> <C>
Bank One Texas NA US Government Money 8.72% Beneficial
1717 Main St Market Fund
Dallas TX 75201-4605
BWC - Miller Anderson US Government Money 8.14% Beneficial
100 E Broad Street Market Fund
Columbus, OH 43215-3607
BISYS Fund Services Inc US Government Money 5.56% Record
FBO Bank One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BWC - Hyperion Capital US Government Money 5.26% Beneficial
100 E BROAD STREET Market Fund
Columbus, OH 43215-3607
The One Group Services Company High Yield Bond Fund 87.47% Record
C/O Fund Administration Class A
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Services Company High Yield Bond Fund 86.96% Record
C/O Fund Administration Class B
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth & Income Fund High Yield Bond Fund 52.67% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
The One Group Investor Growth Fund High Yield Bond Fund 46.71% Beneficial
C/O Mark Redman Class I
The One Group Services Company
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
198
<PAGE> 556
As a group, the Trustee and Officers of the Trust owned less than 1% of the
Shares of each class of the Trust.
The financial statements of the Trust are incorporated by reference into this
Statement of Additional Information. For all Funds other than the Predecessor
Funds, the financial statements for the fiscal year ended June 30, 1998 have
been audited by PricewaterhouseCoopers LLP, independent public accountants to
the Trust, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. The financial
Statements for the Predecessor Funds, have been audited by Arthur Andersen LLP,
independent public accountants to such Funds for the period ended December 31,
1998, as indicated in their reports with respect thereto, and are incorporated
herein by reference in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports. A copy of the annual reports to
shareholders must accompany the delivery of this Statement of Additional
Information.
243
<PAGE> 557
Registration Statement
of One Group(R) Mutual Funds
on Form N-1A
PART C
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A
-- Financial Highlights
Included in Part B
The following financial statements have been incorporated into
the Statement of Additional Information by reference to the
Annual Report to Shareholders for The One Group, for the
fiscal year end June 30, 1998:
-- Reports of Independent Accountants for The One Group
dated August 18, 1998.
-- Statements of Assets and Liabilities at June 30, 1998
(audited).
-- Statements of Operations for the year ended June 30,
1998 (audited).
-- Statements of Changes in Net Assets for the year
ended June 30, 1998 (audited).
-- Schedules of Portfolio Investments at June 30, 1998
(audited).
-- Notes to Financial Statements dated June 30, 1998
(audited).
-- Financial Highlights for the periods or years ended
June 30, 1994, June 30, 1995, June 30, 1996, June 30,
1997 and June 30, 1998 (audited).
The following Financial Statements for the Pegasus Multi-Sector Bond
Fund, the Pegasus Intermediate Bond Fund, the Pegasus Small-Cap
Opportunity Fund, the Pegasus Mid-Cap Opportunity Fund, the Pegasus
International Equity Fund, the Pegasus Market Expansion Index Fund, the
Pegasus Bond Fund, the Pegasus Short Municipal Bond Fund, the Pegasus
Municipal Bond Fund, the Pegasus Michigan Municipal Bond Fund, the
Pegasus Michigan Municipal Money Market Fund, the Pegasus Cash
Management Fund, the Pegasus Treasury Cash Management Fund, the Pegasus
Treasury Prime Cash Management Fund, the Pegasus U.S. Government
Securities Cash Management Fund, and Pegasus Municipal Cash Management
Fund have been incorporated by reference to the Annual Report to
Shareholders for the Pegasus Funds, the Annual Report to Shareholders
for the Pegasus Money Market Funds, and the Annual Report to
Shareholders of Pegasus Cash Management Funds for the fiscal year ended
December 31, 1998:
- Reports of Independent Public Accountants for the Pegasus Funds
dated February 12, 1999.
- Reports of Independent Public Accountants for the Pegasus Money
Market Funds dated February 12, 1999.
- Reports of Independent Public Accountants for the Pegasus Cash
Management Funds dated February 12, 1999.
- Statements of Assets and Liabilities at December 31, 1998
(audited).
- Statements of Operations for the year ended December 31, 1998
(audited).
- Statements of Changes in Net Assets for the year ended
December 31, 1998 (audited).
- Schedules of Portfolio Investments at December 31, 1998 (audited).
- Notes to Financial Statements dated December 31, 1998 (audited).
- Financial Highlights for the periods or years ended
December 31, 1994, December 31, 1995, December 31, 1996,
December 31, 1997, and December 31, 1998.
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<PAGE> 558
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated as of February
18, 1999 is filed herewith.
(2) Code of Regulations as amended and restated as of October 25,
1990 is incorporated by reference to Exhibit (2) to
Post-Effective Amendment No. 39 (filed August 16, 1996) to
Registrant's Registration Statement on Form N-1A.
(3) None.
(4) Rights of Shareholders.
-----------------------
The following portions of Registrant's Declaration of Trust
incorporated as Exhibit (1) hereto, define the rights of
shareholders:
5.1 Shares in the Series or Classes of the Trust.
---------------------------------------------
A. The Trustees shall have full power and authority, in their
sole discretion, without obtaining the prior approval of the
Shareholders (either with respect to the Trust as a whole or
with respect to any series or classes of the Trust) by vote or
otherwise, to establish one or more series of Shares of the
Trust. The establishment of any such series shall be effective
upon the adoption by a majority of the Trustees then in office
of a resolution establishing such series and setting the
voting rights, preferences, designations, conversion or other
rights, restrictions, limitations as to distributions,
conditions of redemption, qualifications, or other terms of
the Shares of such series. The beneficial interest in each
series of the Trust shall at all times be divided into an
unlimited number of full and fractional transferable Shares
without par value. The investment objective, policies, and
restrictions governing the management and operations of each
series of the Trust, including the management of assets
belonging to any particular series, may from time to time be
changed or supplemented by the Trustees, subject to the
requirements of the Act. The Trustees may from time to time
divide or combine the outstanding Shares of any one or more
series of the Trust into a greater or lesser number without
thereby changing their proportionate beneficial interests in
the Trust assets allocated or belonging to such series.
Subject to the respective voting rights, preferences,
designations, conversion or other rights, restrictions,
limitations as to distributions, conditions of redemption,
qualifications, or other terms of the Shares of each series of
the Trust, the Trustees may, without Shareholder approval,
divide the Shares of any series into two or more classes,
Shares of each such class having such
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<PAGE> 559
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> 560
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> 561
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
-5-
<PAGE> 562
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.
-6-
<PAGE> 563
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
-7-
<PAGE> 564
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
-8-
<PAGE> 565
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.
-9-
<PAGE> 566
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.
-10-
<PAGE> 567
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
-11-
<PAGE> 568
subject to the inspection of any Shareholder during each
meeting of Shareholders.
1.5 RECORD DATE. The Trustees may fix a time (during which
they may close the Share transfer books of the Trust) not more
than ninety (90) days prior to the date of any meeting of
Shareholders, or the date fixed for the payment of any
dividend, or the date of the allotment of rights or the date
when any change or conversion or exchange of Shares shall go
into effect, as a record date for the determination of the
Shareholders entitled to notice of, or to vote at, any such
meeting, or entitled to receive payment of any such dividend,
or to receive any such allotment of rights, or to exercise
such rights, as the case may be. In such case, only such
Shareholders as shall be shareholders of record at the close
of business on the date so fixed shall be entitled to notice
of, or to vote at, such meeting or to receive payment of such
dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any
record date, as aforesaid.
3.1 FORM. Notices to Shareholders shall be in writing and
delivered personally or mailed to the Shareholders at their
addresses appearing on the books of the Trust.
3.2 WAIVER. Whenever any notice of the time, place, or purpose
of any meeting of Shareholders, Trustees, or committee is
required to be given under the provisions of Massachusetts law
or under the provisions of the Declaration of Trust or these
Regulations, a waiver thereof in writing, signed by the person
or persons entitled to such notice and filed with the record
of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting of Shareholders in person
or by proxy, or at the meeting of Trustees or committee in
person, shall be deemed equivalent to the giving of such
notice to such persons.
(5)(a) Investment Advisory Agreement dated January 11, 1993 between
Registrant and Banc One Investment Advisors Corporation is
incorporated by reference to Exhibit 5(a) to Post-Effective
Amendment No. 27 (filed March 17, 1993) to Registrant's
Registration Statement on Form N-1A.
(5)(b) Amended and Restated Schedule A to the Investment Advisory
Agreement between Registrant and Banc One Investment Advisors
Corporation dated November 19, 1998 is incorporated by
reference to Exhibit (5)(b) to Post-Effective Amendment No. 47
(filed December 23, 1998) to Registrant's Registration
Statement on Form N-1A.
(5)(c) Sub-Investment Advisory Agreement dated October 1, 1996
between Banc One Investment Advisors Corporation and
Independence International Associates, Inc. is incorporated by
reference to Exhibit (5)(c) to Post-Effective Amendment No. 42
(filed June 18, 1997) to the Registrant's Registration
Statement on Form N-1A.
-12-
<PAGE> 569
(5)(d) Sub-Investment Advisory Agreement, dated as of August 20, 1998
between Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC is incorporated by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(6)(a) Re-executed Distribution Agreement dated December 13, 1995
between Registrant and The One Group Services Company is
incorporated by reference to Exhibit (7)(c) to Registrant's
Registration Statement on Form N-14 (filed January 19, 1996).
(6)(b) Revised Schedules A-E to the Distribution Agreement between
the Registrant and The One Group Services Company is filed
herewith.
(6)(c) Dealer's Agreement for Registrant dated November 11, 1995
between The One Group Services Company and Banc One Securities
Corporation is incorporated by reference to Exhibit (7)(d) to
Registrant's Registration Statement on Form N-14 (filed
January 19, 1996).
(6)(d) Form of Shareholder Servicing Agreement between the Registrant
and Participating Service Organizations is incorporated by
reference to Exhibit (7)(f) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(6)(e) 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).
(6)(f) Processing Agreement by and between Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation and The
One Group dated as of February, 1999 is filed herewith.
(7) 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.
(8)(a) Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(a) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(8)(b) Amendment to Custodian Contract dated as of July 29, 1988
between Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(b) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(8)(c) Sub-Custodian Agreement between State Street Bank and Trust
Company, Bank One Trust Company, N.A. and the Registrant is
incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 37 (filed June 13, 1996) to the Registrant's
Registration Statement on Form N-1A.
(8)(d) First Amendment to the Subcustodian Agreement dated as of
December, 1996 between State Street Bank and Trust Company,
Bank One Trust Company,
-13-
<PAGE> 570
N.A. and the Registrant is incorporated by reference to
Exhibit (8)(d) to Post Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(8)(e) International Securities Lending Subcustodian and Services
Agreement, dated December 29, 1997 between State Street Bank
and Trust Company, Bank One Trust Company, N.A. and the
Registrant is incorporated by reference to Exhibit (8)(c) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to the
Registrant's Registration Statement on Form N-1A.
(9)(a) Re-executed Management and Administration Agreement dated
November 20, 1997 is incorporated by reference to Exhibit
(13)(b) to Registrant's Registration Statement on Form N-14
(filed on May 29, 1998).
(9)(b) Revised Schedule A to the Management and Administration
Agreement between the Registrant and The One Group Services
Company is incorporated by reference to Exhibit (9)(b) to
Post-Effective Amendment No. 47 (filed December 23, 1997) to
the Registrant's Registration Statement on Form N-1A.
(9)(c) Transfer Agency and Service Agreement dated as of February 9,
1988 between the Registrant and State Street Bank and Trust
Company is incorporated by reference to Exhibit (9)(c) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(d) Amendment to the Transfer Agency and Service Agreement dated
as of February 6, 1996 is incorporated by reference to Exhibit
(9)(d) to Post-Effective Amendment No. 45 (filed August 26,
1998) to the Registrant's Registration Statement on Form N-1A.
(9)(e) Fund Accounting Agreement dated December 1, 1995 between the
Registrant and The One Group Services Company is incorporated
by reference to Exhibit (13)(c) to Registrant's Registration
Statement on Form N-14 (filed January 19, 1996).
(9)(f) Revised Schedule A to the Fund Accounting Agreement between
the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (9)(f) to Post-Effective
Amendment No. 47 (filed December 23, 1997) to the Registrant's
Registration Statement on Form N-1A.
(9)(g) Sub-Administration Agreement dated December 1, 1995 between
The One Group Services Company and Banc One Investment
Advisors Corporation is incorporated by reference to Exhibit
(13)(d) to the Registrant's Registration Statement on Form
N-14 (filed January 19, 1996).
(9)(h) Revised Schedule A to the Sub-Administration Agreement between
The One Group Services Company and Banc One Investment
Advisors Corporation incorporated by reference to Exhibit
(9)(h) to Post-Effective Amendment No. 47 (filed December 23,
1997) to the Registrant's Registration Statement on Form N-1A.
(9)(i) Agency Services and Delegation Agreement dated January 1, 1996
between the Registrant and BISYS Qualified Plan Services is
incorporated by reference
-14-
<PAGE> 571
to Exhibit (9)(g) to Post-Effective Amendment No. 37 (filed
June 13, 1996) to the Registrant's Registration Statement on
Form N-1A.
(9)(j) Form of Agency Services and Delegation Agreement between the
Registrant and Bank One Trust Company, NA is incorporated by
reference to Exhibit (9)(i) to Post-Effective Amendment No. 43
(filed August 29, 1997) to Registrant's Registration Statement
on Form N-1A.
(9)(k) Form of Order Processing Agreement between the Registrant and
Bank One Trust Company, NA is incorporated by reference to
Exhibit (9)(j) to Post-Effective Amendment No. 43 (filed
August 29, 1997) to Registrant's Registration Statement on
Form N-1A.
(9)(l) Shareholder Servicing Agreement is incorporated by reference
to Exhibit 9(h) to Post-Effective Amendment No. 37 (filed June
13, 1996) to the Registrant's Registration Statement on Form
N-1A.
(9)(m) Services Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(l) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(9)(n) Operating Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(9)(o) Retirement Services Order Processing Agreement dated as of
June 6, 1997 between the Registrant and Charles Schwab &
Company, is incorporated by reference to Exhibit (9)(n) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(p) Securities Lending Agreement for Non-ERISA Accounts dated as
of August 1995 between the Registrant, Banc One Investment
Advisors Corporation, and Bank One Trust Company, 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.
(9)(q) Amendment to Securities Lending Agreement for Non-ERISA
Accounts dated as of January 21, 1997 between the Registrant,
Banc One Investment Advisors Corporation, and Bank One Trust
Company, N.A. is incorporated by reference to Exhibit (9)(q)
to Post Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(r) Second Amendment to the Securities Lending Agreement (Domestic
Securities), effective May 21, 1998, between the Registrant,
Banc One Investment Advisors, and Bank One Trust Company, N.A.
is incorporated by
-15-
<PAGE> 572
reference to Exhibit (9)(r) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(9)(s) Securities Lending Agreement for Non-ERISA Accounts dated as
of January 8, 1998 between the Registrant, Banc One Investment
Advisors, and Bank One Trust Company, N.A. is incorporated by
reference to Exhibit (9)(s) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(9)(t) Amendment to the Securities Lending Agreement (Foreign
Securities) effective May 21, 1998 is incorporated by
reference to Exhibit (9)(t) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(9)(u) Form of Fund Alliance Agreement by and between The One Group,
The One Group Services Company, and Putnam Fiduciary Trust
Company is filed herewith.
(10) Opinion and consent of counsel is filed herewith.
(11)(a) Consent of PricewaterhouseCoopers LLP is filed herewith.
(11)(b) Consent of Arthur Andersen LLP is filed herewith.
(11)(c) Consent of Ropes & Gray is filed herewith.
(12) None
(13) Purchase Agreement dated July 18, 1985, between Registrant and
Physicians Insurance Company of Ohio is incorporated by
reference to Exhibit (13) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(14) None.
(15)(a) Re-Executed Distribution and Shareholder Services Plan - Class
A and Service Class shares dated November 1, 1995, as amended
August 20, 1997, between the Registrant and The One Group
Services Company is incorporated by reference to Exhibit
(15)(a) to Post-Effective Amendment No. 43 (filed August 29,
1997) to Registrant's Registration Statement on Form N-1A.
(15)(b) Distribution and Shareholder Services Plan - Class B and Class
C Shares dated January 1, 1994, as amended August 20, 1997,
between the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (15)(b) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to Registrant's
Registration Statement on Form N-1A.
