<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 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. 51 |X|
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
AMENDMENT NO. 52 |X|
ONE GROUP(R) MUTUAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(800) 480-4311
(REGISTRANT'S TELEPHONE NUMBER)
MARK S. REDMAN
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
ALAN G. PRIEST, ESQUIRE MICHAEL V. WIBLE, ESQUIRE
ROPES & GRAY BANK ONE CORPORATION
ONE FRANKLIN SQUARE 100 EAST BROAD STREET, 5TH FL.
1301 K STREET, N.W., SUITE 800E COLUMBUS, OHIO 43271-0152
WASHINGTON, D.C. 20005
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: IMMEDIATELY UPON EFFECTIVENESS
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_____ Immediately upon filing pursuant to paragraph (b)
__X__ on November 1, 1999 pursuant to paragraph(b)
_____ 60 days after filing pursuant to paragraph(a)(1)
_____ on (Date) pursuant to paragraph(a)(1)
_____ 75 days after filing pursuant to paragraph(a)(2)
_____ on (Date) pursuant to paragraph(a)(2) of Rule 485.
If appropriate, check the following box:
__X__ post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
ONE GROUP MUTUAL FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A PART A ITEM PROSPECTUS CAPTION
- --------------------- ------------------
<S> <C>
1. Front and Back Cover Page Cover Page
2. Risk/Return Summary: Investments, Risks & Performance Fund Summaries: Investments, Risk &
Performance
3. Risk/Return Summary: Fee Table Fund Summaries: Investments, Risk &
Performance
4. Investment Objectives, Principal Investment Strategies Fund Summaries: Investments, Risk &
Performance, More About the Funds, Appendix
A
5. Management's Discussion of Fund Performance Annual Report
6. Management, Organization, and Capital Structure Management of One Group Mutual Funds
7. Shareholder Information How To Do Business with One Group Mutual
Funds, Shareholder Information
8. Distribution Arrangements How To Do Business with
One Group Mutual Funds
9. Financial Highlights Financial Highlights
COMBINED STATEMENT OF
ADDITIONAL INFORMATION
FORM N-1A PART B ITEM CAPTION
- --------------------- -------
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History The Trust
12. Description of Fund and its Investments and Risk The Trust; Investment Objectives and Policies,
Additional Information - Description of Shares
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Additional Information -
Holders of Securities Miscellaneous
15. Investment Advisory and Other
Services Management of the Trust
16. Brokerage Allocation and Other Practices Management of the Trust -
Portfolio Transactions
17. Capital Stock and Other Securities Valuation; Additional
Information Regarding the
Calculation of Per Share Net
Asset Value;
Additional Purchase
and Redemption Information;
Additional Information
18. Purchase, Redemption and Pricing of The Trust, Valuation; Additional
Shares Information Regarding the
Calculation Per Share Net Asset
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Value; Additional Purchase and
Redemption Information;
Management of the Trust
19. Taxation of the Fund Investment Objectives and
Policies - Additional Tax
Information Concerning the Fund
20. Underwriters Management of the Trust -
Distributor
21. Calculation of Performance Data Additional Information -
Calculation of Performance Data
22. Financial Statements Incorporated by reference
</TABLE>
<PAGE> 4
EQUITY FUNDS
[ONE GROUP LOGO]
PROSPECTUS
November 1, 1999
One Group(R) Small Cap Growth Fund
One Group(R) Small Cap Value Fund
One Group(R) Mid Cap Growth Fund
One Group(R) Mid Cap Value Fund
One Group(R) Diversified Mid Cap Fund
One Group(R) Large Cap Growth Fund
One Group(R) Large Cap Value Fund
One Group(R) Equity Income Fund
One Group(R) Diversified Equity Fund
One Group(R) Balanced Fund
One Group(R) Equity Index Fund
One Group(R) Market Expansion Index Fund
One Group(R) International Equity Index Fund
One Group(R) Diversified International Fund
The Securities and Exchange Commission has not approved or disapproved the
shares of any of the Funds as an investment or determined whether this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.
<PAGE> 5
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Small Cap Growth Fund 2
---------
One Group Small Cap Value Fund 6
---------
One Group Mid Cap Growth Fund 10
---------
One Group Mid Cap Value Fund 14
---------
One Group Diversified Mid Cap Fund 18
---------
One Group Large Cap Growth Fund 22
---------
One Group Large Cap Value Fund 26
---------
One Group Equity Income Fund 30
---------
One Group Diversified Equity Fund 34
---------
One Group Balanced Fund 38
---------
One Group Equity Index Fund 42
---------
One Group Market Expansion Index Fund 46
---------
One Group International Equity Index Fund 50
---------
One Group Diversified International Fund 54
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 58
---------
Investment Risks 62
---------
Investment Policies 63
---------
Portfolio Quality 64
---------
Temporary Defensive Positions 65
---------
Portfolio Turnover 65
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 66
---------
Sales Charges 69
---------
Sales Charge Reductions and Waivers 72
---------
Exchanging Fund Shares 74
---------
Redeeming Fund Shares 76
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 79
---------
Dividend Policies 79
---------
Tax Treatment of Shareholders 80
---------
Shareholder Inquiries 81
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 82
---------
The Fund Managers 83
---------
Year 2000 Readiness Disclosure 83
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 84
---------
APPENDIX A: INVESTMENT PRACTICES 112
---------
</TABLE>
<PAGE> 6
FUND SUMMARIES
Investments, Risk & Performance
<PAGE> 7
2
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Small Cap Growth Fund
WHAT IS THE GOAL OF THE
SMALL CAP GROWTH FUND? The Fund seeks long-term capital growth primarily by
investing in a portfolio of equity securities of small
capitalization and emerging growth companies.
WHAT ARE THE SMALL CAP
GROWTH FUND'S MAIN
INVESTMENT STRATEGIES? The Fund invests mainly in common stock, debt
securities, preferred stocks, convertible securities,
warrants, and other equity securities of small
capitalization companies. Generally, the Fund invests in
small cap companies with market capitalization ranging
from $100 million to $3 billion. For more information
about the Small Cap Growth Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
SMALL CAP GROWTH FUND? The main risks of investing in the Small Cap Growth Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Small Cap Growth Fund will change every day in response
to market conditions. You may lose money if you invest
in the Small Cap Growth Fund.
MAIN RISKS
- ---------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
small cap stocks in particular) may decline over short
or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Smaller Companies. The Fund's primary investment
strategy is to invest in smaller, growth companies.
These investments may be riskier than investments in
larger, more established companies. Securities of
smaller, growth companies tend to be less liquid and
more volatile than stocks of larger companies. In
addition, small companies may be more vulnerable to
economic, market, and industry changes. Because economic
events have a greater impact on smaller companies, there
may be greater and more frequent changes in their stock
price. This may cause unexpected and frequent decreases
in the value of your investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 8
3
- ---------------------------
Small Cap Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE SMALL CAP
GROWTH FUND
PERFORMED? By showing the variability of the Small Cap Growth Fund
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE SMALL CAP
GROWTH FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP GROWTH FUND
---------------------
<S> <C>
1992 16.42
1993 7.85
1994 -7.73
1995 22.06
1996 15.70
1997 28.78
1998 -4.04
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
8.72%. The above-quoted performance data includes
the performance of the Paragon Gulf South Growth
Fund for the period before its consolidation with
the One Group Small Cap Growth Fund on March 26,
1996.