(16) Schedules for Computation of Performance Calculations are
incorporated by reference to Exhibit (16) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to Registrant's
Registration Statement on Form N-1A.
<TABLE>
<CAPTION>
(17) Financial Data schedules for:
<S> <C> <C> <C>
17.1 Prime Money Market (011) Class I 6/30/98
17.2 Prime Money Market (012) Class A 6/30/98
17.3 Prime Money Market (013) Class B 6/30/98
17.4 U.S. Treasury Securities Money Market (021) Class I 6/30/98
17.5 U.S. Treasury Securities Money Market (022) Class A 6/30/98
17.6 U.S. Treasury Securities Money Market (023) Class B 6/30/98
17.7 U.S. Treasury Securities Money Market (024) Class C 6/30/98
17.8 Municipal Money Market (031) Class I 6/30/98
17.9 Municipal Money Market (032) Class A 6/30/98
17.10 Income Equity (041) Class I 6/30/98
17.11 Income Equity (042) Class A 6/30/98
17.12 Income Equity (043) Class B 6/30/98
17.13 Income Equity (044) Class C 6/30/98
17.17 Intermediate Tax-Free Bond (061) Class I 6/30/98
17.18 Intermediate Tax-Free Bond (062) Class A 6/30/98
17.19 Intermediate Tax-Free Bond (063) Class B 6/30/98
17.20 Disciplined Value (071) Class I 6/30/98
17.21 Disciplined Value (072) Class A 6/30/98
17.22 Disciplined Value (073) Class B 6/30/98
17.23 Growth Opportunities (081) Class I 6/30/98
17.24 Growth Opportunities (082) Class A 6/30/98
17.25 Growth Opportunities (083) Class B 6/30/98
17.26 Growth Opportunities (084) Class C 6/30/98
17.27 Limited Volatility (101) Class I 6/30/98
17.28 Limited Volatility (102) Class A 6/30/98
17.29 Limited Volatility (103) Class B 6/30/98
17.30 Equity Index (111) Class I 6/30/98
17.31 Equity Index (112) Class A 6/30/98
17.32 Equity Index (113) Class B 6/30/98
17.33 Equity Index (114) Class C 6/30/98
17.34 Large Company Value (121) Class I 6/30/98
17.35 Large Company Value (122) Class A 6/30/98
17.36 Large Company Value (123) Class B 6/30/98
17.37 Ohio Municipal Bond (131) Class I 6/30/98
17.38 Ohio Municipal Bond (132) Class A 6/30/98
17.39 Ohio Municipal Bond (133) Class B 6/30/98
17.40 International Equity Index (141) Class I 6/30/98
17.41 International Equity Index (142) Class A 6/30/98
17.42 International Equity Index (143) Class B 6/30/98
17.43 International Equity Index (144) Class C 6/30/98
17.44 Treasury Only Money Market (151) Class I 6/30/98
17.45 Government Money Market (161) Class I 6/30/98
17.46 Asset Allocation (171) Class I 6/30/98
17.47 Asset Allocation (172) Class A 6/30/98
17.48 Asset Allocation (173) Class B 6/30/98
17.49 Government Bond (181) Class I 6/30/98
17.50 Government Bond (182) Class A 6/30/98
17.51 Government Bond (183) Class B 6/30/98
17.52 Ultra Short-Term Income (191) Class I 6/30/98
17.53 Ultra Short-Term Income (192) Class A 6/30/98
17.54 Ultra Short-Term Income (193) Class B 6/30/98
17.55 Municipal Income (201) Class I 6/30/98
17.56 Municipal Income (202) Class A 6/30/98
17.57 Municipal Income (203) Class B 6/30/98
17.58 Municipal Income (204) Class C 6/30/98
17.59 Ohio Municipal Money Market (211) Class I 6/30/98
17.60 Ohio Municipal Money Market (212) Class A 6/30/98
17.65 Large Company Growth (231) Class I 6/30/98
17.66 Large Company Growth (232) Class A 6/30/98
17.67 Large Company Growth (233) Class B 6/30/98
17.68 Large Company Growth (234) Class C 6/30/98
17.69 Kentucky Municipal Bond (241) Class I 6/30/98
17.70 Kentucky Municipal Bond (242) Class A 6/30/98
17.71 Kentucky Municipal Bond (243) Class B 6/30/98
17.72 Louisiana Municipal Bond (251) Class I 6/30/98
17.73 Louisiana Municipal Bond (252) Class A 6/30/98
17.74 Louisiana Municipal Bond (253) Class B 6/30/98
17.75 Small Capitalization (261) Class I 6/30/98
17.76 Small Capitalization (262) Class A 6/30/98
17.77 Small Capitalization (263) Class B 6/30/98
17.78 Small Capitalization (264) Class C 6/30/98
17.79 Value Growth (271) Class I 6/30/98
17.80 Value Growth (272) Class A 6/30/98
17.81 Value Growth (273) Class B 6/30/98
17.82 Value Growth (274) Class C 6/30/98
17.83 West Virginia Municipal Bond (291) Class I 6/30/98
17.84 West Virginia Municipal Bond (292) Class A 6/30/98
17.85 West Virginia Municipal Bond (293) Class B 6/30/98
17.86 Arizona Municipal Bond (301) Class I 6/30/98
17.87 Arizona Municipal Bond (302) Class A 6/30/98
17.88 Arizona Municipal Bond (303) Class B 6/30/98
17.89 Investor Growth (351) Class I 6/30/98
17.90 Investor Growth (352) Class A 6/30/98
17.91 Investor Growth (353) Class B 6/30/98
17.92 Investor Growth (354) Class C 6/30/98
17.93 Investor Growth & Income (361) Class I 6/30/98
17.94 Investor Growth & Income (362) Class A 6/30/98
17.95 Investor Growth & Income (363) Class B 6/30/98
17.96 Investor Growth & Income (364) Class C 6/30/98
17.97 Investor Conservative Growth (391) Class I 6/30/98
17.98 Investor Conservative Growth (392) Class A 6/30/98
17.99 Investor Conservative Growth (393) Class B 6/30/98
17.100 Investor Conservative Growth (394) Class C 6/30/98
17.101 Investor Balanced (401) Class I 6/30/98
17.102 Investor Balanced (402) Class A 6/30/98
17.103 Investor Balanced (403) Class B 6/30/98
17.104 Investor Balanced (404) Class C 6/30/98
17.105 Treasury & Agency (411) Class I 6/30/98
17.106 Treasury & Agency (412) Class A 6/30/98
17.107 Treasury & Agency (413) Class B 6/30/98
17.108 Pegasus Mid Cap Opportunity Fund (091) Class I 12/31/98
17.109 Pegasus Mid Cap Opportunity Fund (092) Class A 12/31/98
17.110 Pegasus Mid Cap Opportunity Fund (093) Class B 12/31/98
17.111 Pegasus Intermediate Bond Fund (111) Class I 12/31/98
17.112 Pegasus Intermediate Bond Fund (112) Class A 12/31/98
17.113 Pegasus Intermediate Bond Fund (113) Class B 12/31/98
17.114 Pegasus Bond Fund (121) Class I 12/31/98
17.115 Pegasus Bond Fund (122) Class A 12/31/98
17.116 Pegasus Bond Fund (123) Class B 12/31/98
17.117 Pegasus Michigan Municipal Money Market (131) Class I 12/31/98
17.118 Pegasus Michigan Municipal Money Market (132) Class A 12/31/98
17.119 Pegasus Municipal Bond Fund (161) Class I 12/31/98
17.120 Pegasus Municipal Bond Fund (162) Class A 12/31/98
17.121 Pegasus Municipal Bond Fund (163) Class B 12/31/98
17.122 Pegasus Michigan Municipal Bond Fund (171) Class I 12/31/98
17.123 Pegasus Michigan Municipal Bond Fund (172) Class A 12/31/98
17.124 Pegasus Michigan Municipal Bond Fund (173) Class B 12/31/98
17.125 Pegasus International Equity Fund (211) Class I 12/31/98
17.126 Pegasus International Equity Fund (212) Class A 12/31/98
17.127 Pegasus International Equity Fund (213) Class B 12/31/98
17.128 Pegasus Small Cap Opportunity Fund (231) Class I 12/31/98
17.129 Pegasus Small Cap Opportunity Fund (232) Class A 12/31/98
17.130 Pegasus Small Cap Opportunity Fund (233) Class B 12/31/98
17.131 Pegasus Multi Sector Bond Fund (271) Class I 12/31/98
17.132 Pegasus Multi Sector Bond Fund (272) Class A 12/31/98
17.133 Pegasus Multi Sector Bond Fund (273) Class B 12/31/98
17.134 Pegasus Cash Management Fund (291) Class I 12/31/98
17.135 Pegasus Cash Management Fund (292) Class S 12/31/98
17.136 Pegasus U.S. Government Securities Cash
Management Fund (301) Class I 12/31/98
17.137 Pegasus U.S. Government Securities Cash
Management Fund (302) Class S 12/31/98
17.138 Pegasus Treasury Prime Cash Management Fund (312) Class S 12/31/98
17.139 Pegasus Treasury Prime Cash Management Fund (312) Class I 12/31/98
17.140 Pegasus Municipal Cash Management Fund (331) Class I 12/31/98
17.141 Pegasus Municipal Cash Management Fund (332) Class S 12/31/98
17.142 Pegasus Treasury Cash Management Fund (341) Class I 12/31/98
17.143 Pegasus Treasury Cash Management Fund (342) Class S 12/31/98
17.144 Pegasus Short Municipal Bond Fund (351) Class I 12/31/98
17.145 Pegasus Short Municipal Bond Fund (352) Class A 12/31/98
17.146 Pegasus Short Municipal Bond Fund (353) Class B 12/31/98
17.147 Pegasus Market Expansion Index Fund (361) Class I 12/31/98
17.148 Pegasus Market Expansion Index Fund (362) Class A 12/31/98
17.149 Pegasus Market Expansion Index Fund (363) Class B 12/31/98
</TABLE>
-16-
<PAGE> 573
(18)(a) Multiple Class Plan for the Registrant adopted by the Board of
Trustees on May 22, 1995, as amended May 21, 1998 is
incorporated by reference to Exhibit (10)(k) to Registrant's
Registration Statement on Form N-14 (filed on May 29, 1998).
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of the effective date of this Registration Statement there are no persons
controlled or under common control with the Registrant.
Item 26. Number of Holders of Securities
-------------------------------
No longer required by new Form N-1A.
Item 27 Indemnification.
----------------
Article IX, Section 9.2 of the Registrant's Declaration of
Trust, incorporated as Exhibit (1) hereto, provides for the
indemnification of Registrant's trustees and officers.
Indemnification of the Registrant's principal underwriter,
custodians, investment advisers, administrator, and transfer
agents is provided for in the Registrant's respective
Agreements with those service providers as filed or
incorporated by reference as Exhibits hereto. As of the
effective date of this Registration Statement, the Registrant
has obtained from a major insurance carrier a trustees and
officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of
its trustees, officers, employees, or agents against any
liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of
his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person
of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
-17-
<PAGE> 574
Item 28. Business and Other Connections of Investment Advisers
-----------------------------------------------------
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors") performs investment advisory services for all of
the Funds of The 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> 575
<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 N/A Investment
and Chief Operating Officer
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.
Independence International Associates, Inc.
- -------------------------------------------
Independence International Associates, Inc. ("IIA") is the
Sub-Investment Advisor to the International Equity Index Fund. IIA, a
corporation organized under the laws of Massachusetts, provides investment
advice to institutional and investment company clients. Information regarding
the firm's ownership and other business connections of the officers and
directors is listed on the Form ADV filed by IIA with the SEC pursuant to the
-19-
<PAGE> 576
Investment Advisers Act of 1940 (SEC File No.801-28785), the text of which is
hereby incorporated by reference.
Banc One High Yield Partners, LLC
- ---------------------------------
Banc One High Yield Partners, LLC is the Sub-Investment Advisor to the
High Yield Bond Fund ("Banc One Partners"). Banc One Partners, a limited
liability company organized under the laws of Ohio, provides investment advice
to the High Yield Bond Fund. Set forth below are the names and principal
businesses of the managers and investment officers of Banc One Partners who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Position with Other Substantial Type of
Banc One Partners Occupation Business
----------------- ---------- --------
<S> <C> <C>
James P. Shanahan, Manager Pacholder Associates, Investment
Inc., Managing Director
& General Counsel, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
William J. Morgan, Manager Pacholder Associates, Investment
Inc., President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
Mark A. Beeson, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Columbus, Ohio 43271
Gary Madich, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Columbus, Ohio 43271
</TABLE>
-20-
<PAGE> 577
<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 29. Principal Underwriters
----------------------
(a) The One Group Services Company acts as administrator and
distributor for each of the Fund's Portfolios.
(b) The directors and officers of The One Group Services Company are
set forth below. The business address of each director or officer is
3435 Stelzer Road, Columbus, Ohio 43219.
<TABLE>
<CAPTION>
Positions and Offices
With The One Group
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> 578
<TABLE>
<S> <C> <C>
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
William J. Tomko Senior Vice President Treasurer
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
(1) Banc One Investment Advisors Corporation, 1111 Polaris
Parkway, P.O. Box 710211, Columbus, Ohio 43271-0211
(records relating to its functions as Investment Adviser
and Sub-Administrator).
(2) Independence International Associates, Inc., 75 State
Street, Boston, MA 02109 (records relating to its
functions as Sub-Investment Adviser to the International
Equity Index Fund).
(3) Banc One High Yield Partners, LLC, 1111 Polaris Parkway,
P.O. Box 710211, Columbus, Ohio 43271-0211 and 8044
Montgomery Road, Suite #382, Cincinnati, Ohio 45236
(records relating to its functions as Sub-Investment
Advisor to the High Yield Bond Fund).
(4) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Distributor for all Funds).
(5) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Administrator for all Funds).
(6) State Street Bank and Trust Company, 470 Atlantic
Avenue, Fifth Floor, Boston, MA 02205-9087 (records
relating to its functions as custodian and transfer
agent to all Funds).
(7) Ropes & Gray, One Franklin Square, 1301 K Street, N.W.,
Suite 800 East, Washington, D.C. 20005 (Declaration of
Trust, Code of Regulations, and Minute Books).
Item 31. Management Services
-------------------
N/A
Item 32. Undertakings
------------
The Registrant undertakes to call a meeting of
Shareholders, at the request of at least 10% of the
Registrant's outstanding shares, for the purpose of
voting upon the question of removal of a trustee or
trustees and to assist in communications with other
shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
-22-
<PAGE> 579
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> 580
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 48 to
Registrant's Registration Statement on Form N-1A pursuant to Rule 485(b) under
the 1933 Act and has duly caused this Post-Effective Amendment No. 48 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 11th of March, 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 March 11, 1999
- ------------------
* Mark S. Redman
/s/ William J. Tomko Treasurer March 11, 1999
- --------------------
*William J. Tomko
/s/ Peter C. Marshall Trustee March 11, 1999
- ---------------------
*Peter C. Marshall
/s/ Charles I. Post Trustee March 11, 1999
- --------------------
*Charles I. Post
/s/ Frederick W. Ruebeck Trustee March 11, 1999
- -------------------------
*Frederick W. Ruebeck
/s/ Robert A. Oden Trustee March 11, 1999
- ------------------
*Robert A. Oden
/s/ John F. Finn Trustee March 11, 1999
- ----------------
*John F. Finn
*By: /s/ Alan G. Priest
------------------
Alan G. Priest
Attorney-in-Fact, pursuant to powers of attorney filed herewith.
</TABLE>
-24-
<PAGE> 581
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> 582
POWER OF ATTORNEY
-----------------
William J. Tomko, 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/ William J. Tomko
--------------------
William J. Tomko
-26-
<PAGE> 583
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> 584
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> 585
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> 586
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> 587
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> 588
Exhibit No. Description
----------- -----------
(1) Amended and Restated Declaration of Trust dated as of
February 18, 1999.
(6)(f) Processing Agreement by and between Pershing Division
of Donaldson, Lufkin & Jenrette Securities
corporation and The One Group dated as of February,
1999.
(9)(u) Form of Fund Alliance Agreement by and between The
One Group, The One Group Services Company, and Putnam
Fiduciary Trust Company.
10 Opinion of Counsel
11(a) Consent of PricewaterhouseCoopers LLP
11(b) Consent of Arthur Andersen LLP
11(c) Consent of Ropes & Gray
27 Financial Data Schedules for:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
27.1 Prime Money Market (011) Class I 6/30/98
27.2 Prime Money Market (012) Class A 6/30/98
27.3 Prime Money Market (013) Class B 6/30/98
27.4 U.S. Treasury Securities Money Market (021) Class I 6/30/98
27.5 U.S. Treasury Securities Money Market (022) Class A 6/30/98
27.6 U.S. Treasury Securities Money Market (023) Class B 6/30/98
27.7 U.S. Treasury Securities Money Market (024) Class C 6/30/98
27.8 Municipal Money Market (031) Class I 6/30/98
27.9 Municipal Money Market (032) Class A 6/30/98
27.10 Income Equity (041) Class I 6/30/98
27.11 Income Equity (042) Class A 6/30/98
27.12 Income Equity (043) Class B 6/30/98
27.13 Income Equity (044) Class C 6/30/98
27.17 Intermediate Tax-Free Bond (061) Class I 6/30/98
27.18 Intermediate Tax-Free Bond (062) Class A 6/30/98
27.19 Intermediate Tax-Free Bond (063) Class B 6/30/98
27.20 Disciplined Value (071) Class I 6/30/98
27.21 Disciplined Value (072) Class A 6/30/98
27.22 Disciplined Value (073) Class B 6/30/98
27.23 Growth Opportunities (081) Class I 6/30/98
27.24 Growth Opportunities (082) Class A 6/30/98
27.25 Growth Opportunities (083) Class B 6/30/98
27.26 Growth Opportunities (084) Class C 6/30/98
27.27 Limited Volatility (101) Class I 6/30/98
27.28 Limited Volatility (102) Class A 6/30/98
27.29 Limited Volatility (103) Class B 6/30/98
27.30 Equity Index (111) Class I 6/30/98
27.31 Equity Index (112) Class A 6/30/98
27.32 Equity Index (113) Class B 6/30/98
27.33 Equity Index (114) Class C 6/30/98
27.34 Large Company Value (121) Class I 6/30/98
27.35 Large Company Value (122) Class A 6/30/98
27.36 Large Company Value (123) Class B 6/30/98
27.37 Ohio Municipal Bond (131) Class I 6/30/98
27.38 Ohio Municipal Bond (132) Class A 6/30/98
27.39 Ohio Municipal Bond (133) Class B 6/30/98
27.40 International Equity Index (141) Class I 6/30/98
27.41 International Equity Index (142) Class A 6/30/98
27.42 International Equity Index (143) Class B 6/30/98
27.43 International Equity Index (144) Class C 6/30/98
27.44 Treasury Only Money Market (151) Class I 6/30/98
27.45 Government Money Market (161) Class I 6/30/98
27.46 Asset Allocation (171) Class I 6/30/98
27.47 Asset Allocation (172) Class A 6/30/98
27.48 Asset Allocation (173) Class B 6/30/98
27.49 Government Bond (181) Class I 6/30/98
27.50 Government Bond (182) Class A 6/30/98
27.51 Government Bond (183) Class B 6/30/98
27.52 Ultra Short-Term Income (191) Class I 6/30/98
27.53 Ultra Short-Term Income (192) Class A 6/30/98
27.54 Ultra Short-Term Income (193) Class B 6/30/98
27.55 Municipal Income (201) Class I 6/30/98
27.56 Municipal Income (202) Class A 6/30/98
27.57 Municipal Income (203) Class B 6/30/98
27.58 Municipal Income (204) Class C 6/30/98
27.59 Ohio Municipal Money Market (211) Class I 6/30/98
27.60 Ohio Municipal Money Market (212) Class A 6/30/98
27.65 Large Company Growth (231) Class I 6/30/98
27.66 Large Company Growth (232) Class A 6/30/98
27.67 Large Company Growth (233) Class B 6/30/98
27.68 Large Company Growth (234) Class C 6/30/98
27.69 Kentucky Municipal Bond (241) Class I 6/30/98
27.70 Kentucky Municipal Bond (242) Class A 6/30/98
27.71 Kentucky Municipal Bond (243) Class B 6/30/98
27.72 Louisiana Municipal Bond (251) Class I 6/30/98
27.73 Louisiana Municipal Bond (252) Class A 6/30/98
27.74 Louisiana Municipal Bond (253) Class B 6/30/98
27.75 Small Capitalization (261) Class I 6/30/98
27.76 Small Capitalization (262) Class A 6/30/98
27.77 Small Capitalization (263) Class B 6/30/98
27.78 Small Capitalization (264) Class C 6/30/98
27.79 Value Growth (271) Class I 6/30/98
27.80 Value Growth (272) Class A 6/30/98
27.81 Value Growth (273) Class B 6/30/98
27.82 Value Growth (274) Class C 6/30/98
27.83 West Virginia Municipal Bond (291) Class I 6/30/98
27.84 West Virginia Municipal Bond (292) Class A 6/30/98
27.85 West Virginia Municipal Bond (293) Class B 6/30/98
27.86 Arizona Municipal Bond (301) Class I 6/30/98
27.87 Arizona Municipal Bond (302) Class A 6/30/98
27.88 Arizona Municipal Bond (303) Class B 6/30/98
27.89 Investor Growth (351) Class I 6/30/98
27.90 Investor Growth (352) Class A 6/30/98
27.91 Investor Growth (353) Class B 6/30/98
27.92 Investor Growth (354) Class C 6/30/98
27.93 Investor Growth & Income (361) Class I 6/30/98
27.94 Investor Growth & Income (362) Class A 6/30/98
27.95 Investor Growth & Income (363) Class B 6/30/98
27.96 Investor Growth & Income (364) Class C 6/30/98
27.97 Investor Conservative Growth (391) Class I 6/30/98
27.98 Investor Conservative Growth (392) Class A 6/30/98
27.99 Investor Conservative Growth (393) Class B 6/30/98
27.100 Investor Conservative Growth (394) Class C 6/30/98
27.101 Investor Balanced (401) Class I 6/30/98
27.102 Investor Balanced (402) Class A 6/30/98
27.103 Investor Balanced (403) Class B 6/30/98
27.104 Investor Balanced (404) Class C 6/30/98
27.105 Treasury & Agency (411) Class I 6/30/98
27.106 Treasury & Agency (412) Class A 6/30/98
27.107 Treasury & Agency (413) Class B 6/30/98
27.108 Pegasus Mid Cap Opportunity Fund (091) Class I 12/31/98
27.109 Pegasus Mid Cap Opportunity Fund (092) Class A 12/31/98
27.110 Pegasus Mid Cap Opportunity Fund (093) Class B 12/31/98
27.111 Pegasus Intermediate Bond Fund (111) Class I 12/31/98
27.112 Pegasus Intermediate Bond Fund (112) Class A 12/31/98
27.113 Pegasus Intermediate Bond Fund (113) Class B 12/31/98
27.114 Pegasus Bond Fund (121) Class I 12/31/98
27.115 Pegasus Bond Fund (122) Class A 12/31/98
27.116 Pegasus Bond Fund (123) Class B 12/31/98
27.117 Pegasus Michigan Municipal Money Market (131) Class I 12/31/98
27.118 Pegasus Michigan Municipal Money Market (132) Class A 12/31/98
27.119 Pegasus Municipal Bond Fund (161) Class I 12/31/98
27.120 Pegasus Municipal Bond Fund (162) Class A 12/31/98
27.121 Pegasus Municipal Bond Fund (163) Class B 12/31/98
27.122 Pegasus Michigan Municipal Bond Fund (171) Class I 12/31/98
27.123 Pegasus Michigan Municipal Bond Fund (172) Class A 12/31/98
27.124 Pegasus Michigan Municipal Bond Fund (173) Class B 12/31/98
27.125 Pegasus International Equity Fund (211) Class I 12/31/98
27.126 Pegasus International Equity Fund (212) Class A 12/31/98
27.127 Pegasus International Equity Fund (213) Class B 12/31/98
27.128 Pegasus Small Cap Opportunity Fund (231) Class I 12/31/98
27.129 Pegasus Small Cap Opportunity Fund (232) Class A 12/31/98
27.130 Pegasus Small Cap Opportunity Fund (233) Class B 12/31/98
27.131 Pegasus Multi Sector Bond Fund (271) Class I 12/31/98
27.132 Pegasus Multi Sector Bond Fund (272) Class A 12/31/98
27.133 Pegasus Multi Sector Bond Fund (273) Class B 12/31/98
27.134 Pegasus Cash Management Fund (291) Class I 12/31/98
27.135 Pegasus Cash Management Fund (292) Class S 12/31/98
27.136 Pegasus U.S. Government Securities Cash
Management Fund (301) Class I 12/31/98
27.137 Pegasus U.S. Government Securities Cash
Management Fund (302) Class S 12/31/98
27.138 Pegasus Treasury Prime Cash Management Fund (312) Class S 12/31/98
27.139 Pegasus Treasury Prime Cash Management Fund (312) Class I 12/31/98
27.140 Pegasus Municipal Cash Management Fund (331) Class I 12/31/98
27.141 Pegasus Municipal Cash Management Fund (332) Class S 12/31/98
27.142 Pegasus Treasury Cash Management Fund (341) Class I 12/31/98
27.143 Pegasus Treasury Cash Management Fund (342) Class S 12/31/98
27.144 Pegasus Short Municipal Bond Fund (351) Class I 12/31/98
27.145 Pegasus Short Municipal Bond Fund (352) Class A 12/31/98
27.146 Pegasus Short Municipal Bond Fund (353) Class B 12/31/98
27.147 Pegasus Market Expansion Index Fund (361) Class I 12/31/98
27.148 Pegasus Market Expansion Index Fund (362) Class A 12/31/98
27.149 Pegasus Market Expansion Index Fund (363) Class B 12/31/98
</TABLE>
-32-
<PAGE> 1
EXHIBIT(1)
AMENDED AND RESTATED DECLARATION OF TRUST DATED AS OF FEBRUARY 18, 1999
<PAGE> 2
AMENDED AND RESTATED
DECLARATION OF TRUST
ONE GROUP(R) MUTUAL FUNDS
February 18, 1999
THIS AMENDED AND RESTATED DECLARATION OF TRUST, made as of
February 18, 1999, hereby amends and restates in its entirety the Declaration of
Trust dated May 23, 1985, by the Trustees hereunder (the "Trustees") and by the
holders of shares of beneficial interest to be issued hereunder as hereinafter
provided.
WHEREAS, the Trustees desire to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust fund hereunder shall be held and managed under
this Declaration of Trust as herein set forth below.
I.
NAME
This trust shall be known as One Group(R) Mutual Funds (hereinafter
called the "Trust").
II.
PURPOSE OF TRUST; AGENT FOR SERVICE
The Trust is a Massachusetts business trust of the type described in
Chapter 182, Section 1 of the General Laws of the Commonwealth of Massachusetts,
and is formed for the purpose of
<PAGE> 3
acting as a management investment company under the Investment Company Act of
1940; PROVIDED, HOWEVER, that the Trust may exercise all powers which are
ordinarily exercised by or permissible for Massachusetts business trusts.
The Agent of the Trust for Service of Process within the Commonwealth
of Massachusetts shall be: CT Corporation System, Two Oliver Street, Boston,
Massachusetts 02109.
III.
DEFINITIONS
3.1 DEFINITION OF CERTAIN TERMS. As used in this Declaration
of Trust, the terms set forth below shall have the following meanings:
A. "Shares" means the equal proportionate transferable units
of interest into which the beneficial interest of each series or class of the
Trust may be divided or redivided from time to time by the Trustees acting under
this Declaration of Trust or, in the absence of such action, such term means the
equal proportionate transferable units of interest into which the entire
beneficial interest in the Trust shall be divided from time to time, and
includes fractions of Shares as well as whole Shares.
B. "Shareholder" means a record owner of Shares of the Trust
or of any series or class of the Trust.
C. "Person" shall mean a natural person, a corporation, a
partnership, an association, a joint-stock company, a trust, a fund, any
federal, state, or local governmental body, agency, instrumentality, or any
political
-2-
<PAGE> 4
subdivision thereof, or any organized group of persons whether or not
incorporated.
D. "Trustees" refers to the individual trustees of the Trust,
in their capacity as trustees hereunder and not as individuals, and to their
successor or successors, while serving in office as a trustee of the Trust.
E. The "Act" refers to the Investment Company Act of 1940, as
now or hereafter amended, and to the rules and regulations adopted from time to
time thereunder.
F. The terms "assignment" and "interested person" shall have
the respective meanings set forth in the Act. The term "vote of a majority of
the outstanding Shares" shall mean, where required by the Act, the vote, at an
annual or special meeting of Shareholders duly called, of the lesser of (i) the
holders of 67% or more of the Shares present at any such meeting, if the holders
of more than 50% of the outstanding Shares are present or represented by proxy
thereat; or (ii) the holders of more than 50% of the outstanding Shares;
PROVIDED, HOWEVER, that the term "vote of a majority of the outstanding Shares"
may be used herein with respect to Shares of the Trust as a whole, or with
respect to Shares of a particular series or class of the Trust, as the context
may require.
G. The "Regulations" shall refer to the Code of Regulations of
the Trust as adopted and amended from time to time.
H. The "Declaration of Trust" shall mean this Declaration of
Trust as amended or restated from time to time.
-3-
<PAGE> 5
I. The terms "series" or "series of Shares" refers to the one
or more separate investment portfolios of the Trust into which the assets and
liabilities of the Trust may be divided and the Shares of the Trust representing
the beneficial interest of Shareholders in such respective portfolios; and
J. The terms "class" or "class of Shares" refers to the Shares
representing the division of any series into two or more classes as provided in
Article V, Section 5.1.A hereof.
IV.
OWNERSHIP OF ASSETS OF THE TRUST
4.1 The assets of the Trust shall be held separate and apart
from any assets now or hereafter held in any capacity, other than as Trustees
hereunder, by the Trustees. Legal title to all the assets of the Trust shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any assets of the Trust to be held by or in the
name of one or more of the Trustees, in the name of the Trust, in the name of a
particular series or class of the Trust, or in the name of any other Person as
nominee, on such terms as the Trustees may reasonably determine. The right,
title, and interest of the Trustees in the assets of the Trust shall vest
automatically in each person who may hereafter become a Trustee. Upon the
resignation, removal, or death of a Trustee, such Trustee shall automatically
cease to have any right, title, or interest in any of the assets of the Trust,
and the right, title, and interest of such Trustee in the assets of the Trust
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective regardless of whether conveyancing documents
(pursuant to Section 6.6 of this Declaration of Trust or otherwise) have been
executed and delivered. Except to the extent otherwise required by Article V
-4-
<PAGE> 6
hereof, no Shareholder shall be deemed to have severable ownership in any
individual asset of the Trust or any right of partition or possession thereof;
nor shall any Shareholder be called upon to assume any losses of the Trust or
suffer an assessment of any kind by virtue of his ownership of Shares; but each
Shareholder shall have a proportionate undivided beneficial interest in the
series or class of the Trust in respect of which the Shares held by such
Shareholder shall have been issued.
V.
SHAREHOLDERS; SERIES; CLASSES; BENEFICIAL INTEREST IN
SERIES OR CLASSES OF THE TRUST; PURCHASE AND REDEMPTION OF SHARES
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
-5-
<PAGE> 7
or more series of the Trust into a greater or lesser number without thereby
changing their proportionate beneficial interests in the Trust assets allocated
or belonging to such series.
Subject to the respective voting rights, preferences,
designations, conversion or other rights, restrictions, limitations as to
distributions, conditions of redemption, qualifications, or other terms of the
Shares of each series of the Trust, the Trustees may, without Shareholder
approval, divide the Shares of any series into two or more classes, Shares of
each such class having such voting rights, preferences, designations, conversion
or other rights, restrictions, limitations as to distributions, conditions of
redemption, qualifications, or other terms applicable to Shares of such class as
the Trustees may determine.
B. The holder of each Share shall be entitled to one vote for
each full Share, and a proportionate fractional vote for each fractional Share,
irrespective of the series or class, then recorded in his name on the books of
the Trust. On any matter submitted 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:
-6-
<PAGE> 8
(1) ASSETS BELONGING TO A SERIES OR CLASS. All
consideration received by the Trust for the issue or sale of Shares of any
series or class, together with all assets in which such consideration is
invested or reinvested, including any proceeds derived from the sale, exchange,
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that series or class. In addition, any
assets, income, earnings, profits or proceeds thereof, or funds or payments
which are not readily identifiable as belonging to a particular series or class
shall be allocated by the Trustees to one or more series or class (such
allocation to be conclusive and binding upon the Shareholders of all series or
class for all purposes) in such manner as they, in their sole discretion, deem
fair and equitable, and shall also be referred to as "assets belonging to" such
series or class. Such assets belonging to a particular series or class shall
irrevocably belong for all purposes to the Shares of the series or class, and
shall be so handled upon the books of account of the Trust. Such assets and the
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange, or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such a series or class. Shareholders of any
series or class shall have no right, title or interest in or to the assets
belonging to any other series or class.