- --------------------------------------------------------------------------------
Best Quarter: 21.57% 3Q1997 Worst Quarter: -22.13% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 9
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Small Cap Growth Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 7/1/91)
<S> <C> <C> <C>
One Group Small Cap Growth Fund -9.26% 8.70% 13.41%
--------------------------------------------------------------------------------------
S&P 600 Index (3) -1.31% 13.23% 16.09%
--------------------------------------------------------------------------------------
S&P/BARRA Small Cap Growth Index (4) 2.29% 10.88% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 9/12/94)
<S> <C> <C> <C>
One Group Small Cap Growth Fund -9.26% 10.80%
--------------------------------------------------------------------------------------
S&P 600 Index (3) -1.31% 16.39%
--------------------------------------------------------------------------------------
S&P/BARRA Small Cap Growth Index (4) 2.29% 14.16%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Small Cap Growth Fund -5.90% -6.40%
--------------------------------------------------------------------------------------
S&P 600 Index (3) -1.31% 0.63%
--------------------------------------------------------------------------------------
S&P/BARRA Small Cap Growth Index (4) 2.29% 3.23%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 7/1/91)
<S> <C> <C> <C>
One Group Small Cap Growth Fund (2) -4.04% 10.00% 14.31%
--------------------------------------------------------------------------------------
S&P 600 Index (3) -1.31% 13.23% 16.09%
--------------------------------------------------------------------------------------
S&P/BARRA Small Cap Growth Index (4) 2.29% 10.88% *
</TABLE>
(1) The above-quoted performance data includes the
performance of the Paragon Gulf South Growth Fund
for the period before its consolidation with the
One Group Small Cap Growth Fund on March 26,
1996.
(2) Prior to March 26, 1996, performance for Class I
Shares is based on Class A Share performance
adjusted to reflect the absence of sales charges.
(3) The S&P 600 Index is an unmanaged index generally
representative of the performance of small
companies in the US stock market. The benchmark
index for the Small Cap Growth Fund has changed
from the S&P 600 Index to the S&P/BARRA Small Cap
Growth Index in order to better represent the
investment policies for comparison purposes.
(4) The S&P/BARRA Small Cap Growth Index is an
unmanaged index generally representative of the
performance of 600 small capitalization domestic
stocks with a higher price to book ratio. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
* Index did not exist.
<PAGE> 10
5
- ---------------------------
Small Cap Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .35% .35% .35% .35%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.44% 2.09% 2.09% 1.09%
-------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.14%) (.04%) (.04%) (.04%)
-------------------------------------------------------------------------------------------------
Net Expenses 1.30% 2.05% 2.05% 1.05%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.30% for Class A shares, 2.05% for Class B
shares, 2.05% for Class C shares, and 1.05% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 650 $ 708 $ 208 $ 308 $ 208 $ 107
-------------------------------------------------------------------------------------------------------------------------------
3 Years 944 951 651 651 651 343
-------------------------------------------------------------------------------------------------------------------------------
5 Years 1,258 1,320 1,120 1,120 1,120 597
-------------------------------------------------------------------------------------------------------------------------------
10 Years 2,147 2,252 2,252 2,418 2,418 1,325
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $664
Class B (no redemption) $212
Class B (with redemption) $712
Class C (no redemption) $212
Class C (with redemption) $312
Class I $111
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 11
6
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Small Cap Value Fund
WHAT IS THE GOAL OF THE
SMALL CAP VALUE FUND? The Fund seeks long-term capital growth primarily by
investing in equity securities of companies with small
capitalizations.
WHAT ARE THE SMALL CAP
VALUE FUND'S MAIN
INVESTMENT STRATEGIES? The Fund invests mainly in equity securities of small
domestic companies with market capitalizations of $100
million to $3 billion. In reviewing investment
opportunities, Banc One Investment Advisors looks for
high quality management, a dominant position in a major
product line, significant equity ownership positions by
management, a sound financial position, and a relatively
high rate of return on invested capital. The Fund also
will invest in companies that demonstrate a potential
for earnings growth due to management changes, new
products, or a changing marketplace. For more
information about the Small Cap Value Fund's investment
strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
SMALL CAP VALUE FUND? The main risks of investing in the Small Cap Value Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Small Cap Value Fund will change every day in response
to market conditions. You may lose money if you invest
in the Small Cap Value Fund.
MAIN RISKS
- ----------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
small cap stocks in particular) may decline over short
or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Smaller Companies. The Fund's primary investment
strategy is to invest in smaller, newer companies. These
investments may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid and more volatile than
stocks of larger companies. In addition, small companies
may be more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 12
7
- ---------------------------
Small Cap Value Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE SMALL CAP
VALUE FUND PERFORMED? By showing the variability of the Small Cap Value Fund
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE SMALL CAP
VALUE FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
--------------------
<S> <C>
1989 22.47
1990 -7.34
1991 58.42
1992 17
1993 12.29
1994 -5.04
1995 25.33
1996 25.63
1997 30.57
1998 -4.09
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-12.12%. The above quoted performance data
includes the performance of a common trust fund,
the predecessor to the Pegasus Small Cap
Opportunity Fund and the Pegasus Small Cap
Opportunity Fund for the period before the
consolidation with One Group Small Cap Value Fund
on March 22, 1999. The predecessor to the Pegasus
Small Cap Opportunity Fund commenced operations
on January 27, 1995 subsequent to the transfer of
assets from a common trust fund with materially
equivalent investment objectives, policies,
guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the
performance of the common trust fund for periods
prior to the commencement of operations of the
predecessor to the Pegasus Small Cap Opportunity
Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 23.56% 1Q1991 Worst Quarter: -24.07% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 13
8
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Small Cap Value Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 6/30/72)
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -9.30% 11.66% 14.88% 9.33%
--------------------------------------------------------------------------------------------------------------------
Russell 2000 (2) -2.57% 11.86% 12.92% *
--------------------------------------------------------------------------------------------------------------------
S&P/BARRA Small Cap Value Index (3) -5.06% 15.31% * *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS B (since 6/30/72)
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -9.68% 12.05% 15.19% 9.46%
--------------------------------------------------------------------------------------------------------------------
Russell 2000 (2) -2.57% 11.86% 12.92% *
--------------------------------------------------------------------------------------------------------------------
S&P/BARRA Small Cap Value Index (3) -5.06% 15.31% * *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 6/30/72)
<S> <C> <C> <C> <C>
One Group Small Cap Value Fund -4.09% 13.36% 16.03% 10.14%
--------------------------------------------------------------------------------------------------------------------
Russell 2000 (2) -2.57% 11.86% 12.92% *
--------------------------------------------------------------------------------------------------------------------
S&P/BARRA Small Cap Value Index (3) -5.06% 15.31% * *
</TABLE>
(1) The above-quoted performance data includes the
performance of a common trust fund, the
predecessor to the Pegasus Small Cap Opportunity
Fund and the Pegasus Small Cap Opportunity Fund
prior to the consolidation with the One Group
Small Cap Value Fund on March 22, 1999. The
predecessor to the Pegasus Small Cap Opportunity
Fund commenced operations on January 27, 1995 as
the Pegasus Small Cap Opportunity Fund subsequent
to the transfer of assets from a common trust
fund with materially equivalent investment
objectives, policies, guidelines and restrictions
as the Fund. The quoted performance of the Fund
includes the performance of the common trust fund
for periods prior to the commencement of
operations of the predecessor to the Pegasus
Small Cap Opportunity Fund as adjusted to reflect
the expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower. The Fund also offers Class C
Shares. Class C Shares commenced operations on
March 22, 1999 and do not have a full calendar
year of investment returns as of the date of this
prospectus.