(2) LIABILITIES BELONGING TO A SERIES OR CLASS. The
assets belonging to any series or class of the Trust shall be charged with the
direct liabilities in respect of such series or class and with all expenses,
costs, charges, and reserves attributable to such series or class, and shall
also be charged with the share of such series or class of the general
-7-
<PAGE> 9
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
-8-
<PAGE> 10
to such termination and winding up in proportion to the relative net assets of
the respective series or class determined as hereinafter provided and the
number of Shares of such series or class held by them and recorded in their
names on the books of the Trust.
(4) DIVIDENDS AND DISTRIBUTIONS. Shares of each
series or class shall be entitled to such dividends and distributions in Shares
or in cash or both, as may be declared from time to time by the Trustees, acting
in their sole discretion, with respect to such series or class, PROVIDED,
HOWEVER, that dividends and distributions on Shares of a particular series or
class shall be paid only out of the lawfully available "assets belonging to"
such series or class as such term is defined in this Declaration of Trust.
5.2 PURCHASE OF SHARES. The Trustees may accept investments in
each series or class of the Trust from such Persons for such consideration and
on such other terms as they may from time to time authorize. The Trust may
reject any order for, or refuse to give effect on the books of the Trust to the
transfer of, any Shares as permitted under the Act. Each such investment shall
be credited to the Shareholder's account in the form of full and fractional
Shares of the appropriate series or class of the Trust, at the net asset value
per Share next computed after receipt of the investment.
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
-9-
<PAGE> 11
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
-10-
<PAGE> 12
holder thereof (i) if the value of such Shares in an account maintained by the
Trust or its transfer agent for any Shareholder with respect to any series or
class of the Trust is $1,000 or less; PROVIDED, HOWEVER, that any such
Shareholder shall be notified that the value of his account is $1,000 or less,
and shall be allowed sixty days to make additional purchases of Shares of the
appropriate series or class so that the value of his account will exceed $1,000
before any such involuntary redemption is processed by the Trust; or (ii) if the
net income with respect to any particular series or class of the Trust should be
negative or it should otherwise be appropriate to carry out the Trust's
responsibilities under the Act, in each case subject to such further terms and
conditions as the Board of Trustees of the Trust may from time to time adopt.
The redemption price of Shares of any series or 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
-11-
<PAGE> 13
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.
-12-
<PAGE> 14
VI.
THE TRUSTEES
6.1 MANAGEMENT OF THE TRUST. Subject to any applicable
requirements of law, the business and affairs of the Trust shall be managed by
the Trustees, who shall have all powers necessary or desirable to carry out such
responsibility, including without limitation the appointment of and delegation
of responsibility to such officers, employees, agents, and contractors as they
may select.
6.2 NUMBER AND TERM OF OFFICE. The number of Trustees shall be
determined from time to time by the Trustees themselves, but shall not be less
than three, nor more than ten, subject to any applicable requirements of law.
Each Trustee shall hold such position for such term as may be provided in the
Code of Regulations of the Trust, as amended from time to time (the
"Regulations"), and until his successor is elected and qualifies. A Trustee
shall qualify by accepting in writing his election or appointment and agreeing
to be bound by the provisions of this Declaration of Trust. Except as otherwise
provided herein in the case of vacancies, Trustees (other than the Initial
Trustees provided in Section 6.3) shall be elected by the Shareholders, who
shall vote in the aggregate and not by series or class and at such time or times
as the Trustees shall determine that such election is required under Section
16(a) of the Act or is otherwise advisable. Notwithstanding the foregoing, (a)
any Trustee may resign as a Trustee by written instrument signed by him and
delivered to the other Trustees at the principal business office of the Trust
(without need for prior or subsequent accounting), which resignation shall take
effect upon such delivery or upon such later date as is specified therein; (b)
any Trustee may be removed at any time with or without cause by written
instrument, signed by at least two-thirds of the number
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of Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) any Trustee who requests to be retired or who has become
incapacitated by illness or injury may be retired by written instrument signed
by a majority of the other Trustees; and (d) the term of a Trustee shall
terminate at his death, resignation, bankruptcy, removal, or adjudicated
incompetency.
6.3. INITIAL TRUSTEES. The initial Trustees were G. Ronald
Henderson, 33 North 3rd Street, Columbus, Ohio 43215, Kenneth B. Quintenz, 33
North 3rd Street, Columbus, Ohio 43215, and Martin E. Lybecker, 1752 N Street,
N.W., Suite 500, Washington, D.C. 20036, who, by their execution of the
Declaration of Trust dated May 23, 1985, agreed to be bound by the provisions of
that Declaration of Trust.
6.4 QUORUM. At all meetings of the Trustees, a majority of the
Trustees shall constitute a quorum for the transaction of business and the
action of a majority of the Trustees present at any meeting at which a quorum is
present shall be the action of the Trustees unless the concurrence of a greater
proportion is required for such action by law, the Regulations, or this
Declaration of Trust. If a quorum shall not be present at any meeting of
Trustees, the Trustees present thereat may by a majority vote adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. Meetings may be held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating may hear each other at the same time. The
Trustees may also act without a meeting, unless provided otherwise in this
Declaration of Trust or required by law, by written consents of a majority of
the Trustees.
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The Trustees may appoint committees of Trustees and delegate
powers to them as provided in the Regulations. Any committee of the Trustees,
including an executive committee, if any, may act with or without a meeting. A
quorum for all meetings of any such committee shall be a majority of the members
thereof. Unless provided otherwise in this Declaration of Trust, any action of
any such committee may be taken at a meeting by vote of a majority of the
members present (a quorum being present), or without a meeting by unanimous
written consent of the members.
6.5 VACANCIES. In case a vacancy shall exist by reason of an
increase in the number of Trustees, or for any other reason, the remaining
Trustees may fill such vacancy by appointing such other person as they in their
discretion shall select, subject to the requirements of the Act. Such
appointment shall be evidenced by a written instrument signed by a majority of
the then Trustees, but the appointment shall not take effect until the
individual so named shall have qualified by accepting in writing the appointment
and agreeing to be bound by the terms of this Declaration of Trust. As may be
required by law, the Trustees shall cause notice thereof to be mailed to each of
the Shareholders of record at the address of such Shareholder on the books of
the Trust. Whenever a vacancy in the number of Trustees shall occur, until such
vacancy is filled as provided in this Section, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed on the Trustees by this Declaration
of Trust. In anticipation of a vacancy to occur as a result of the resignation,
retirement, or removal of a Trustee or an increase in number of the Trustees, a
majority of the Trustees then in office may appoint such other person to fill
such vacancy as they in their discretion shall select, such appointment to be
effective at such future time as the Trustees may specify
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(subject to the acceptance in writing by such other person of said appointment
and his or her agreement to be bound by the terms of this Declaration of Trust),
with such notice as required to be mailed as aforesaid to the Shareholders of
record. A vacancy may also be filled by the Shareholders in an election held at
an annual or special meeting. As soon as any Trustee so appointed or elected
shall have qualified, the Trust estate shall vest in the new Trustee or
Trustees, together with the continuing Trustees, without any further act or
conveyance.
6.6 EFFECT OF DEATH, RESIGNATION, ETC. OF TRUSTEE. The death,
resignation, bankruptcy, removal, retirement, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
asset of the Trust held in the name of the resigning or removed Trustee. Upon
the incapacity or death of any Trustee, his legal representative shall execute
and deliver on his behalf such documents as the remaining Trustees shall require
as provided in the preceding sentence. The failure to request or deliver such
documents shall not affect the operation of the provisions of Article IV hereof.
6.7 POWERS. The Trustees in all instances shall act as
principals and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or desirable in connection with the management of the Trust. The
Trustees shall not be bound or limited by present or future laws or customs in
regard to Trust investments, but shall have full
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authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in this Declaration of Trust or the
Regulations, and without limiting the generality of the foregoing, the Trustees
shall have power and authority:
A. To establish, in their sole discretion, without obtaining
the prior approval of the Shareholders, one or more series or classes of the
Trust, such establishment to be effective upon the adoption by a majority of the
Trustees then in office of a resolution establishing such series or class 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 or class, and to
allocate assets liabilities, income and expenses to the Trust to a particular
series of Shares or to apportion the same among two or more series, provided
that any liabilities or expenses incurred by or arising in connection with a
particular series of Shares shall be payable solely out of the assets of that
series; and to the extent necessary or appropriate to implement the relative
preferences, rights and privileges of any classes of Shares, to allocate assets,
liabilities, income and expenses of a series to a particular class of Shares of
that series or to apportion the same among two or more classes of Shares of that
series, and to allocate among such series or classes any assets, liabilities,
income, and expenses not readily identifiable as belonging to a particular
series or class, such allocations to be conclusive and binding upon all
Shareholders for all purposes in accordance with the provisions of Article V of
this Declaration of Trust.
B. To buy and invest funds in their hands in such securities
as they may from time to time determine; and to invest
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and reinvest cash and other property or to hold cash and other property
uninvested, in either instance without being subject to any limitations imposed
by law upon the nature of investments made by fiduciaries.
C. To adopt a Code of Regulations not inconsistent with this
Declaration of Trust providing for the conduct of the affairs of the Trust, and
to amend and repeal them to the extent that they do not reserve that right
solely to the Shareholders.
D. To elect and remove representatives and appoint and
terminate the appointment of agents.
E. To set record dates in the manner provided for hereinafter
or in the Regulations.
F. To issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in full
and fractional Shares with respect to each series or class of the Trust for such
amount and type of consideration, including, without limitation, cash or
property, as the Trustees may determine; and to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or other
assets of the Trust, whether constituting capital or surplus or otherwise, and
to divide or combine Shares of any series or class without thereby changing the
proportionate beneficial interests in any series or class of the Trust.
G. To vote or give assent, or exercise any rights of
ownership, with respect to securities or property; to solicit proxies from
Shareholders and to execute and deliver powers of attorney and proxies to such
Person or Persons as the Trustees shall deem proper, granting to such Person or
Persons such power
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and discretion with relation to securities or property as the Trustees shall
deem proper.
H. To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities.
I. To hold any security or property in a form not indicating
any trust, whether in bearer, unregistered, or other negotiable form, in the
name of the Trust or a particular series thereof or in the name of the custodian
or a nominee or nominees, subject in either case to proper safeguards according
with applicable law or the usual practices of Massachusetts trust companies or
investment companies.
J. To consent to or participate in any plan for the
reorganization, consolidation, or merger of any corporation or concern, any
security of which is held by any series or class of the Trust; to consent to any
contract, lease, mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any security held by
any series or class of the Trust.
K. To collect all property due to the Trust; to pay all
claims, including taxes, against the assets belonging to the Trust; to
prosecute, defend, compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including, but not limited
to, claims for taxes; to foreclose any security interest securing any
obligations by virtue of which any property is owed to the Trust; and to enter
into releases, agreements, and other instruments.
L. To establish in their absolute discretion in accordance
with the provisions of applicable law the basis or
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method for determining the value of the assets belonging to any series or class,
the value of the liabilities belonging to any series or class, the allocation of
any assets or liabilities to any series, the net asset value of any series or
class, the times at which Shares of any series or class shall be deemed to be
outstanding or no longer outstanding and the net asset value of each Share of
any series or class for purposes of sales, redemptions, repurchases of Shares or
otherwise.
M. To determine in accordance with generally accepted
accounting principles and practices what constitutes net profits or net
earnings, and to determine what accounting periods shall be used by the Trust
for any purpose, whether annual or any other period, including daily; to set
apart out of the assets belonging to any series or class such reserves of funds
for such purposes as it shall determine and to abolish the same; to declare and
pay any dividends and distributions to any series or class in cash, securities
or other property from any assets legally available therefor, at such intervals
(which may be as frequently as daily) or on such other periodic basis, as it
shall determine; to declare such dividends or distributions by means of a
formula or other method of determination, at meetings held less frequently than
the frequency of the effectiveness of such declaration; to establish payment
dates for dividends or any other distributions on any basis, including dates
occurring less frequently than the effectiveness of declarations thereof; and to
provide for the payment of declared dividends on a date earlier or later than
the specified payment date in the case of Shareholders redeeming their entire
ownership of Shares of any series or class.
N. To issue guarantees, to lend its assets, and to borrow
money from banks, and to pledge, assign, mortgage, encumber or hypothecate the
assets of any series or class of the Trust.
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O. To issue, acquire, hold, resell, convey, and otherwise deal
in securities, and to apply to any acquisition
of securities any property of the appropriate series or class of the Trust,
whether from capital or surplus or otherwise.
P. To enter into joint ventures, partnerships, and any other
combinations or associations.
Q. To purchase, and pay for out of the assets of the Trust,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action or admitted to be
taken by such Person in such capacity, whether or not constituting negligence,
or whether or not the Trust would have the power to indemnify such Persons
against such liability.
R. To the extent permitted by law, to indemnify any Person
with whom the Trust has dealings, to such extent as the Trustees shall determine
consistent with Article X hereof.
S. To engage in and to prosecute, defend, compromise, abandon,
or adjust, by arbitration or otherwise, any actions, suits, proceedings,
disputes, claims, and demands relating to the Trust or the assets of the Trust,
and, out of the assets of the Trust, to pay or to satisfy any debts, claims or
expenses incurred in connection therewith, including those of litigation, and
such power shall include without limitation the power of the Trustees or any
appropriate committee thereof, in the exercise of their or its good faith
business judgment, consenting to dismiss any action, suit, proceeding, dispute,
claims, or demand, derivative or otherwise, brought by any person, including a
Shareholder in such Shareholder's own name or in the name of the Trust, whether
or not the Trust or any of the Trustees may be
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named individually therein or the subject matter arises by reason of business
for or on behalf of the Trust.
T. To retain and employ any Person to serve on behalf of the
Trust as investment adviser, administrator, transfer agent, custodian,
underwriter, distributor, or in such other capacity as he or she considers
desirable.
U. To the extent permitted by law, to delegate such power and
authority as they consider desirable to any representatives of the Trust and to
any investment adviser, administrator, transfer agent, custodian, underwriter,
distributor, or other Person.
V. To conduct, operate and carry on, either directly or
through one or more wholly owned subsidiaries, the business of an investment
company or any other lawful business activity which the Trustees, in their sole
discretion, consider to be incidental to the business of the Trust or any series
or class of the Trust as an investment company, conducive to or expedient for
the benefit or protection of the Trust, any series or class of the Trust, or the
Shareholders, or calculated in any other manner to promote the interests of the
Trust, any series or class of the Trust, or the Shareholders.
W. To engage in any other lawful act or activity in which a
Massachusetts business trust may engage.
No one dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
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6.8 TRUSTEES AND REPRESENTATIVES AS SHAREHOLDERS. Any Trustee,
representative, or other agent of the Trust may acquire, own, vote, and dispose
of Shares of any series or class of the Trust to the same extent as if he were
not a Trustee, representative, or agent; and the Trust may issue and sell or
cause to be issued and sold Shares of any series or class of the Trust to, and
may buy such Shares from, any Persons with which such Trustee, representative,
or agent is affiliated, subject only to the general limitations herein contained
as to the sale and purchase of such Shares, and to any restrictions which may be
contained in the Regulations and in the Act.
6.9 TRUSTEE REIMBURSEMENT. The Trustees shall have the power
to incur and to pay (or shall be reimbursed) from the Trust estate all expenses
and disbursements of the Trust, including without limitation: interest expenses;
compensation payable to Trustees and representatives of the Trust; taxes; fees
and commissions of every kind incurred in connection with the affairs of the
Trust; expenses of the issue, repurchase, and redemption of Shares; expenses of
registering and qualifying the Trust and its Shares under federal and state
securities laws and regulations; charges of custodians, transfer agents,
investment advisers, administrators, and registrars; expenses of preparing and
printing and distributing prospectuses; auditing and legal expenses; expenses of
reports to Shareholders; expenses of meetings of Shareholders and proxy
solicitations therefor; insurance expenses; association membership dues; and
such non-recurring items as may arise, including costs and expenses of
litigation to which the Trust is a party. For all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses, and liabilities, the Trustees shall have a lien on the
Trust estate prior to any rights or interests of the Shareholders thereto;
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PROVIDED, HOWEVER, that this section shall not prevent the Trust from directly
paying any of the aforementioned fees and expenses.