(2) The Russell 2000 Index is an unmanaged index
generally representative of the small-cap equity
markets. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as investment management. By
contrast, the performance of the Fund reflects
the deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
(3) The S&P/BARRA Small Cap Value Index is an
unmanaged index generally representative of the
performance of 600 small capitalization domestic
stocks with a lower price to book ratio. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares. The benchmark index
for the Small Cap Value Fund has been changed
from the Russell 2000 to the S&P/BARRA Small Cap
Value Index in order to better represent the
investment policies for comparison purposes.
* Index did not exist.
<PAGE> 14
9
- ---------------------------
Small Cap Value Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 5.25% NONE NONE NONE
------------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
------------------------------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
------------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
---------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
---------------------------------------------------------------------------------------------------
Other Expenses .37% .37% .37% .37%
---------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.46% 2.11% 2.11% 1.11%
---------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.27%) (.17%) (.17%) (.17%)
---------------------------------------------------------------------------------------------------
Net Expenses 1.19% 1.94% 1.94% .94%
---------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.19% for Class A shares, 1.94% for Class B
shares, 1.94% for Class C shares, and .94% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 640 $ 697 $ 197 $ 297 $ 197 $ 96
--------------------------------------------------------------------------------------------------------
3 Years 937 945 645 645 645 336
--------------------------------------------------------------------------------------------------------
5 Years 1,256 1,318 1,118 1,118 1,118 595
--------------------------------------------------------------------------------------------------------
10 Years 2,158 2,262 2,262 2,428 2,428 1,336
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $666
Class B (no redemption) $214
Class B (with redemption) $714
Class C (no redemption) $214
Class C (with redemption) $314
Class I $113
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 15
10
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Growth Fund
WHAT IS THE GOAL OF THE
MID CAP GROWTH FUND? The Fund seeks growth of capital and secondarily,
current income by investing primarily in equity
securities.
WHAT ARE THE MID CAP
GROWTH FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests in securities that have the potential
to produce above-average earnings growth per share over
a one-to-three year period. The Fund typically invests
in mid-cap companies with a market capitalizations of
$500 million to $10 billion. Typically, the Fund
acquires shares of established companies with a history
of above-average growth, as well as those companies
expected to enter periods of above-average growth. Not
all the securities purchased by the Fund will pay
dividends. The Fund also invests in smaller companies in
emerging growth industries. For more information about
the Mid Cap Growth Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE MID
CAP GROWTH FUND? The main risks of investing in the Mid Cap Growth Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Mid Cap Growth Fund will change every day in response to
market conditions. You may lose money if you invest in
the Mid Cap Growth Fund.
MAIN RISKS
- --------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
mid cap growth stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Smaller Companies. Investments in smaller, newer
companies may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 16
11
- ---------------------------
Mid Cap Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE MID CAP
GROWTH FUND
PERFORMED? By showing the variability of the Mid Cap Growth Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP GROWTH
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-------------------
<S> <C>
1990 1.37
1991 42.92
1992 9.54
1993 12.74
1994 -3.72
1995 27.88
1996 20.29
1997 30.07
1998 37.34
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.51%.
- --------------------------------------------------------------------------------
Best Quarter: 39.91% 4Q1998 Worst Quarter: -17.05% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 17
12
FUND SUMMARY
Mid Cap Growth Fund
ONE GROUP(R)
- ------------------------------------
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 29.87% 19.91% 16.54%
------------------------------------------------------------------------------------------
Russell Mid Cap Growth Index (1) 17.86% 17.33% 15.39%
------------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Growth Index (2) 34.86% 19.76% 17.23%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 30.90% 19.83%
------------------------------------------------------------------------------------------
Russell Mid Cap Growth Index (1) 17.86% 17.05%
------------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Growth Index (2) 34.86% 19.58%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 36.81% 29.93%
------------------------------------------------------------------------------------------
Russell Mid Cap Growth Index (1) 17.86% 17.79%
------------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Growth Index (2) 34.86% 33.71%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 3/2/89)
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 37.34% 21.48% 19.39%
------------------------------------------------------------------------------------------
Russell Mid Cap Growth Index (1) 17.86% 17.33% 17.04%
------------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Growth Index (2) 34.86% 19.76% *
</TABLE>
(1) The Russell Mid Cap Growth Index is an unmanaged
index generally representative of the mid-cap
growth market. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B and Class C Shares.
(2) The S&P/BARRA Midcap 400 Growth Index is an
unmanaged index representing the performance of
the highest price to book securities in the S&P
MidCap 400 Index. The performance of the index
does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B and Class C Shares.
* Index did not exist.
<PAGE> 18
13
- ---------------------------
Mid Cap Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them for the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
---------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
---------------------------------------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
---------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.35% 2.00% 2.00% 1.00%
---------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) NONE NONE NONE
---------------------------------------------------------------------------------------------------
Net Expenses 1.25% 2.00% 2.00% 1.00%
---------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.25% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 646 $ 703 $ 203 $ 303 $ 203 $ 102
-------------------------------------------------------------------------------------------------------------
3 Years 921 927 627 627 627 318
-------------------------------------------------------------------------------------------------------------
5 Years 1,217 1,278 1,078 1,078 1,078 552
-------------------------------------------------------------------------------------------------------------
10 Years 2,055 2,160 2,160 2,327 2,327 1,225
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A shares would be $655.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 19
14
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Value Fund
WHAT IS THE GOAL OF THE
MID CAP VALUE FUND? The Fund seeks capital appreciation with the secondary
goal of achieving current income by investing primarily
in equity securities.
WHAT ARE THE MID CAP
VALUE FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests mainly in equity securities of
companies with below-market average price-to-earnings
and price-to-book value ratios and with market
capitalizations of $500 million to $10 billion. In
choosing investments, the Fund considers the issuer's
soundness and earnings prospects. If Banc One Investment
Advisors thinks that a company's fundamentals are
declining or that a company's ability to pay dividends
has been impaired, it may eliminate the Fund's holding
of the company's stock. For more information about the
Mid Cap Value Fund's investment strategies, please read
"More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE MID
CAP VALUE FUND? The main risks of investing in the Mid Cap Value Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Mid Cap Value Fund and its yield will change every day
in response to interest rates and other market
conditions. You may lose money if you invest in the Mid
Cap Value Fund.
MAIN RISKS
- --------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) which are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
mid cap value stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Smaller Companies. The Fund's investments in smaller,
newer companies may be riskier than investments in
larger, more established companies. Securities of small
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 20
15
- ---------------------------
Mid Cap Value Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE MID CAP
VALUE FUND PERFORMED? By showing the variability of the Mid Cap Value Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP VALUE
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MID CAP VALUE FUND CLASS I SHARES
---------------------------------
<S> <C>
1990 -14.47
1991 27.18
1992 12.92
1993 13.20
1994 -0.71
1995 26.03
1996 16.50
1997 35.10
1998 5.67
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-8.01%.
- --------------------------------------------------------------------------------
Best Quarter: 15.97% 4Q1998 Worst Quarter: -17.70% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 21
16
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Mid Cap Value Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Mid Cap Value Fund -0.11% 14.31% 13.67%
--------------------------------------------------------------------------------------
Russell Mid Cap Value Index (2) 5.09% 17.53% 17.22%
--------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Value Index (3) 4.67% 17.48% 16.14%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Mid Cap Value Fund 0.04% 14.28%
--------------------------------------------------------------------------------------
Russell Mid Cap Value Index (2) 5.09% 17.15%
--------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Value Index (3) 4.67% 17.21%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 3/2/89)
<S> <C> <C> <C>
One Group Mid Cap Value Fund 5.67% 15.79% 13.36%
--------------------------------------------------------------------------------------
Russell Mid Cap Value Index (2) 5.09% 17.53% 15.67%
--------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Value Index (3) 4.67% 17.48% *
</TABLE>
(1) The Fund also offers Class C Shares. Class C
Shares commenced operations on March 22, 1999 and
do not have a full calendar year of investment
returns as of the date of this Prospectus.
2 The Russell Mid Cap Value Index is an unmanaged
index generally representative of the performance
of the mid cap value market. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B and Class C Shares.
(3) The S&P/BARRA Midcap 400 Value Index is an
unmanaged index representing the performance of
the lowest price to book securities in the S&P
Midcap 400 Index. The performance of the index
does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management fees. By contrast, the performance of
the Fund reflects the deduction of these services
as well as the deduction of sales charges on
Class A Shares and applicable contingent deferred
sales charges on Class B and Class C Shares.
* Index did not exist.
<PAGE> 22
17
- ---------------------------
Mid Cap Value Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees 0.35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.31% 1.96% 1.96% .96%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) NONE NONE NONE
--------------------------------------------------------------------------------------------------
Net Expenses 1.21% 1.96% 1.96% .96%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.21% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING NO ASSUMING ASSUMING NO ASSUMING
REDEMPTION REDEMPTION AT REDEMPTION REDEMPTION AT
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 642 $ 199 $ 699 $ 199 $ 299 $ 98
--------------------------------------------------------------------------------------------------------
3 Years 909 615 915 615 615 306
--------------------------------------------------------------------------------------------------------
5 Years 1,196 1,057 1,257 1,057 1,057 531
--------------------------------------------------------------------------------------------------------
10 Years 2,013 2,117 2,117 2,285 2,285 1,178
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A Shares would be $651.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 23
18
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Mid Cap Fund
WHAT IS THE GOAL OF THE
DIVERSIFIED MID CAP
FUND? The Fund seeks long-term capital growth by investing
primarily in equity securities of companies with
intermediate capitalizations.
WHAT ARE THE DIVERSIFIED
MID CAP FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests mainly in equity securities of mid cap
companies. Mid Cap companies are defined as companies
with market capitalizations of $500 million to $10
billion. The Fund looks for mid cap companies of this
size with strong potential, stable market share, and an
ability to quickly respond to new business
opportunities. In choosing securities, the Fund invests
in mid cap and other companies across different
capitalization levels targeting both value and growth
oriented companies. Because the Fund seeks return over
the long term, Banc One Investment Advisors will not
attempt to time the market. For more information about
the Diversified Mid Cap Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
DIVERSIFIED MID CAP
FUND? The main risks of investing in the Diversified Mid Cap
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Diversified Mid Cap Fund will change every day in
response to market conditions. You may lose money if you
invest in the Diversified Mid Cap Fund.
MAIN RISKS
- --------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities also are subject to "stock
market risk" meaning that stock prices in general (or
mid cap stock prices in particular) may decline over
short or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Smaller Companies. Investments in smaller, newer
companies may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 24
19
- ---------------------------
Diversified Mid Cap Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE DIVERSIFIED
MID CAP FUND
PERFORMED? By showing the variability of the Diversified Mid Cap
Fund performance from year to year, the chart and the
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
DIVERSIFIED MID CAP FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED MID CAP FUND CLASS I SHARES
---------------------------------------
<S> <C>
1989 16.26
1990 -8.58
1991 35.20
1992 24.57
1993 24.04
1994 -3.26
1995 19.74
1996 25.05
1997 27.89
1998 4.62
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-3.89%. The above-quoted performance data
includes the performance of a common trust fund,
the predecessor to the Pegasus Mid Cap
Opportunity Fund and the Pegasus Mid Cap
Opportunity Fund for the period prior to the
consolidation with the One Group Diversified Mid
Cap Fund on March 22, 1999. The predecessor to
the Pegasus Mid Cap Opportunity Fund commenced
operations on June 1, 1991 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
periods prior to the commencement of operations
of the predecessor to the Pegasus Mid Cap
Opportunity Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 22.78% 4Q1998 Worst Quarter: -20.69% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 25
20
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Diversified Mid Cap Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A(2) (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund -1.20% 12.78% 15.01% 14.13%
--------------------------------------------------------------------------------------------------------------
Russell 2500 Index (3) 0.38% 14.13% 14.61% 13.26%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS B(2) (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund -0.73% 13.56% 15.53% 14.49%
--------------------------------------------------------------------------------------------------------------
Russell 2500 Index (3) 0.38% 14.13% 14.61% 13.26%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Diversified Mid Cap Fund 4.62% 14.15% 15.71% 14.60%
--------------------------------------------------------------------------------------------------------------
Russell 2500 Index (3) 0.38% 14.13% 14.61% 13.26%
</TABLE>
(1) The above-quoted performance data includes the
performance of a common trust fund, the
predecessor to the Pegasus Mid Cap Opportunity
Fund and the Pegasus Mid Cap Opportunity Fund for
the period prior to the consolidation with the
One Group Diversified Mid Cap Fund on March 22,
1999. The predecessor to the Pegasus Mid Cap
Opportunity Fund commenced operations on June 1,
1991 subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Mid Cap Opportunity Fund as adjusted
to reflect the expenses associated with the Fund.
The common trust fund was not registered with the
SEC and was not subject to the investment
restrictions, limitations, and diversification
requirements imposed by law on registered mutual
funds. If the common trust fund had been
registered, its return may have been lower. The
Fund also offers Class C Shares. Class C Shares
commenced operations on March 22, 1999 and do not
have a full calendar year of investment returns
as of the date of this Prospectus.
(2) After June 1, 1991, but prior to the commencement
of operations of Class A shares on May 1, 1992
and Class B shares on September 23, 1996, the
performance for Class A shares is based on Class
I share performance, and the performance for
Class B shares is based on Class A share
performance adjusted to reflect the difference in
expenses and sales charges.
(3) The Russell 2500 Index is an unmanaged index
generally representative of the performance of
the 2500 smallest companies in the Russell 3000
index which represents approximately 17% of the
total market capitalization of the Russell 3000
Index. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as investment management
fees. By contrast, the performance of the Fund
reflects the deduction of these services as well
as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B and Class C Shares.