6.10 POWER TO CARRY OUT TRUST'S PURPOSES; PRESUMPTIONS. The
Trustees shall have power to carry out any and all acts consistent with the
Trust's purposes through branches and offices both within and without the
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, possessions, agencies, or instrumentalities of the
United States of America and of foreign governments, and to do all such other
things and execute all such instruments as they deem necessary, proper, or
desirable in order to promote the interests of the Trust, although such things
may not be herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive
and binding for all purposes. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of a grant of power to the Trustees.
The Trustees shall not be required to obtain any court order to deal with the
Trust property.
6.11 SERVICE IN OTHER CAPACITIES. Any Trustee, representative,
employee, or agent of the Trust, including any investment adviser, transfer
agent, administrator, distributor, custodian, or underwriter for the Trust, may
serve in any other capacity on his or its own behalf or on behalf of others, and
may engage in other business activities in addition to his or its services on
behalf of the Trust; PROVIDED, HOWEVER, that such other activities do not
materially interfere with the performance of his or its duties for or on behalf
of the Trust.
6.12 DETERMINATIONS BY TRUSTEES. Any determination made in
good faith and, so far as accounting matters are involved
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in accordance with generally accepted accounting principles, by or pursuant to
the direction of the Trustees as to the amount and value of assets, obligations
or liabilities of the Trust or any series or class, as to the amount of net
income of the Trust or any series or class from dividends and interest for any
period or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Trust or any series or
class, as to the allocation of any assets or liabilities to any series or class,
as to the times at which Shares of any series or class shall be deemed to be
outstanding or no longer outstanding, or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities or
Shares, and any reasonable determination made in good faith by the Trustees as
to whether any transaction constitutes a purchase of securities on "margin," a
sale of securities "short," or any underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the public
distribution of, any securities, shall be final and conclusive, and shall be
binding upon the Trust and all Shareholders, past, present and future, and
Shares are issued and sold on the condition and understanding, evidenced by the
purchase of Shares or acceptance of Share certificates, that any and all such
determinations shall be binding as aforesaid.
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VII.
AGREEMENTS WITH INVESTMENT ADVISER,
PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT,
AND CUSTODIAN
7.1 INVESTMENT ADVISER. Subject to the vote of a majority of
the outstanding Shares of each series affected thereby, if then required by the
Act, and subject to all other applicable requirements of the Act, the Trustees
may, on such terms and conditions as they may in their discretion determine,
enter into a written investment advisory agreement or agreements with any Person
or Persons whereby such Person(s) shall undertake to furnish the Trustees, on
behalf of the Trust or one or more series (including all classes thereof) of the
Trust, such portfolio management, investment advisory, statistical, research,
and other services upon such terms and conditions as the Trustees may in their
discretion determine. Notwithstanding any provisions of this Declaration of
Trust, the Trustees may authorize the investment adviser (subject to such
general or specific instructions as the Trustees may adopt) to effect purchases,
sales, or exchanges of portfolio securities of any series (including all classes
thereof) of the Trust on behalf of the Trustees, or may authorize any
representative, agent, or Trustee to effect such purchases, sales, or exchanges
pursuant to the recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales, and exchanges so
effected shall be deemed to have been authorized by all of the Trustees.
7.2 ADMINISTRATOR. The Trustees may, on such terms and
conditions as they may in their discretion determine, enter into one or more
agreements with any Person or Persons providing for administrative services to
the Trust, including assistance in supervising the affairs of the Trust or one
or more of its series
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or class and the performance of administrative, clerical, and other services
considered desirable by the Trustees, and to determine the net asset value and
net income with respect to Shares of each series or class of the Trust.
7.3 PRINCIPAL UNDERWRITER. The Trustees may, on such terms and
conditions as they may in their discretion determine, enter into one or more
distribution agreements with any Person or Persons providing for the sale of
Shares of any series or class at a price at least equal to the net asset value
per Share of such series or class and further providing for sale of Shares of
any series or class pursuant to arrangements by which the Trust may either agree
to sell the Shares to the other party to the agreement or appoint such other
party its sales agent for such Shares. Such agreement may also provide for the
repurchase of Shares of any series or class of the Trust by such other party as
principal or as agent of the Trust, and may authorize the other party to enter
into agreements with others for the purpose of the distribution or repurchase of
Shares of any series or class.
7.4 TRANSFER AGENT. The Trustees may, on such terms and
conditions as they may in their discretion determine, enter into one or more
agreements with any Person or Persons providing for transfer agency and other
services to Shareholders of any series or class of the Trust.
7.5 CUSTODIAN. The Trustees shall at all times employ one or
more banks or trust companies, each organized under the laws of the United
States or one of the states thereof, and having capital, surplus, and undivided
profits of at least two million dollars ($2,000,000), as custodian(s) with
authority as the agent of the Trust, but subject to such restrictions,
limitations, and other requirements as may be contained in the Regulations of
the Trust:
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(1) to hold the cash and securities owned by the Trust
and deliver the same upon written order;
(2) to receive and receipt for any moneys due to the
Trust and deposit the same in its own banking
department or elsewhere as the Trustees may direct;
and
(3) to disburse such funds upon orders or vouchers.
The Trust may also employ such custodian(s) as its agent:
(1) to furnish transfer agency services;
(2) to keep the books and accounts of the Trust and
furnish clerical and accounting services; and
(3) to compute, if authorized to do so by the Trustees,
the net asset value of the Trust or any series
thereof in accordance with the provisions hereof;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian(s). If so directed by a vote of a majority of the outstanding
Shares of each affected series or class, any custodian shall deliver and pay
over all property of the series or class of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian(s) to employ one
or more subcustodians from time to time to perform
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such of the acts and services of the custodian(s) and upon such terms and
conditions, as may be agreed upon between the custodian(s) and such
subcustodians. Any such subcustodian shall be a bank or trust company organized
under the laws of the United States or one of the states thereof and having
capital, surplus, and undivided profits of at least two million dollars
($2,000,000), or such other Person as may be permitted by the Securities and
Exchange Commission, or otherwise in accordance with the Act as from time to
time amended.
7.6 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations, and orders as the Securities and Exchange Commission may adopt, the
Trustees may direct the custodian to deposit all or any part of the securities
owned by any series or class of the Trust in a system for the central handling
of securities established by a national securities exchange or a national
securities association registered with the Securities and Exchange Commission
under the Securities and Exchange Act of 1934, or such other person as may be
permitted by the Securities and Exchange Commission, or otherwise in accordance
with the Act as from time to time amended, pursuant to which system all
securities of any particular class or series or class of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
7.7 PARTIES TO THE AGREEMENT. The same Person or Persons may
be employed in multiple capacities under Sections 7.1 through 7.5 of this
Article VII and may receive compensation from the Trust in as many capacities in
which such Person or Persons shall serve the Trust. The Trustees may enter into
any agreement of the character described in this Article VII or any other
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agreement or transaction with any Person, including any Person in which any
Trustee, representative, employee, or Shareholder of the Trust may be
interested, pecuniarily or otherwise, and no such agreement or transaction shall
be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any Person holding such relationship be liable by reason
of such relationship for any loss or expense to the Trust under or by reason of
said agreement or transaction, or accountable for any profit realized directly
or indirectly therefrom; PROVIDED, HOWEVER, that any such agreement or
transaction, when entered into, shall have been reasonable and fair and not
inconsistent with this Declaration of Trust, the Regulations, or the Act. The
same Person or Persons may be party to agreements or transactions entered into
pursuant to this Article VII and any such other agreement or transaction, and
any individuals may be financially interested in or otherwise affiliated with
Persons who are party to any or all of the agreements or transactions mentioned
in this Section 7.7.
VIII.
SHAREHOLDERS' VOTING POWERS AND MEETINGS
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,
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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
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outstanding and entitled to vote with respect to a matter appearing in person or
by proxy; PROVIDED, HOWEVER, that at any meeting at which the only actions to be
taken are actions required by the Act to be taken by vote of all outstanding
Shares of all series or class entitled to vote thereon, irrespective of series
or class, a quorum shall consist of a majority of Shares (without regard to
series or class) entitled to vote thereon, and that at any meeting at which the
only actions to be taken shall have been determined by the Board of Trustees to
affect the rights and interests of one or more but not all series or classes of
the Trust, a quorum shall consist of a majority of the outstanding Shares of the
series or class so affected; and PROVIDED, FURTHER, that reasonable adjournments
of such meeting until a quorum is obtained may be made by vote of the Shares
present in person or by proxy. A majority of the Shares voted shall decide any
question and a plurality shall elect a Trustee, subject to any 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.
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<PAGE> 34
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.
IX.
LIMITATION OF LIABILITY AND INDEMNIFICATION
9.1 LIMITATION OF TRUSTEE LIABILITY. Every act or thing done
or omitted, and every power exercised or obligation incurred by the Trustees or
any of them in the administration of this Trust or in connection with any
affairs, property, or concerns of the Trust, whether ostensibly in their own
names or in their capacity as Trustees, shall be done, omitted, exercised, or
incurred by them as Trustees and not as individuals; and every Person
contracting or dealing with the Trustees or having any debt, claim, or judgment
against them or any of them shall look only to the funds and property of the
Trust for payment or satisfaction. No Trustee or Trustees of the Trust shall
ever be personally liable for or on account of any contract, debt, tort, claim,
damage, judgment, or decree arising out of or connected with the administration
or preservation of the Trust estate or the conduct of any of the affairs of the
Trust. Every note, bond, contract, order, or other undertaking issued by the
Trust or the Trustees relating to the Trust, and stationery used by the Trust,
shall include the notice set forth in Section 9.4 of this Article IX (but the
omission thereof shall not be construed as a waiver of the foregoing provision,
and shall not render the Trustees personally liable).
It is the intention of this Section 9.1 that no Trustee shall
be subject to any personal liability whatsoever to any Person for any action or
failure to act, or any action or failure to act of any officer, agent, employee
of the Trust or of any
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<PAGE> 35
investment adviser, administrator, distributor, custodian, or transfer agent to
the Trust or to any series or class thereof, or any officer, agent, or employee
of any of the foregoing (including, without limitation, the failure to compel in
any way any former or acting Trustee to redress any breach of trust), except
that nothing in this Declaration of Trust shall protect any Trustee from any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties, or by reason of reckless disregard of his obligations
and duties as Trustee; and that all persons shall look solely to the assets of
the Trust for satisfaction of claims of any nature arising in connection with
the affairs of the Trust.
9.2 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES, AND
EMPLOYEES. The Trust shall indemnify, to the fullest extent permitted by law,
every person who is or has been a Trustee or officer of the Trust and any person
rendering or having rendered investment advisory, administrative, distribution,
custodian, or transfer agency services to the Trustees or to the Trust or any
series or class thereof pursuant to Article VII of this Declaration of Trust or
otherwise, and every officer, director, trustee, shareholder, employee, and
agent of any such Person (all such Persons hereinafter referred to as the
"Covered Persons") against all liabilities and expenses (including amounts paid
in satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the defense or
disposition of any action, suit, or other proceeding, whether civil or criminal,
in which he may be involved or with which he may be threatened, while as a
Covered Person or thereafter, by reason of his being or having been such a
Covered Person EXCEPT with respect to any matter as to which he shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross negligence,
or reckless disregard of his
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<PAGE> 36
duties; PROVIDED, HOWEVER, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that, if either the matter
of willful misfeasance, gross negligence, or reckless disregard of duty or the
matter of bad faith had been adjudicated, it would in the opinion of such
counsel have been adjudicated in favor of such person. The rights accruing to
any Covered Person under these provisions shall not exclude any other right to
which he may be lawfully entitled; PROVIDED, HOWEVER, that no Covered Person may
satisfy any right of indemnity or reimbursement except out of the property of
the Trust. The Trustees may make advance payments in connection with the
indemnification under this Section 9.2; PROVIDED, HOWEVER, that the indemnified
Covered Person shall have given a written undertaking to reimburse the Trust in
the event it is subsequently determined that he is not entitled to such
indemnification. Rights of indemnification herein provided may be insured
against by policies maintained by the Trust. Such rights of indemnification are
severable, and shall inure to the benefit of the heirs, executors,
administrators, and other legal representatives of such Covered Persons.
9.3 RELIANCE ON EXPERTS, ETC. Each Trustee and representative
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel satisfactory to the Trust, or upon reports
made to the Trust by any of its representatives or employees or by the
investment adviser, the principal underwriter, selected dealers, accountants,
appraisers, or other
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<PAGE> 37
experts or consultants selected with reasonable care by the Trustees or
representatives of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
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 into in the
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<PAGE> 38
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
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<PAGE> 39
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.
X.
MISCELLANEOUS
10.1 TRUST NOT A PARTNERSHIP. It is hereby expressly declared
that a Massachusetts business trust and not a partnership, joint venture,
corporation, joint stock company, or any form of legal relationship other than a
trust is created hereby. Nothing herein shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association. No Trustee hereunder shall have any power to bind
personally either the Trust's representatives or any Shareholders. All Persons
extending credit to, contracting with, or having any claim against any series or
class of the Trust or the Trustees shall look only to the assets of the
appropriate series or class of the Trust for payment under such credit,
contract, or claim; and neither the Shareholders, or the Trustees nor any of
their agents, whether past, present, or future, shall be personally liable
therefor.
10.2 NO BOND OR SURETY. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
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
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<PAGE> 40
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.
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,
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<PAGE> 41
(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.
10.4 INCORPORATION. With the approval of the holders of a
majority of the outstanding Shares, the Trustees may cause
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<PAGE> 42
to be organized, or assist in organizing, a corporation or corporations under
the laws of any jurisdiction, to carry on any affairs in which the Trust shall
directly or indirectly have any interest, and to transfer the Trust property to
any such Person in exchange for any Shares or securities thereof or otherwise,
and to lend money to, subscribe for the Shares or securities of, and enter into
any contracts with any such Person in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such Person if
and to the extent permitted by law. Nothing contained herein shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations, or
other organizations and selling, conveying, or transferring a portion of the
Trust property to such Person(s).
10.5 FILING OF COPIES, REFERENCES, HEADINGS. The original
instrument of this Declaration of Trust and each amendment hereto shall be filed
with the State Secretary of the Commonwealth of Massachusetts and in such other
place or places as may be required under the laws of the Commonwealth of
Massachusetts, and copies thereof shall be kept at the office of the Trust where
they may be inspected by any Shareholder. Each amendment so filed shall be
accompanied by a certificate signed and acknowledged by a Trustee or by the
Secretary or any Assistant Secretary of the Trust stating that such action was
duly taken in a manner provided herein and, unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its filing. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
that are then in effect and operative, may be executed from time to time by a
majority of the Trustees and shall, upon filing with the State
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<PAGE> 43
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
initial Declaration and the various amendments thereto. Anyone dealing with the
Trust may rely on a certificate by a representative of the Trust as to whether
or not any such amendment hereto shall have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by a representative of the Trust to be a
copy of this instrument or of any amendment thereto. Headings are placed herein
for convenience of reference only and in the case of any conflict, the text of
this instrument, rather than the headings, shall control. This instrument may be
executed in any number of counterparts, each of which shall be deemed an
original. All signatures to this instrument need not appear on the same page.
10.6 APPLICABLE LAW. The Trust set forth in this instrument is
a trust made in the Commonwealth of Massachusetts and is to be governed by and
construed and administered according to the laws of said Commonwealth.
10.7 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
A. The provisions of this Declaration of Trust are severable
and, if the Trustees shall determine with the advice of counsel that any of such
provisions shall be in conflict with the Act, the regulated investment company
provisions of the Internal Revenue Code, Chapter 182 of the General Laws of the
Commonwealth of Massachusetts, or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration of Trust; PROVIDED, HOWEVER, that such determination shall not
affect any of the remaining provisions of this Declaration of Trust or render
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<PAGE> 44
invalid or improper any action taken or omitted prior to such determination.
B. If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
C. Notwithstanding the foregoing, nothing contained in this
Declaration of Trust shall permit any amendment of this Declaration of Trust
which would impair the exemption from personal liability of the Trustees and
Shareholders or to permit assessments upon Shareholders.
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,
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<PAGE> 45
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.
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<PAGE> 1
EXHIBIT (6)(f)
PROCESSING AGREEMENT BY AND BETWEEN PERSHING DIVISION OF DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION AND THE ONE GROUP DATED AS OF February 9, 1999
<PAGE> 2
PROCESSING AGREEMENT
This Agreement made and entered into by and between Pershing Division
of Donaldson, Lufkin & Jenrette Securities Corporation, (hereinafter referred to
as Pershing) with offices in Jersey City, New Jersey and The One Group with
offices in Columbus, Ohio.
WHEREAS, Pershing currently enables customers of various broker/dealer
affiliates, subsidiaries or divisions of Bank One Corporation (hereinafter
referred to as Bank One) whose accounts are carried by Pershing as clearing
agent (hereinafter "Customers") on a fully disclosed basis, to purchase shares
of certain money market funds of The One Group ("the Funds").
WHEREAS, The One Group desires that Pershing perform certain functions
related to these purchases.
NOW THEREFORE, Pershing and The One Group agree as follows:
PART I
------
RESPONSIBILITIES OF PERSHING
----------------------------
Pershing will perform the following functions:
- - Daily calculation and accrual of dividends, by beneficial owner, of the
Fund's shares, held for Customers in Pershing's Master Omnibus Account
at each One Group Fund.
- - Daily reconciliation of the Master Omnibus Account to The One Group
Fund shares owned by each Customer.
- - Send prospectus updates, semi-annual reports, annual reports and other
required notifications as provided by the Funds to Customers as
required at The One Group's expense.
- - Prepare and mail periodic statements to all Customers which detail
purchases and redemptions of the Fund's shares. Such statement shall
include opening balances, closing balances and yields for the period as
provided by the Funds.
<PAGE> 3
- - Tax reporting of the purchases, sales and dividends relating to fund
shares held on IRS Form 1099 DIV. for each Customer annually.
- - Provide "Resource Checking" checks and check processing to Customers
holding the funds.
PART II
-------
RESPONSIBILITIES OF THE ONE GROUP
---------------------------------
The One Group assumes the following obligations, responsibilities, and
functions, which it will perform:
- - Transmit to Pershing by no later than 6:30 p.m. eastern time on each
business day yield factors for each Fund as required so that Pershing
may accurately allocate accrued dividends to each Customer recorded on
Pershing's records.
- - Provide Pershing by no later than December 15th of each year the
specific dates when dividends will be posted for each fund each month
for the following year.
- - Transmit to Pershing each day by no later than 1:00 am Eastern Time a
full position file (principal and accrued dividends) and prior day
history for each fund account registered where Pershing is the dealer
of record.
- - Indemnify and hold harmless Pershing from and against any losses,
costs, penalties, fines or other damages, including attorney's fees and
attorneys' fees incurred in enforcing this indemnification, arising
from Pershing's performance of these services, provided such losses,
costs, penalties, fines or other damages do not arise out of Pershing's
gross negligence, willful misconduct, or reckless disregard of its
obligations under this Agreement.
- - Represent and warrant to Pershing that, at all times during the term of
this Agreement, it will remain in compliance with all duties and
obligations pursuant to all applicable law or industry
<PAGE> 4
regulation to which it is subject, including any and all record keeping
obligations and obligations concerning disclosure to public customers
and shareholders.
PART III
--------
PAYMENT
-------
The One Group agrees to pay Pershing 41.67 cents per account per month
for all accounts maintained on Pershing's records that had a position in one or
more of the funds. The One Group agrees to pay all reasonable costs associated
with the distribution of shareholder materials including prospectuses,
semi-annual reports, annual reports and any other required notifications of the
funds. Pershing will provide The One Group with invoices each month for amounts
due and the One Group agrees to remit payment within 10 business days of receipt
of such invoices. At any time after October 5, 2001, Pershing may change these
payment terms upon giving one-hundred eighty (180) days prior written notice to
The One Group.
PART IV
-------
TERM AND TERMINATION OF THE AGREEMENT
-------------------------------------
This Agreement will begin at the time Pershing establishes Master
Omnibus Account (s) at the Funds and purchases fund shares for Customers as
instructed to do so by Bank One. Unless terminated, this Agreement shall
continue in effect thereafter as long as fund shares remain in one or more of
Pershing's Master Omnibus Account (s). Either party may terminate this Agreement
for convenience and without cause by giving the other party at least one hundred
eighty (180) days prior written notice.
<PAGE> 5
PART V
- ------
NOTICE PROCEDURE
- ----------------
Notice when required hereunder, shall be sent by Certified
Mail, postage paid, to the respective parties as set out below:
As to Pershing John Koehler
Senior Vice President and Treasurer
Pershing Division of Donaldson,
Lufkin & Jenrette
Securities Corporation
One Pershing Plaza
Jersey City, NJ 07399
and a copy to the Office of the General Counsel, same address
As to The One Group Mark Redman
President
The One Group
3435 Stelzer Road
Columbus, OH 43219
PART VI
-------
CONFIDENTIALITY
---------------
Neither Pershing nor The One Group shall disclose the terms of this
Agreement or information obtained as a result thereof to any outside party
except to regulatory or self- regulatory organizations with appropriate
jurisdiction, pursuant to judicial process or to authorized employees of the
other on a need-to-know basis. Any other publication or disclosure of the terms
of this Agreement may be made only with the prior written consent of the other
party. The One Group
<PAGE> 6
and Pershing shall each maintain the confidentiality of documents and
information received from the other party pursuant to this Agreement. Pershing
and The One Group each agree that any information regarding the identity of the
other's customers shall be kept confidential and not used by the other except as
required in connection with obligations under this Agreement.
The One Group acknowledges that the services Pershing provides
hereunder involve access to proprietary technology, trading and other systems,
and that techniques, algorithms and processes contained in such systems
constitute trade secrets and shall be safeguarded by The One Group, and The One
Group shall exercise reasonable care to protect Pershing's interest in such
trade secrets. The One Group agrees to make the proprietary nature of such
systems known to those of its consultants, staff, agents or clients who may
reasonably be expected to come into contact with such systems. The One Group
agrees that any breach of this confidentiality provision may result in its being
liable for damages, as provided by law.
This Part VI shall be inoperative as to information which (i) is or
becomes generally available to the public other than as a result of disclosure
by The One Group or its officers agents; or (ii) becomes available to The One
Group or its agents on a non-confidential basis from a third party which is
entitled to disclose such information; or (iii) was known to The One Group or
its agents on a non-confidential basis prior to its disclosure to The One Group
by Pershing.
<PAGE> 7
PART VII
--------
YEAR 2000 REPRESENTATION
------------------------
Pershing represents that its proprietary technology, system
and processes ("Software") will record, store, process, calculate, and present
calendar dates falling on or after (and if applicable, spans of time including)
January 1, 2000, in the same manner, and with the same functionally, data
integrity and performance, as the Software records, stores, processes,
calculates and presents calendar dates on or before December 31, 1999 ("2000
Compliant"). Pershing represents that the Software (i) will lose no
functionality with respect to the introduction of records containing dates
failing on or after January 1, 2000 and (ii) will be interoperable with other
software that has been tested and used by Pershing ("Other Software") which may
deliver records to the Software or receive records from Software, or interact
with the Software, including but not limited to back-up and archived data,
except to the extent that Other Software is not 2000 Compliant.
PART VIII
---------
OTHER MATTERS
-------------
The parties shall, at all times during the term of this Agreement,
remain independent contractors. Nothing herein shall be construed to create a
relationship between the parties, including but not limited to an affiliation,
partnership or joint venture. Nothing herein shall be construed to supersede or
otherwise effect the terms of the Fully Disclosed Clearing Agreement between any
of the Bank One affiliates, subsidiaries or divisions and Pershing as those
agreements may be amended or assigned from time to time. In the event of any
conflict between the terms of this Agreement and the Fully Disclosed Clearing
Agreement, the terms of the Fully Disclosed Clearing Agreement shall govern with
respond to the parties thereto. This Agreement is between
<PAGE> 8
the parties hereto and is not intended to confer any benefits on third parties,
including, but not limited to, customers of either party or Banc One.
PART IX
-------
GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A
MASSACHUSETTS BUSINESS TRUST.
-----------------------------
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized 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.
Agreed and accepted this ____ day of ______________________, 1998
Pershing Division of Donaldson,
Lufkin &, Jenrette Securities Corporation The One Group
By: /s/ JOHN P. KOEHLER By: /s/ MARK REDMAN
--------------------------------------- ----------------------------
Name: JOHN P. KOEHLER Name: MARK REDMAN
------------------------------------ --------------------------
Title: SENIOR VICE PRESIDENT/TREASURER Title: PRESIDENT
----------------------------------- -------------------------
Date: February 4, 1999 Date: January 1, 1999
------------------------------------ --------------------------
<PAGE> 1
EXHIBIT (9)(u)
FORM OF FUND ALLIANCE AGREEMENT BY AND BETWEEN THE ONE GROUP, THE
ONE GROUP SERVICES COMPANY, AND PUTNAM FIDUCIARY TRUST COMPANY
<PAGE> 2
THE ONE GROUP FUND ALLIANCE AGREEMENT
FUND ALLIANCE AGREEMENT made as of the ___ day of ____________, 19__ by
and between The One Group, a Massachusetts business trust, (the "Fund Company")
and The One Group Services Company (the "TOGSC") with principal offices at 3435
Stelzer Road, Columbus, OH 43219, and Putnam Fiduciary Trust Company, a
Massachusetts trust company with its principal office at One Post Office Square,
Boston, Massachusetts 02109 ("Plan Agent").
WHEREAS TOGSC serves as administrator and distributor in connection
with certain other matters for each investment company listed on Schedule A
hereto, as such Schedule A may be amended from time to time with the mutual
consent of the parties hereto (each such investment company a "Fund" and,
collectively, the "Funds"), each of which is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the "
1940 Act"). With respect to any Fund, this Agreement shall become effective upon
the date such Fund is identified on Schedule A and this Agreement is approved by
the Fund or its Board of Trustees if such approval is required;
WHEREAS Plan Agent provides certain administrative and recordkeeping
services as agent for certain employee benefit plans, (each such plan a "Plan"
and, collectively, the "Plans"), and is a transfer agent registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"); and
WHEREAS TOGSC desires to appoint Plan Agent as agent for the Funds
solely with respect to the Plans, Plan Agent desires to accept such appointment;
and
WHEREAS, the Plans have authorized and requested the parties hereto to
carry out the obligations described herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE PARTIES.
1.01. TOGSC and Plan Agent agree to facilitate the purchase and
redemption OF SHARES of shares of the Funds on behalf of the
Plans and their Participants through one or more accounts per
Fund for each Plan (the "Accounts"). Accounts for a Plan will
be opened upon completion of the application form for the
appropriate Fund. Plan Agent represents and warrants that it
is authorized to act on behalf of each Plan effecting
transactions in the Accounts.
1.02. TOGSC agrees to waive any and all loads or fees associated
with purchase, exchange and redemption transactions. Any
trading restrictions, including those related to the size and
frequency of transactions, are also waived. TOGSC agrees to
cause the Accounts to be kept open on each Fund's books
regardless of a lack of activity or small position size except
to the extent Plan Agent takes specific action to close an
Account.
1.03. Subject to the terms and conditions set forth in this
Agreement, TOGSC hereby appoints Plan Agent to act as, and
Plan Agent agrees to act as, agent for the sole purpose of
accepting orders for the purchase, and requests for the
redemption, of the authorized and
<PAGE> 3
issued shares of beneficial interest or common stock of any
Fund (the "Shares") purchased, held or redeemed by a Plan
(collectively referred to as "Instructions"). If a Fund offers
two or more series of Shares, at any time, each such series
shall be deemed at such time to be a Fund, unless otherwise
indicated herein.
1.04. Plan Agent shall perform the following services in accordance
with procedures established from time to time by agreement of
the parties hereto:
a) Receive from the Plans orders for the purchase of
Shares by the close of regular trading on the New
York Stock Exchange (the "Close of Trading") each
business day that the New York Stock Exchange is open
for business ("Business Day"), transmit such orders
to the Fund Company or its designee for acceptance on
such Business Day and promptly deliver or instruct
the Plans (or the Plans' Trustee(s) as the case may
be) to deliver payment and appropriate documentation
therefor to the Fund Company or its designee for
acceptance. On occasions when the New York Stock
Exchange closes earlier than its regular trading time
(4:00 p.m. Eastern Time), the earlier close time will
apply;
b) Receive from the Plans by the Close of Trading each
Business Day redemption requests and redemption
directions, transmit such requests and directions to
the Fund Company or its designee and deliver
appropriate documentation therefor to the Fund
Company or its designee, in each case for acceptance
on such Business Day; and
c) As instructed, maintain adequate records related to,
and advise the Fund Company or its designee as to,
the foregoing. To the extent required under the 1940
Act and rules thereunder, Plan Agent and the Fund
Company or its designee agree that such records
maintained by it will be preserved, maintained and
made available in accordance with the provisions of
the 1940 Act and rules thereunder, and copies or, if
required, originals, will be surrendered promptly to
the Fund Company or its designee on and in accordance
with its request. Records surrendered hereunder shall
be in machine readable or optical disk form. This
provision shall survive the termination of this
Agreement.
1.05. Plan Agent shall maintain adequate offices, personnel and
computer and other equipment to perform the services
contemplated by this Agreement. Plan Agent shall notify TOGSC
and the Fund Company or its designee promptly in the event
that it becomes unable for any reason to perform the services
contemplated by, or any other of its obligations under, this
Agreement.
1.06. Plan Agent shall maintain insurance coverage at all times that
is reasonable and customary in light of its duties hereunder.
1.07. In accordance with procedures established from time to time by
agreement of the parties hereto, TOGSC and the Fund Company or
its designee shall furnish to Plan Agent, for each Fund, no
later than 6:30 p.m. Eastern Time on each Business Day as
appropriate:
2
<PAGE> 4
a) Net asset value information as of the Close of Trading each
Business Day when such information is used for crediting
accounts;
b) Dividend and capital gains distribution information, as it
arises, when such information is used for crediting accounts;
c) Daily accrual for interest rate factor (mil rate) information
with respect to Funds which declare dividends daily, when such
information is used for crediting accounts; and
d) In addition, the TOGSC, the Fund Company or its designee will
transmit daily net asset value information and daily accrual
for interest rate factor (mil rate) information as of the
Close of Trading each Business Day to Plan Agent via the
NSCC's Mutual Fund Profile system ("MFPS") no later than 7:00
p.m. Eastern Time on each Business Day.
1.08. a) Orders derived from, and in amounts equal to, Instructions
received by Plan Agent prior to the Close of Trading on any
Business Day ("Day 1") shall be transmitted by Plan Agent via
the Fund/SERV system to the Fund Company or its designee no
later than 5:00 a.m. Eastern Time on the next Business Day
("Day 2"). Such trades will be effected at the net asset value
of each Fund's shares calculated as of the Close of Trading on
Day 1 subject to the terms of such Fund's prospectus. In the
event or an error or delay with respect to the transmittal of
such orders by Plan Agent, Plan Agent may resubmit such order
to the Fund Company or its designee via the Fund/SERV system
on the Business Day following Day 2 and the Fund Company or
its designee shall effect such trade as of the original trade
date.
b) To the extent that such orders are not transmitted to the Fund
Company or its designee via the Fund/SERV system, such orders
shall be transmitted via facsimile to the Fund Company or its
designee by 9:00 a.m. Eastern Time on the next Business Day.
Such trades will be effected at the net asset value of each
Fund's shares calculated as of the Close of Trading on Day 1
subject to the terms of such Fund's prospectus.
1.09. Plan Agent, TOGSC and the Fund Company or its designee agree that all
books, records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the negotiation
or the carrying out of this Agreement shall remain confidential and
shall not be voluntarily disclosed to any other person, except as may
be required by law.
1.10. Plan Agent and the Fund Company or its designee shall maintain or
provide for redundant facilities and shall maintain or provide for
backup files of its records maintained hereunder and shall store such
back-up files in a secure off-premises location, so that in the event
of a power failure or other interruption of whatever cause at the
location of its records such records are maintained intact and
transactions can be processed at another location.
3
<PAGE> 5
1.11. Plan Agent, TOGSC and the Fund Company or its designee shall comply
with federal and state securities laws and regulations thereunder in
connection with its responsibilities under this Agreement.