<PAGE> 26
21
- ---------------------------
Diversified Mid Cap Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 5.25% NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.35% 2.00% 2.00% 1.00%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.24%) (.14%) (.14%) (.14%)
--------------------------------------------------------------------------------------------------
Net Expenses 1.11% 1.86% 1.86% .86%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.11% for Class A shares, 1.86% for Class B
shares, 1.86% for Class C shares, and .86% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 632 $ 689 $ 189 $ 289 $ 189 $ 88
--------------------------------------------------------------------------------------------------------
3 Years 908 914 614 614 614 304
--------------------------------------------------------------------------------------------------------
5 Years 1,204 1,265 1,065 1,065 1,065 539
--------------------------------------------------------------------------------------------------------
10 Years 2,044 2,148 2,148 2,316 2,316 1,212
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 27
22
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap Growth Fund
WHAT IS THE GOAL OF THE
LARGE CAP GROWTH FUND?The Fund seeks long-term capital appreciation and growth
of income by investing primarily in equity securities.
WHAT ARE THE LARGE CAP
GROWTH FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests mainly in equity securities of large,
well-established companies. The weighted average
capitalization of companies in which the Fund invests
normally will exceed the median market capitalization of
the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index"). (1) For more information about the
Large Cap Growth Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
LARGE CAP GROWTH FUND?The main risks of investing in the Large Cap Growth Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Large Cap Growth Fund will change every day in response
to market conditions. You may lose money if you invest
in the Large Cap Growth Fund.
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
large cap growth stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 28
23
- ---------------------------
Large Cap Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE LARGE CAP
GROWTH FUND
PERFORMED? By showing the variability of the Large Cap Growth
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE
CAP GROWTH FUND IS NOT NECESSARILY AN INDICATION OF HOW
THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP GROWTH FUND
---------------------
<S> <C>
1993 13.95
1994 5.56
1995 27.04
1996 17.25
1997 32.84
1998 44.71
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
6.82%.
- --------------------------------------------------------------------------------
Best Quarter: 24.51% 4Q1998 Worst Quarter: -6.66% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 29
24
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Large Cap Growth Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 2/22/94)
<S> <C> <C> <C>
One Group Large Cap
Growth Fund 36.74% 23.39%
--------------------------------------------------------------------
S&P/BARRA 500 Growth
Index (1) 42.16% 28.94%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Large Cap
Growth Fund 38.24% 23.38%
--------------------------------------------------------------------
S&P/BARRA 500 Growth
Index (1) 42.16% 27.92%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Large Cap
Growth Fund 42.30% 40.01%
--------------------------------------------------------------------
S&P/BARRA 500 Growth
Index (1) 42.16% 39.93%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 2/28/92)
<S> <C> <C> <C>
One Group Large Cap
Growth Fund 44.71% 24.76% 20.92%
--------------------------------------------------------------------
S&P/BARRA 500 Growth
Index (1) 42.16% 27.94% 21.45%
</TABLE>
(1) The S&P/BARRA 500 Growth Index is an unmanaged
index representing the performance of the highest
price to book securities in the S&P 500 Index.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
<PAGE> 30
25
- ---------------------------
Large Cap Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .69% .69% .69% .69%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .25% .25% .25% .25%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.29% 1.94% 1.94% .94%
-------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) NONE NONE NONE
-------------------------------------------------------------------------------------------------
Net Expenses 1.19% 1.94% 1.94% .94%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.19% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 640 $ 697 $ 197 $ 297 $ 197
-------------------------------------------------------------------------------------
3 Years 903 909 609 609 609
-------------------------------------------------------------------------------------
5 Years 1,186 1,247 1,047 1,047 1,047
-------------------------------------------------------------------------------------
10 Years 1,991 2,096 2,096 2,264 2,264
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 96
-------------------------------------
3 Years 300
-------------------------------------------
5 Years 520
-------------------------------------------------
10 Years 1,155
-------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A shares would be $649.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 31
26
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap Value Fund
WHAT IS THE GOAL OF THE
LARGE CAP VALUE FUND? The Fund seeks capital appreciation with the incidental
goal of achieving current income by investing primarily
in equity securities.
WHAT ARE THE LARGE CAP
VALUE FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests mainly in equity securities of large
capitalization companies that are believed to be selling
below their long-term investment values. The weighted
average capitalization of companies in which the Fund
invests normally will exceed the market median
capitalization of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"). (1) The Fund also
may invest in the stock of companies which have "breakup
values" well in excess of current market values or which
have uniquely undervalued corporate assets. For more
information about the Large Cap Value Fund's investment
strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
LARGE CAP VALUE FUND? The main risks of investing in the Large Cap Value Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Large Cap Value Fund will change every day in response
to market conditions. You may lose money if you invest
in the Large Cap Value Fund.
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
large cap value stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 32
27
- ---------------------------
Large Cap Value Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE LARGE CAP
VALUE FUND PERFORMED? By showing the variability of the Large Cap Value Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE CAP
VALUE FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND
--------------------
<S> <C>
1992 9.19
1993 4.65
1994 0.78
1995 24.88
1996 19.94
1997 26.32
1998 13.89
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.03%.
- --------------------------------------------------------------------------------
Best Quarter: 15.50% 4Q1998 Worst Quarter: -10.86% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 33
28
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Large Cap Value Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Large Cap
Value Fund 8.07% 15.39% 12.54%
------------------------------------------------------------------
S&P/BARRA 500 Value
Index (2) 14.67% 19.87% 18.45%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Large Cap
Value Fund 7.81% 15.33%
------------------------------------------------------------------
S&P/BARRA 500 Value
Index (2) 14.67% 19.14%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 3/1/91)
<S> <C> <C> <C>
One Group Large Cap
Value Fund 13.89% 16.78% 14.10%
------------------------------------------------------------------
S&P/BARRA 500 Value
Index (2) 14.67% 19.87% 18.11%
</TABLE>
(1) The Fund also offers Class C Shares. Class C
Shares commenced operations on March 22, 1999 and
do not have a full calendar year of investment
returns as of the date of this prospectus.
(2) The S&P/BARRA 500 Value Index is an unmanaged
index representing the performance of the lowest
price to book securities in the S&P 500 Index.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B Shares and Class C Shares.
<PAGE> 34
29
- ---------------------------
Large Cap Value Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. the examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.33% 1.98% 1.98% .98%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) .10% NONE NONE NONE
------------------------------------------------------------------------------------------------
Net Expenses 1.23% 1.98% 1.98% .98%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.23% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 644 $ 701 $ 201 $ 301 $ 201
-------------------------------------------------------------------------------------
3 Years 919 926 626 626 626
-------------------------------------------------------------------------------------
5 Years 1,215 1,276 1,076 1,076 1,076
-------------------------------------------------------------------------------------
10 Years 2,054 2,158 2,158 2,326 2,326
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 100
-------------------------------------------------------------
3 Years 316
-------------------------------------------------------------------
5 Years 551
-------------------------------------------------------------------------
10 Years 1,223
-------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 35
30
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Income Fund
WHAT IS THE GOAL OF THE
EQUITY INCOME FUND? The Fund seeks current income through regular payment of
dividends with the secondary goal of achieving capital
appreciation by investing primarily in equity
securities.
WHAT ARE THE EQUITY
INCOME FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund attempts to keep its dividend yield above the
Standard & Poor's 500 Composite Price Index ("S&P 500
Index")(1) by investing in common stock of corporations
which regularly pay dividends, as well as stocks with
favorable long-term fundamental characteristics. As part
of its main investment strategy, the Fund may invest in
convertible bonds and REITs. Because yield is the main
consideration in selecting securities, the Fund may
purchase stocks of companies that are out of favor in
the financial community. For more information about the
Equity Income Fund's investment strategies, please read
"More About The Funds" and "Principal Investment
Strategies."
WHAT IS A REIT? A REIT or a real estate investment trust is a pooled
investment vehicle which invests in income producing
real estate or real estate loans. REITs are classified
as equity REITs, mortgage REITs, or a combination of
equity and mortgage REITs. Equity REITs mainly invest
directly in real estate and obtain income from the
collecting rent. Mortgage REITs invest in mortgages and
obtain income from collecting interest payments on the
mortgages. REITs are not taxed on income distributed to
shareholders if they comply with several requirements of
the Internal Revenue Code.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
EQUITY INCOME FUND? The main risks of investing in the Equity Income Fund
and the circumstances likely to adversely affect your
investment are described below. The share price and
yield of the Equity Income Fund will change every day in
response to market conditions. You may lose money if you
invest in the Equity Income Fund.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 36
31
- ---------------------------
Equity Income Fund
MAIN RISKS
- --------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Yield. Because of the Fund's emphasis on yield, the Fund
may purchase stocks of companies that are out of favor
with the financial community. These stocks may have less
of a chance for capital appreciation than securities of
companies that are considered to be more attractive
investments. In addition, there can be no assurance that
a company will continue to pay dividends.
Real Estate Securities. The Fund's investments in real
estate securities are subject to the same risks as
direct investments in real estate. Real estate values
rise and fall in response to many factors, including
local, regional and national economic conditions, the
demand for rental property, and interest rates. When
economic growth is slowing, demand for property
decreases and prices may fall. Rising interest rates,
which drive up mortgage and financing costs, can inhibit
construction, purchases, and sales of property. Property
values could decrease because of overbuilding, extended
vacancies, increase in property taxes and operating
expenses, zoning laws, environmental regulations,
clean-up of and liability for environmental hazards,
uninsured casualty or condemnation losses, or a general
decline in neighborhood values. The Fund's investments
and your investment may decline in response to declines
in property values or other adverse changes to the real
estate market.
REIT Risk. In addition to the risks facing real estate
securities, the Fund's investments in REITs involve
unique risks. REITs may have limited financial
resources, may trade less frequently and in limited
volume and may be more volatile than other securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 37
32
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Equity Income Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total return is a
hypothetical rate of return
that, if achieved annually,
would have produced the same
cumulative total return if
performance had been constant
over the entire period. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE EQUITY
INCOME FUND
PERFORMED? By showing the variability of the Equity Income Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INCOME
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1989 26.24
- ---- -----
<S> <C>
1990 -3.14
1991 23.66
1992 6.81
1993 11.4
1994 0.98
1995 34.94
1996 16.7
1997 32.52
1998 17.18
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-2.24%.
- --------------------------------------------------------------------------------
Best Quarter: 16.77% 2Q1997 Worst Quarter: -9.67% 3Q1990
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C> <C>
One Group Equity Income Fund 16.76% 19.50% 16.68%
--------------------------------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 20.13%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C> <C>
One Group Equity Income Fund 11.07% 18.46%
--------------------------------------------------------------------------------------------
S&P 500 Index (1) 28.58% 23.67%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C> <C>
One Group Equity Income Fund 15.08% 17.64%
--------------------------------------------------------------------------------------------
S&P 500 Index (1) 28.58% 28.11%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 7/2/87)
<S> <C> <C> <C> <C>
One Group Equity Income Fund 17.18% 19.82% 16.08% 13.73%
--------------------------------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 19.21% 15.75%
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the US stock market. The performance
of the index does not reflect the deduction of
expenses associated with a mutual fund, such as
investment management. By contrast, the
performance of the Funds reflects the deduction
of these services as well as the deduction of
sales charges on Class A Shares and applicable
contingent deferred sales charges on Class B and
Class C Shares.
<PAGE> 38
33
- ---------------------------
Equity Income Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .74% .74% .74% .74%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.33% 1.98% 1.98% .98%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) NONE NONE NONE
--------------------------------------------------------------------------------------------------
Net Expenses 1.23% 1.98% 1.98% .98%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.23% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 644 $ 701 $ 201 $ 301 $ 201 $ 100
----------------------------------------------------------------------------------------------------------------------------
3 Years 915 921 621 621 621 312
----------------------------------------------------------------------------------------------------------------------------
5 Years 1,206 1,268 1,068 1,068 1,068 542
----------------------------------------------------------------------------------------------------------------------------
10 Years 2,034 2,139 2,139 2,306 2,306 1,201
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A Shares would be $653.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 39
34
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Equity Fund
WHAT IS THE GOAL OF THE
DIVERSIFIED EQUITY
FUND? The Fund seeks long term capital growth and growth of
income with a secondary objective of providing a
moderate level of current income.
WHAT ARE THE DIVERSIFIED
EQUITY FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests mainly in common stocks of overlooked
or undervalued companies that have the potential for
earnings growth over time. The Fund uses a multi-style
approach, meaning that it may invest across different
capitalization levels targeting both value and growth
oriented companies. Because the Fund seeks return over
the long term, Banc One Investment Advisors will not
attempt to time the market. For more information about
the Diversified Equity Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
DIVERSIFIED EQUITY
FUND? The main risks of investing in the Diversified Equity
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Diversified Equity Fund will change every day in
response to market conditions. You may lose money if you
invest in the Diversified Equity Fund.
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer
companies may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 40
35
- ---------------------------
Diversified Equity Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE DIVERSIFIED
EQUITY FUND
PERFORMED? By showing the variability of the Diversified Equity
Fund performance from year to year, the charts and table
below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
DIVERSIFIED EQUITY FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
TOTAL RETURN (per calendar year) (1) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED EQUITY FUND
-----------------------
<S> <C>
1990 1.40
1991 38.13
1992 13.64
1993 7.33
1994 -3.64
1995 27.54
1996 21.42
1997 34.53
1998 27.96
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.08%. The above quoted performance data includes
the performance of the Paragon Value Equity
Income Fund for the period before its
consolidation with the One Group Diversified
Equity Fund on March 26, 1996.