1.12. In accordance with the procedures established from time to time by
agreement of the parties hereto, the Fund Company or its designee shall
promptly furnish to the Plan Agent in the frequency requested, for each
Fund:
a) copies of prospectuses, financial statements, reports or other
materials relating to each Fund, and updates of such
materials, in the quantity requested by Plan Agent, as such
updates become available and as required by law; and
b) performance data for each Fund, including without limitation,
standardized performance information, total return and current
yield information computed in accordance with SEC rules and
other performance information as the Plan Agent may reasonably
request;
c) Such copies and performance data as described in subsections
1.12. (a) and (b) above (collectively "Fund Information") may
be received by the Plan Agent through electronic means or in
disk format. Plan Agent is authorized to distribute such
Information to the Plan and plan participants via Internet,
other electronic means or hard copy;
d) With respect to the Fund Information received electronically
or in disk format, Plan Agent represents, warrants and
covenants that it shall not alter in any way such Fund
Information provided by the Fund Company or its designee and
shall promptly make available updated Fund Information after
Plan Agent receives such Fund Information from the Fund
Company or its designee in the format specified in subsection
(c) above. The Fund Company or its designee represents,
warrants and covenants that Fund Information shall be promptly
delivered electronically or in disk format to the Plan Agent.
1.13. Purchases and sales of the Funds are subject to the terms of the Funds'
prospectuses.
1.14. TOGSC and the Fund Company hereby authorizes Plan Agent, for purposes
of Section 1.12 (b) and (c), concerning the transmission of performance
data, to utilize Lipper Analytical Services ("Lipper") in reporting the
performance of the Fund(s). TOGSC and the Fund Company shall not be
responsible for such information obtained from Lipper except to the
extent TOGSC and/or the Fund Company provides erroneous information to
Lipper.
1.15. On each Business Day for which Plan Agent has transmitted orders for
purchases, exchanges or redemptions for a Plan, the Fund Company or its
designee shall send to Plan Agent via the Fund/SERV system,
verification of such purchases, exchanges or redemptions or
notification of the rejection of such orders("Confirmations"). Such
Confirmations shall include the total number of Shares of each Fund
held by a Plan following such purchases, exchanges or redemptions.
4
<PAGE> 6
The Fund Company or its designee shall submit, in a timely
manner, such Confirmations to the Fund/SERV system in order
for Plan Agent to receive no later than 11:00 a.m. Eastern
Time the next Business Day.
1.16. a) In the event there are purchase and redemption orders
received by the transfer agent of a Fund within the
time limits set forth above on any Business Day for
any Fund, settlement shall occur consistent with the
requirements of the Fund/SERV system.
b) For those purchase orders not transmitted via the
Fund/SERV system, Plan Agent shall initiate payment
to the Fund Company or its designated agent in
federal funds no later than 1:00 p.m. on the Business
Day following the day on which the Instructions are
treated as having been received by the Fund Company
or its designee pursuant to this Agreement.
c) For those redemption orders not transmitted via the
Fund/SERV system, the Fund Company or its designee
shall initiate payment in federal funds no later than
1:00 p.m. on the Business Day following the day on
which the Instructions are treated as having been
received by the Fund Company or its designee pursuant
to this Agreement.
1.17. The Fund Company or its designee will transmit to Plan Agent
by dedicated facsimile and via the NETWORKING system those
Networking activity files reflecting all account activity
including but not limited to closing account balance,
purchases, redemptions, capital gains, dividends, price and
share adjustments. Such files must be received by Plan Agent
on the Business Day following Day 2. Information transmitted
by dedicated facsimile shall be sent to Plan Agent no later
than 11:00 a.m. on the next Business Day.
2. COMPENSATION. For the services which Plan Agent will render to TOGSC
and the Fund Company under this Agreement, TOGSC and the Fund Company
will pay to Plan Agent an annual fee calculated on a quarterly basis,
at the rate or rates as set forth in Schedule B.
3. REPRESENTATIONS AND WARRANTIES.
3.01. Each party represents and warrants to the other party that:
a) It is duly organized, validly existing and in good
standing under the laws of its state of organization
or incorporation:
b) It has legal power and authority to carry on its
business, and is registered or licensed as required,
in each jurisdiction where it conducts its business.
c) It is empowered by its charter and bylaws and under
applicable law to enter into and to perform this
Agreement.
d) All requisite actions have been taken to authorize it
to enter into and to perform this Agreement.
5
<PAGE> 7
e) TOGSC is duly registered as a registered broker
dealer, the Fund Company is duly registered as a
registered investment company under the 1940 Act and
Plan Agent is duly registered as registered transfer
agent under section 17A of the 1934 Act;
f) It maintains and knows of no reason why it cannot or
will not during the term hereof maintain adequate
offices, personnel and computer and other equipment
to perform the services contemplated by this
Agreement; and
g) Each party hereby represents that all of its core
systems directly affecting client operations will be
fully tested and operational prior to December 31,
1999 to ensure that they will function without
material disruption of each party's ability to
provide services as provided herein in the Year 2000
and beyond.
4. INDEMNIFICATION.
4.01. Each party (an "Indemnitor") shall indemnify and hold harmless
the other party, each of such other party's affiliated
companies, and all of the divisions, subsidiaries, directors,
officers, agents, employees and assigns of each of the
foregoing (collectively, "Indemnified Parties"), against and
from any and all demands, damages, liabilities, and losses, or
any pending or completed actions, claims, suits, complaints,
proceedings, or investigations (including all expenses of
litigation or arbitration, judgments, fines or amounts paid in
any settlement consented to by the Indenmitor) to which any of
them may be or become subject as a result or arising out of
(a) any negligent act or omission by the Indemnitor or its
agents relating to the performance of its obligations under
this Agreement; (b) any breach of the Indemnitor's
representations or warranties contained in this Agreement; (c)
the Indemnitor's failure to comply with any of the terms of
this Agreement; or (d) the acceptance by any Indemnified Party
of any transaction or account maintenance information from the
Indemnitor with respect to the Plans or their assets. Each
party represents and warrants that at all times it has
sufficient financial resources, whether through a fidelity
bond or otherwise, to meet all of its indemnification
obligations arising under this Agreement.
4.02. In order that the indemnification provisions contained herein
shall apply, upon the assertion of a claim or loss for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party
of such assertion or loss, and shall keep the other advised
with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option
to participate at its expense with the party seeking
indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may
be required to indemnify it except with the other party's
prior written consent. The obligations of the parties hereto
under this Section 4 shall survive the termination of the
Agreement.
6
<PAGE> 8
5. ACKNOWLEDGMENTS. Plan Agent acknowledges that each Fund, as a
registered investment company under the 1940 Act, is subject
to the provisions of the 1940 Act and regulations thereunder,
and that the offer and sale of its shares are subject to the
provisions of federal and state laws and regulations
applicable to the offer and sale of securities. The Fund
Company and TOGSC acknowledges that Plan Agent is not
responsible for such Fund's compliance with such laws and
regulations.
6. STATEMENTS REGARDING THE FUNDS. It is understood by the
parties that the Plan Agent's representatives will discuss
with Participants the investment objectives and policies of
the Funds: provided, however, that Plan Agent is not
authorized to make any representations concerning the
Distributor, any Fund, or a Fund's Shares except those
representations contained in the Fund's then-current
Prospectus and the Company's Statement of Additional
Information and in such printed information as the Distributor
or the Company may subsequently prepare.
[;solely as set forth in the Fund's current Prospectus and
other written materials prepared by the Fund Company or its
affiliates, and the recent investment performance of the Funds
as provided by the Fund Company, TOGSC or a third party
distributor of performance data.]
7. REVIEW OF PARTICIPANT COMMUNICATIONS MATERIALS. It is
understood by the parties that, based on the Fund's current
Prospectus and the information supplied by the Fund Company or
its designee under Section 1.12. above, the Plan Agent may
prepare communications or disclosure materials for the Plans
and their Participants which describe the Funds. Except for
those materials described above, the Plan Agent shall supply
the Fund, or its designated representative, with copies of all
other materials concerning the Funds within a reasonable time
period in advance of their intended distribution to the Plans
or their Participants. The Plan Agent and the Fund Company
shall establish a mutually agreeable time frame in which such
materials shall be reviewed and approved for use by the Fund
Company , or its designated representative. The Plan Agent
agrees not to use any such materials without the prior
approval of the Fund Company or its designated representative.
The Fund Company shall provide to Plan Agent updated
prospectuses and sales literature. The Fund Company represents
and warrants that such sales literature has been filed with
the NASD and reflects resolution of any NASD comments thereon.
Plan Agent agrees its use of such materials in literature
prepared by Plan Agent will conform to applicable law and NASD
Conduct Rules, including any filing requirements with respect
to such literature.
8. OTHER FUND INFORMATION. The Fund Company agrees to supply the
Plan Agent with any information which it may have that could
have an adverse impact on the performance of the Funds in the
same manner and time frame in which such information is made
available to the Fund's shareholders.
9. REASONABLE ACCESS. The Fund Company will provide Plan Agent or
its designated affiliate with reasonable access to its
offices, representatives, sales support personnel and Fund
investment management professionals for meetings and
day-to-day investment questions. The Fund Company or its
designee will provide to the Plan Agent written quarterly
performance reports with respect to the Funds, including but
not limited to (i) a comparison of performance against one or
more appropriate benchmarks or indices; (ii) quarterly,
year-to-date and annualized one, three and five year
performance date (or data for such lesser period of the Fund's
existence), and (iii) the Fund earnings on a net-of-fees
basis.
7
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets '[' and ']' in the electronic format.
<PAGE> 9
In addition, the Fund Company or its designee shall provide
such materials as reasonably requested by the Plan Agent,
including but not limited to, fund fact sheets, descriptions
of current Fund structure and attribution rates related to
fund strategy.
10. NOTIFICATION OF MATERIAL CHANGES. TOGSC shall promptly notify
the Plan Agent in the event of any material change in the
management, ownership or control of the Fund. In addition,
TOGSC shall notify the Plan Agent of any change in the
"fundamental policies" or other policy limitations described
in the Prospectus or Statement of Additional Information.
11. TERMINATION OF AGREEMENT.
11.01. This Agreement may be terminated by either party (i)
upon sixty (60) days written notice to the other
party or (ii) immediately upon written notice to the
other party in the event that:
a) Plan Agent becomes unable for any reason to
perform the services contemplated by this
Agreement,
b) TOGSC ceases to be the distributor for the
Funds, or
c) the Funds cease to be investment
alternatives under the Plans.
11.02. Upon termination of this Agreement, each party shall
return to the other party all copies of confidential
or proprietary materials or information received from
such other party hereunder other than materials or
information required to be retained by such party
under applicable laws or regulations. The obligations
of the parties under this subsection 11.02. and the
provisions of Sections 1, 2, 4, and 6 through 10;
provided, however, that, in the event TOGSC is
terminated as distributor for the Fund or otherwise
ceases to act as distributor for the Fund, such
payment obligation shall immediately cease. In such
event, Plan Agent may seek to receive such payments
from the Fund or any successor distributor that is
appointed by the Fund.
12. ASSIGNMENT.
12.01. Neither this Agreement nor any rights or obligations hereunder
may be assigned or delegated by either party without the
written consent of the other party.
12.02. This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
13. NOTICES. Notices hereunder shall be in writing, shall be delivered
personally, sent by certified mail, return receipt requested, or sent by
facsimile machine in accordance with procedures established by agreement of the
parties hereto, and shall be addressed to a party either at his address below or
at a changed address specified by it in a notice to the other party hereto:
8
<PAGE> 10
The Fund Company:
The One Group
3435 Stelzer Road
Columbus, OH 43229
ATTN: Mark S. Redman
TOGSC:
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43229
ATTN: Mark S. Redman
Plan Agent:
DCPA
Level 1
Location 33
P.O. Box 9740
Providence, RI 02940-9740
ATTN: Maureen Phillips, Managing Director
14. AMENDMENT. This Agreement may be amended or modified only by a written
agreement executed by both parties.
15. NON-SOLICITATION. The Fund Company and TOGSC hereby agree that, so long
as this Agreement is in effect and for a period of two years from the
date of its termination, it will not solicit defined contribution plan
business from any sponsor of any plan for which Plan Agent provides
defined contribution plan services (including without limitation
trustee or recordkeeping services) or any affiliate of such a sponsor.
16. RELATIONSHIP OF THE PARTIES; NO JOINT VENTURE. Except for the limited
purpose provided for in Section 1, it is understood and agreed that all
services performed under this Agreement by Plan Agent shall not be as an
employee or agent of the Fund Company, TOGSC or Funds and none of the
parties shall hold itself out as an agent of any other party with the
authority to bind such party. Neither the execution nor performance of
this Agreement shall be deemed to create a partnership or joint venture
by and among any of the parties.
17. USE OF NAMES. Except as expressly agreed to in writing by the parties,
neither the Fund Company nor TOGSC shall use, nor shall it allow its
employees or agents to use, the name or logo of Plan Agent or any of
its affiliates, or any of the products or services sponsored, by the
Plan Agent or any of its affiliates for advertising, trade or other
commercial or non-commercial purposes.
18. GOVERNING LAW. This Agreement shall be constructed and the provisions
thereof interpreted under and in accordance with the laws of The
Commonwealth of Massachusetts.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written. This
Agreement is intended to set forth the rights, duties and
responsibilities between the Fund Company, TOGSC and Plan Agent with
respect to the matters covered herein.
9
<PAGE> 11
Nothing contained in the Agreement is intended to convey rights to any
third parties such as Plans, Plan participants, the Fund Company or
TOGSC.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
PUTNAM FIDUCIARY TRUST COMPANY THE ONE GROUP SERVICES COMPANY
By:________________________________ By:________________________________
Name: _____________________________ Name: _____________________________
Title: ____________________________ Title:_____________________________
THE ONE GROUP
By: ______________________________
Name:_____________________________
Title: ___________________________
01/25/99
10
<PAGE> 12
SCHEDULE A
The following funds shall be offered as part of the Fund Alliance Program:
FUNDS
-----
The One Group Growth Opportunities Fund - Class A Shares
The One Group Bond Fund - Class A Shares
11
<PAGE> 13
SCHEDULE B - FUNDS AND FEES
The Fund Company and TOGSC shall automatically pay to Plan Agent a fee with
respect to each Fund, calculated and paid quarterly in arrears, equal to the
product of: (i) (a) the number of calendar days in the applicable quarter
divided by the number of calendar days in that year and (b) the percentage
specified below and (ii) the average daily net asset value of the investments
held in such Fund pursuant to this Agreement computed by totaling the aggregate
investment (share net asset value multiplied by the total number of shares held)
on each day during the calendar quarter and dividing by the total number of days
during such quarter. Fee will be paid by wire transfer or by check, at the Plan
Agent's election.
The Fund Company and TOGSC shall keep adequate and accurate records with respect
to the calculation and payment of these fees. Such records shall be provided to
Plan Agent upon request for purposes of auditing and reconciliation of payment
amounts.
The fees for the funds as listed in Part I of Revised Schedule A - List of Funds
shall be as follows:
Fund Annual Fee
The One Group Growth Opportunities Fund 0.35% (35 basis points)
(Class A Shares)
The One Group Bond Fund (Class A Shares) 0.25% (25 basis points)
The above stated fees shall continue throughout the duration of this Agreement.
The foregoing, notwithstanding, if either the Fund Company or TOGSC extends a
higher rate of fees to any other plan service provider, the Fund Company and
TOGSC shall offer such higher rate of fees to the Plan Agent.