- --------------------------------------------------------------------------------
Best Quarter: 21.43% 4Q1998 Worst Quarter: -11.31% 3Q1990
- --------------------------------------------------------------------------------
<PAGE> 41
36
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Diversified Equity Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 12/29/89)
<S> <C> <C> <C>
One Group Diversified
Equity Fund 21.24% 19.47% 17.75%
-------------------------------------------------------------------
S&P 500 (2) 28.58% 24.06% 17.90%
-------------------------------------------------------------------
S&P 1500 Index (3) 26.35% * *
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 9/9/94)
<S> <C> <C> <C>
One Group Diversified
Equity Fund 21.92% 22.24%
-------------------------------------------------------------------
S&P 500 (2) 28.58% 28.47%
-------------------------------------------------------------------
S&P 1500 Index (3) 26.35% *
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Diversified
Equity Fund 26.14% 26.78%
-------------------------------------------------------------------
S&P 500 (2) 28.58% 28.11%
-------------------------------------------------------------------
S&P 1500 Index (3) 26.35% 26.33%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (4) (since 12/29/89)
<S> <C> <C> <C>
One Group Diversified
Equity Fund 28.32% 20.96% 18.06%
-------------------------------------------------------------------
S&P 500 (2) 28.58% 24.06% 17.90%
-------------------------------------------------------------------
S&P 1500 Index (3) 26.35% * *
</TABLE>
(1) The above quoted performance data includes the
performance of the Paragon Value Equity Income
Fund for the period before its consolidation with
the One Group Diversified Equity Fund on March
26, 1996.
(2) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the U.S. stock market. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
(3) The S&P 1500 Index is an unmanaged index
generally representative of the performance of
large and small companies in the US stock market.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
(4) Prior to March 26, 1996, performance for Class I
shares is based on Class A share performance
adjusted to reflect the absence of sales charges.
* Index did not exist.
<PAGE> 42
37
- ---------------------------
Diversified Equity Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .72% .72% .72% .72%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.31% 1.96% 1.96% .96%
-------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) NONE NONE NONE
-------------------------------------------------------------------------------------------------
Net Expenses 1.21% 1.96% 1.96% .96%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.21% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 642 $ 699 $ 199 $ 299 $ 199 $ 98
----------------------------------------------------------------------------------------------------------------------------
3 Years 909 915 615 615 615 306
----------------------------------------------------------------------------------------------------------------------------
5 Years 1,196 1,257 1,057 1,057 1,057 531
----------------------------------------------------------------------------------------------------------------------------
10 Years 2,013 2,117 2,117 2,285 2,285 1,178
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A would be $651.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 43
38
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Balanced Fund
WHAT IS THE GOAL OF THE
BALANCED FUND? The Fund seeks to provide total return while preserving
capital.
WHAT ARE THE BALANCED
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests in a combination of stocks (including
both growth and value securities), fixed income
securities and money market instruments. Banc One
Investment Advisors will regularly review the Fund's
asset allocations and vary them over time to favor
investments that it believes will provide the most
favorable total return. In making asset allocation
decisions, Banc One Investment Advisors will evaluate
projections of risk, market and economic conditions,
volatility, yields and expected returns. Because the
Fund seeks total return over the long term, Banc One
Investment Advisors will not attempt to time the market.
Rather, asset allocation shifts will be made gradually
over time. For more information about the Balanced
Fund's investment strategies, please read "More About
The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
BALANCED FUND? The main risks of investing in the Balanced Fund and the
circumstances likely to adversely affect your investment
are described below. The share price of the Balanced
Fund and its yield will change every day in response to
interest rates and other market conditions. You may lose
money if you invest in the Balanced Fund.
<PAGE> 44
39
- ---------------------------
Balanced Fund
MAIN RISKS
- --------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) which are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Interest Rate Risk. In connection with the Fund's fixed
income strategy, the Fund invests in bonds and other
debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its fixed income
investment strategy, the Fund invests in mortgage-backed
and asset-backed securities. The issuers of these
securities and other callable securities may be able to
repay principal in advance, especially when interest
rates fall. Changes in pre-payment rates can affect the
return on investment and yield of mortgage and
asset-backed securities. When mortgage and other
obligations are pre-paid and when securities are called,
the Fund may have to reinvest in securities with a lower
yield. The Fund may also fail to recover premiums paid
for the securities, resulting in an unexpected capital
loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives may be more volatile and riskier
in terms of both liquidity and value than traditional
investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 45
40
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Balanced Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE BALANCED
FUND PERFORMED? By showing the variability of the Balanced Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BALANCED FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED FUND
-------------
<S> <C>
1994 -3.23
1995 24.72
1996 12.4
1997 22.26
1998 19.46
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.83%.
- --------------------------------------------------------------------------------
Best Quarter: 12.36% 4Q1998 Worst Quarter: -4.22% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 4/2/93)
<S> <C> <C> <C>
One Group Balanced Fund 13.17% 13.42% 12.54%
------------------------------------------------------------------------
S&P 500 Index (2) 28.58% 24.06% 22.63%
------------------------------------------------------------------------
Lipper Balanced Funds
Index (3) 15.09% 13.87% 13.62%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Balanced Fund 13.61% 13.50%
------------------------------------------------------------------------
S&P 500 Index (2) 28.58% 23.67%
------------------------------------------------------------------------
Lipper Balanced Funds
Index (3) 15.09% 13.52%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 4/5/93)
<S> <C> <C> <C>
One Group Balanced Fund 19.77% 14.97% 13.91%
------------------------------------------------------------------------
S&P 500 Index (2) 28.58% 24.06% 22.63%
------------------------------------------------------------------------
Lipper Balanced Funds
Index (3) 15.09% 13.87% 13.62%
</TABLE>
(1) The table above compares the average annual
return of the Fund, which holds a mix of stocks,
bonds and other debt securities to an unmanaged
stock index and a blended index for the period
indicated.
(2) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the US stock market. The performance
of the index does not reflect the deduction of
expenses associated with a mutual fund, such as
investment management fees. By contrast, the
performance of the Fund reflects the deduction of
these services as well as the deduction of sales
charges on Class A Shares and applicable
contingent deferred sales charges on Class B
Shares.
(3) The Lipper Balanced Funds Index is a blended
index consisting of both stocks and bonds with a
typical stock to bond ratio of around 60% to 40%.
<PAGE> 46
41
- ---------------------------
Balanced Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .65% .65% .65% .65%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .35% .35% .35% .35%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.35% 2.00% 2.00% 1.00%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.20%) (.10%) (.10%) (.10%)
------------------------------------------------------------------------------------------------
Net Expenses 1.15% 1.90% 1.90% .90%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.15% for Class A shares, 1.90% for Class B
shares, 1.90% for Class C shares, and .90% for
Class I Shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 636 $ 693 $ 193 $ 293 $ 193
-------------------------------------------------------------------------------------
3 Years 912 918 618 618 618
-------------------------------------------------------------------------------------
5 Years 1,207 1,269 1,069 1,069 1,069
-------------------------------------------------------------------------------------
10 Years 2,047 2,165 2,165 2,319 2,319
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 92
-----------------------------------
3 Years 308
-----------------------------------------
5 Years 543
-----------------------------------------------
10 Years 1,216
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $655
Class B (no redemption) $203
Class B (with redemption) $703
Class C (no redemption) $203
Class C (with redemption) $303
Class I $102
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 47
42
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
WHAT IS THE GOAL OF THE
EQUITY INDEX FUND? The Fund seeks investment results that correspond to the
aggregate price and dividend performance of securities
in the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index"). (1)
WHAT ARE THE EQUITY INDEX
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in stocks included in the S&P
500 Index. The Fund may also invest in stock index
futures. Banc One Investment Advisors attempts to track
the performance of the S&P 500 Index to achieve a
correlation of 0.95 between the performance of the Fund
and that of the S&P 500 Index without taking into
account the Fund's expenses. For more information about
the Equity Index Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
EQUITY INDEX FUND? The main risks of investing in the Equity Index Fund and
the circumstances likely to adversely affect your
investment are described below. The share price of the
Equity Index Fund will change every day in response to
market conditions. You may lose money if you invest in
the Equity Index Fund.