12
<PAGE> 1
EXHIBIT 10
OPINION OF COUNSEL
<PAGE> 2
ROPES & GRAY
ONE FRANKLIN SQUARE
1301 K STREET, N.W.
SUITE 800 EAST
WASHINGTON, DC 20005
WRITER'S DIRECT DIAL NUMBER: (202) 626-3925
March 10, 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
One Group(R) Mutual Funds ("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 upon the foregoing, we are of the opinion that the issue and sale
of the authorized but unissued Shares of the Trust 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
One Group(R) Mutual Funds
March 10, 1999
Page 2
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
-2-
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
March 11, 1999
We consent to the incorporation by reference in this Post-Effective Amendment
No. 48 to the Registration Statement on Form N-1A (File No. 2-95973) of One
Group Mutual Funds, of our reports dated August 18, 1998 on our audits of the
financial statements and financial highlights of the U.S. Treasury Securities
Money Market Fund, the Prime Money Market Fund, the Municipal Money Market Fund,
the Ohio Municipal Money Market Fund, the Ultra Short-Term Income Fund, the
Limited Volatility Bond Fund, the Government Bond Fund, the Treasury & Agency
Fund, the Intermediate Tax-Free Bond Fund, the Municipal Income Fund, the
Kentucky Municipal Bond Fund, the Ohio Municipal Bond Fund, the Louisiana
Municipal Bond Fund, the West Virginia Municipal Bond Fund, the Arizona
Municipal Bond Fund, the Treasury Only Money Market Fund, the Government Money
Market Fund, the Asset Allocation Fund, the Income Equity Fund, the Equity Index
Fund, the Value Growth Fund, the Large Company Value Fund, the Disciplined Value
Fund, the Large Company Growth Fund, the Growth Opportunities Fund, the Small
Capitalization Fund, the International Equity Index Fund, the Investor Growth
Fund, the Investor Growth & Income Fund, the Investor Balanced Fund, and the
Investor Conservative Growth Fund constituting One Group Mutual Funds which
reports are included in the Annual Reports to Shareholders for the year ended
June 30, 1998. We also consent to the references to our Firm under the caption
"Financial Highlights" and "Independent Accountants" in the Prospectuses and
"Experts" in the Statement of Additional Information relating to One Group
Mutual Funds which are incorporated by reference in this Post-Effective
Amendment No. 48 to the Registration Statement on Form N-1A (File No. 2-95973).
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF ARTHUR ANDERSEN LLP
<PAGE> 2
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form N-1A of our reports dated
February 12, 1999 included herein (or incorporated by reference) in the Pegasus
Funds, Pegasus Money Market Funds and Pegasus Cash Management Funds Annual
Reports to Shareholders for the year ended December 31, 1998 and to all
references to our firm included in this Post Effective Amendment No. 48 to the
One Group's registration statement under the Securities Act of 1933.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan,
March 8, 1999.
<PAGE> 1
EXHIBIT 11(c)
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. 48 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.
March 10, 1999
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 032
<NAME> THE ONE GROUP MUNICIPAL MONEY MARKET FUND
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<S> <C>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 041
<NAME> THE ONE GROUP INCOME EQUITY FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 042
<NAME> THE ONE GROUP INCOME EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<AVERAGE-NET-ASSETS> 99091<F1>
<PER-SHARE-NAV-BEGIN> 21.90<F1>
<PER-SHARE-NII> .25<F1>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 043
<NAME> THE ONE GROUP INCOME EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 044
<NAME> THE ONE GROUP INCOME EQUITY FUND
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<S> <C>
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<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 061
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 062
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 063
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
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<S> <C>
<PERIOD-TYPE> YEAR
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 071
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 072
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 073
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
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<F1>CLASS B
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<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 081
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 082
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 083
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<F1>CLASS C
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 103
<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<REALIZED-GAINS-CURRENT> (2526)
<APPREC-INCREASE-CURRENT> 4699
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<NUMBER-OF-SHARES-REDEEMED> 111<F1>
<SHARES-REINVESTED> 22<F1>
<NET-CHANGE-IN-ASSETS> 24148
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<GROSS-EXPENSE> 4975
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 111
<NAME> THE ONE GROUP EQUITY INDEX FUND
<MULTIPLIER> 1,000
<S> <C>
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<NUMBER-OF-SHARES-REDEEMED> 5630<F1>
<SHARES-REINVESTED> 212<F1>
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<GROSS-EXPENSE> 9167
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<PER-SHARE-NII> .33<F1>
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<EXPENSE-RATIO> .35<F1>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 112
<NAME> THE ONE GROUP EQUITY INDEX FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<NUMBER-OF-SHARES-REDEEMED> 1415<F1>
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<GROSS-EXPENSE> 9167
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 113
<NAME> THE ONE GROUP EQUITY INDEX FUND
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<S> <C>
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<AVERAGE-NET-ASSETS> 252732<F1>
<PER-SHARE-NAV-BEGIN> 21.80<F1>
<PER-SHARE-NII> .10<F1>
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 114
<NAME> THE ONE GROUP EQUITY INDEX FUND
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<S> <C>
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<PER-SHARE-NII> .07<F1>
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<PER-SHARE-DISTRIBUTIONS> .12<F1>
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<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 121
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
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<S> <C>
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<ACCUM-APPREC-OR-DEPREC> 195407
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 122
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
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<S> <C>
<PERIOD-TYPE> YEAR
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<ACCUM-APPREC-OR-DEPREC> 195407
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 123
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
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<F1>CLASS B
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 131
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<F1>FIDUCIARY CLASS
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<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 132
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<S> <C>
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<F1>CLASS A
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<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 133
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
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<PER-SHARE-GAIN-APPREC> .20<F1>
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<F1>CLASS B
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 141
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 142
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<PER-SHARE-NII> .19<F1>
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<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 143
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<F1>CLASS B
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 144
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<F1>CLASS C
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 151
<NAME> THE ONE GROUP TREASURY ONLY MONEY MARKET FUND
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<FN>
<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 161
<NAME> THE ONE GROUP GOVERNMENT MONEY MARKET FUND
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<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 171
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 172
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<S> <C>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 173
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<S> <C>
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 181
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 182
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 183
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 192
<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<F1>CLASS A
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 193
<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 201
<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 202
<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 203
<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP OHIO MUNICIPAL MONEY MARKT FUND
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP OHIO MUNICIPAL MONEY MARKT FUND
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<F1>CLASS A
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 231
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 232
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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</TABLE>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 233
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 234
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<F1>CLASS C
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 241
<NAME> THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND
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<F1>FIDUCIARY CLASS
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<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 242
<NAME> THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND
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<S> <C>
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<F1>CLASS A
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 243
<NAME> THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND
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<S> <C>
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<F1>CLASS B
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 252
<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 137584
<INVESTMENTS-AT-VALUE> 145524
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<SHARES-COMMON-PRIOR> 4802<F1>
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<NUMBER-OF-SHARES-SOLD> 519<F1>
<NUMBER-OF-SHARES-REDEEMED> 872<F1>
<SHARES-REINVESTED> 140<F1>
<NET-CHANGE-IN-ASSETS> (20429)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 675
<GROSS-ADVISORY-FEES> 928
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1502
<AVERAGE-NET-ASSETS> 48628<F1>
<PER-SHARE-NAV-BEGIN> 10.10<F1>
<PER-SHARE-NII> .47<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> .47<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
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<PER-SHARE-NAV-END> 10.26<F1>
<EXPENSE-RATIO> .85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 253
<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 137584
<INVESTMENTS-AT-VALUE> 145524
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<TOTAL-LIABILITIES> 2700
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137009
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 293
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7940
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<DIVIDEND-INCOME> 20
<INTEREST-INCOME> 8410
<OTHER-INCOME> 0
<EXPENSES-NET> 1093
<NET-INVESTMENT-INCOME> 7337
<REALIZED-GAINS-CURRENT> 968
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<NET-CHANGE-FROM-OPS> 9895
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 202<F1>
<NUMBER-OF-SHARES-REDEEMED> 59<F1>
<SHARES-REINVESTED> 11<F1>
<NET-CHANGE-IN-ASSETS> (20429)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 675
<GROSS-ADVISORY-FEES> 928
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1502
<AVERAGE-NET-ASSETS> 4322<F1>
<PER-SHARE-NAV-BEGIN> 10.10<F1>
<PER-SHARE-NII> .41<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> .41<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.26<F1>
<EXPENSE-RATIO> 1.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 261
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 132255
<INVESTMENTS-AT-VALUE> 157845
<RECEIVABLES> 2548
<ASSETS-OTHER> 10
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<OTHER-ITEMS-LIABILITIES> 14721
<TOTAL-LIABILITIES> 15161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105501
<SHARES-COMMON-STOCK> 9542<F1>
<SHARES-COMMON-PRIOR> 7159<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 319
<ACCUMULATED-NET-GAINS> 14135
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25925
<NET-ASSETS> 145242
<DIVIDEND-INCOME> 557
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<OTHER-INCOME> 100
<EXPENSES-NET> 1397
<NET-INVESTMENT-INCOME> (163)
<REALIZED-GAINS-CURRENT> 21421
<APPREC-INCREASE-CURRENT> 1800
<NET-CHANGE-FROM-OPS> 23058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 9265<F1>
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<NUMBER-OF-SHARES-SOLD> 4210<F1>
<NUMBER-OF-SHARES-REDEEMED> 2551<F1>
<SHARES-REINVESTED> 724<F1>
<NET-CHANGE-IN-ASSETS> 45790
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 176
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<GROSS-ADVISORY-FEES> 902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 97062<F1>
<PER-SHARE-NAV-BEGIN> 10.94<F1>
<PER-SHARE-NII> 0<F1>
<PER-SHARE-GAIN-APPREC> 2.44<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 1.33<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.05<F1>
<EXPENSE-RATIO> 1.06<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 262
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 132255
<INVESTMENTS-AT-VALUE> 157845
<RECEIVABLES> 2548
<ASSETS-OTHER> 10
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 15161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105501
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<SHARES-COMMON-PRIOR> 1581<F1>
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 14135
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25925
<NET-ASSETS> 145242
<DIVIDEND-INCOME> 557
<INTEREST-INCOME> 577
<OTHER-INCOME> 100
<EXPENSES-NET> 1397
<NET-INVESTMENT-INCOME> (163)
<REALIZED-GAINS-CURRENT> 21421
<APPREC-INCREASE-CURRENT> 1800
<NET-CHANGE-FROM-OPS> 23058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 1939<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 374<F1>
<NUMBER-OF-SHARES-REDEEMED> 329<F1>
<SHARES-REINVESTED> 173<F1>
<NET-CHANGE-IN-ASSETS> 45790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4697
<OVERDISTRIB-NII-PRIOR> 176
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 19415<F1>
<PER-SHARE-NAV-BEGIN> 10.94<F1>
<PER-SHARE-NII> (.03)<F1>
<PER-SHARE-GAIN-APPREC> 2.44<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 1.33<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.02<F1>
<EXPENSE-RATIO> 1.31<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 263
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 132255
<INVESTMENTS-AT-VALUE> 157845
<RECEIVABLES> 2548
<ASSETS-OTHER> 10
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<OTHER-ITEMS-LIABILITIES> 14721
<TOTAL-LIABILITIES> 15161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105501
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<SHARES-COMMON-PRIOR> 354<F1>
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 14135
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25925
<NET-ASSETS> 145242
<DIVIDEND-INCOME> 557
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<OTHER-INCOME> 100
<EXPENSES-NET> 1397
<NET-INVESTMENT-INCOME> (163)
<REALIZED-GAINS-CURRENT> 21421
<APPREC-INCREASE-CURRENT> 1800
<NET-CHANGE-FROM-OPS> 23058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 521<F1>
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<NUMBER-OF-SHARES-REDEEMED> 59<F1>
<SHARES-REINVESTED> 49<F1>
<NET-CHANGE-IN-ASSETS> 45790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4697
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<GROSS-ADVISORY-FEES> 902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 5534<F1>
<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> (.03)<F1>
<PER-SHARE-GAIN-APPREC> 2.31<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 1.33<F1>
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<PER-SHARE-NAV-END> 11.79<F1>
<EXPENSE-RATIO> 2.06<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 264
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 132255
<INVESTMENTS-AT-VALUE> 157845
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<TOTAL-LIABILITIES> 15161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105501
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<ACCUMULATED-NET-GAINS> 14135
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<ACCUM-APPREC-OR-DEPREC> 25925
<NET-ASSETS> 145242
<DIVIDEND-INCOME> 557
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<OTHER-INCOME> 100
<EXPENSES-NET> 1397
<NET-INVESTMENT-INCOME> (163)
<REALIZED-GAINS-CURRENT> 21421
<APPREC-INCREASE-CURRENT> 1800
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 7<F1>
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<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 45790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4697
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<GROSS-ADVISORY-FEES> 902
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 19<F1>
<PER-SHARE-NAV-BEGIN> 13.03<F1>
<PER-SHARE-NII> (.02)<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 1.33<F1>
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<PER-SHARE-NAV-END> 11.97<F1>
<EXPENSE-RATIO> 2.05<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 271
<NAME> THE ONE GROUP VALUE GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 617512
<INVESTMENTS-AT-VALUE> 786406
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50185
<TOTAL-LIABILITIES> 50185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 525615
<SHARES-COMMON-STOCK> 46646<F1>
<SHARES-COMMON-PRIOR> 37439<F1>
<ACCUMULATED-NII-CURRENT> 53
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<ACCUMULATED-NET-GAINS> 42561
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<ACCUM-APPREC-OR-DEPREC> 169346
<NET-ASSETS> 737575
<DIVIDEND-INCOME> 8118
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<NET-INVESTMENT-INCOME> 3666
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<DISTRIBUTIONS-OF-GAINS> 54060<F1>
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<NUMBER-OF-SHARES-REDEEMED> 9458<F1>
<SHARES-REINVESTED> 1984<F1>
<NET-CHANGE-IN-ASSETS> 248915
<ACCUMULATED-NII-PRIOR> 12
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<GROSS-ADVISORY-FEES> 4485
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<GROSS-EXPENSE> 6328
<AVERAGE-NET-ASSETS> 528650<F1>
<PER-SHARE-NAV-BEGIN> 11.51<F1>
<PER-SHARE-NII> .08<F1>
<PER-SHARE-GAIN-APPREC> 3.36<F1>
<PER-SHARE-DIVIDEND> .08<F1>
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<EXPENSE-RATIO> .98<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 272
<NAME> THE ONE GROUP VALUE GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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<TOTAL-LIABILITIES> 50185
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<PAID-IN-CAPITAL-COMMON> 525615
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<ACCUMULATED-NII-CURRENT> 53
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<ACCUMULATED-NET-GAINS> 42561
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<ACCUM-APPREC-OR-DEPREC> 169346
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<DISTRIBUTIONS-OF-GAINS> 6125<F1>
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<NUMBER-OF-SHARES-REDEEMED> 847<F1>
<SHARES-REINVESTED> 531<F1>
<NET-CHANGE-IN-ASSETS> 248915
<ACCUMULATED-NII-PRIOR> 12
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6328
<AVERAGE-NET-ASSETS> 61902<F1>
<PER-SHARE-NAV-BEGIN> 11.50<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 3.36<F1>
<PER-SHARE-DIVIDEND> .05<F1>
<PER-SHARE-DISTRIBUTIONS> 1.36<F1>
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<PER-SHARE-NAV-END> 13.50<F1>
<EXPENSE-RATIO> 1.23<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 273
<NAME> THE ONE GROUP VALUE GROWTH FUND
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<S> <C>
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 274
<NAME> THE ONE GROUP VALUE GROWTH FUND
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<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 291
<NAME> THE ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 292
<NAME> THE ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<APPREC-INCREASE-CURRENT> 2009
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<NUMBER-OF-SHARES-REDEEMED> 39<F1>
<SHARES-REINVESTED> 5<F1>
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 770
<AVERAGE-NET-ASSETS> 1290<F1>
<PER-SHARE-NAV-BEGIN> 10.15<F1>
<PER-SHARE-NII> .48<F1>
<PER-SHARE-GAIN-APPREC> .21<F1>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 293
<NAME> THE ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
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<SHARES-REINVESTED> 2<F1>
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<GROSS-EXPENSE> 770
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<PER-SHARE-NAV-BEGIN> 10.12<F1>
<PER-SHARE-NII> .42<F1>
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<EXPENSE-RATIO> 1.50<F1>
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 301
<NAME> THE ONE GROUP ARIZONA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 302
<NAME> THE ONE GROUP ARIZONA MUNICIPAL BOND FUND
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<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 303
<NAME> THE ONE GROUP ARIZONA MUNICIPAL BOND FUND
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<S> <C>
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<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<F1>FIDUCIARY CLASS
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<NUMBER> 362
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH & INCOME FUND
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<F1>FIDUCIARY CLASS
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<ARTICLE> 6
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<NUMBER> 412
<NAME> THE ONE GROUP TREASURY AND AGENCY FUND
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<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 413
<NAME> THE ONE GROUP TREASURY AND AGENCY FUND
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> PEGASUS FUNDS
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<NUMBER> 091
<NAME> PEGASUS MID CAP OPPORTUNITY FUND
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> PEGASUS FUNDS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> PEGASUS FUNDS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> PEGASUS FUNDS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> PEGASUS SHORT MUNICIPAL BOND FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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