MAIN RISKS
- --------------------------------
Index Investing. The Fund attempts to track the
performance of the S&P 500 Index. Therefore, securities
may be purchased, retained and sold by the Fund at times
when an actively managed fund would not do so. If the
value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss
than would be the case if the Fund were not fully
invested in such securities.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 48
43
- ---------------------------
Equity Index Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
HOW HAS THE EQUITY INDEX
FUND PERFORMED? By showing the variability of the Equity Index Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY INDEX FUND
-----------------
<S> <C>
1992 6.86
1993 9.37
1994 0.75
1995 37.07
1996 22.59
1997 33
1998 28.24
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
5.15%.
- --------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 49
44
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Equity Index Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Equity Index
Fund 21.21% 22.04% 18.46%
------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 20.13%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Equity Index
Fund 21.95% 22.05%
------------------------------------------------------------------
S&P 500 Index (1) 28.58% 23.67%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Equity Index
Fund 26.20% 26.89%
------------------------------------------------------------------
S&P 500 Index (1) 28.58% 28.11%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 7/2/91)
<S> <C> <C> <C>
One Group Equity Index
Fund 28.24% 23.63% 19.61%
------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 15.75%
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the U.S. stock market. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B and Class C Shares.
<PAGE> 50
45
- ---------------------------
Equity Index Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .30% .30% .30% .30%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .91% 1.56% 1.56% .56%
-------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.26%) (.16%) (.16%) (.16%)
-------------------------------------------------------------------------------------------------
Net Expenses .65% 1.40% 1.40% .40%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.65% for Class A shares, 1.40% for Class B
shares, 1.40% for Class C shares, and .40% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 588 $ 643 $ 143 $ 243 $ 143 $ 41
-------------------------------------------------------------------------------------------------------------------
3 Years 775 777 477 477 477 163
-------------------------------------------------------------------------------------------------------------------
5 Years 978 1,035 835 835 835 297
-------------------------------------------------------------------------------------------------------------------
10 Years 1,563 1,668 1,668 1,843 1,843 686
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $613
Class B (no redemption) $159
Class B (with redemption) $659
Class C (no redemption) $159
Class C (with redemption) $259
Class I $57
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 51
46
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Market Expansion Index Fund
WHAT IS THE GOAL OF THE
MARKET EXPANSION INDEX
FUND? The Fund seeks to provide a return which substantially
duplicates the price and yield performance of
domestically traded common stocks in the small and mid
capitalization equity markets, as represented by a
market capitalization weighted combination of the
Standard & Poor's Small Cap 600 Index ("S&P Small Cap
600") and the Standard & Poor's Mid Cap 400 Index ("S&P
Mid Cap 400").(1)
WHAT ARE THE MARKET
EXPANSION INDEX FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests in a representative sampling of stocks
of medium-sized and small U.S. companies that are
included in the S&P Small Cap 600 and S&P Mid Cap 400
and which trade on the New York and American Stock
Exchanges as well as over-the-counter stocks that are
part of the National Market System. (Not all of the
stocks in the indices are included in the Fund). The
Fund uses a sampling methodology to determine which
stocks to purchase or sell in order to closely replicate
the performance of the combined indices. The Fund seeks
to achieve a correlation between its portfolio and that
of the indices of at least 0.95, without taking into
account expenses. For more information about the Market
Expansion Index Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MARKET EXPANSION INDEX
FUND? The main risks of investing in the Market Expansion
Index Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Market Expansion Index Fund and its yield
will change every day in response to economic and other
market conditions. You may lose money if you invest in
the Market Expansion Index Fund.
(1) "S&P Small Cap 600" and "S&P Mid Cap 400" are
registered service marks of Standard & Poor's
corporation, which does not sponsor and is in no
way affiliated with the Fund.
<PAGE> 52
47
- ---------------------------
Market Expansion Index Fund
MAIN RISKS
- --------------------------
Index Investing. The Fund attempts to track the
performance of the S&P Small Cap 600 Index and the S&P
Mid Cap 400 Index. Therefore, securities may be
purchased, retained and sold by the Fund at times when
an actively managed fund would not do so. If the value
of securities that are heavily weighted in the index
changes, you can expect a greater risk of loss than
would be the case if the Fund were not fully invested in
such securities.
Market Risk. The Fund invests in equity securities (such
as stocks) which are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
small cap and mid cap stock prices in particular) may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. The Fund's investments in smaller,
newer companies may be riskier than investments in
larger, more established companies. Securities of
smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 53
48
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Market Expansion Index Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
This Section would normally include a bar chart and
average annual total return table. The Market Expansion
Index Fund began operations on July 31, 1998 and did not
have a full calendar year of investment returns as of
the date of this prospectus.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)(1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE(2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)(3) CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
-----------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------------------------------------
Other Expenses .73% .73% .73% .73%
-----------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.43% 2.08% 2.08% 1.08%
-----------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(4) (.61%) (.51%) (.51%) (.51%)
-----------------------------------------------------------------------------------------------
Net Expenses .82% 1.57% 1.57% .57%
-----------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.82% for Class A shares, 1.57% for Class B
shares, 1.57% for Class C shares, and .57% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<PAGE> 54
49
- ---------------------------
Market Expansion Index Fund
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B(2) CLASS B(2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 604 $ 660 $ 160 $ 260 $ 160 $ 58
------------------------------------------------------------------------------------------------------------------------------
3 Years 897 903 603 603 603 293
------------------------------------------------------------------------------------------------------------------------------
5 Years 1,211 1,272 1,077 1,072 1,072 546
------------------------------------------------------------------------------------------------------------------------------
10 Years 2,098 2,203 2,203 2,370 2,370 1,271
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $663
Class B (no redemption) $211
Class B (with redemption) $711
Class C (no redemption) $211
Class C (with redemption) $311
Class I $110
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 55
50
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
International
Equity Index Fund
WHAT IS THE GOAL OF THE
INTERNATIONAL EQUITY
INDEX FUND? The Fund seeks to provide investment results that
correspond to the aggregate price and dividend
performance of the securities in the MSCI EAFE GDP
Index.(1)
WHAT ARE THE
INTERNATIONAL EQUITY
INDEX FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests mainly in foreign stocks included in
the MSCI EAFE GDP Index. The Fund may also invest in
stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP
Index to achieve a correlation of 0.90 between the
performance of the Fund and that of the MSCI EAFE GDP
Index, without taking into account the Fund's expenses.
As part of its investment strategy, the Fund may invest
in securities of emerging international markets such as
Mexico, Chile and Brazil. Banc One Investment Advisors
selects securities of emerging markets that are included
in the Morgan Stanley Emerging Market Free Index based
on size, risk and the ease of investing in the country's
market (e.g., reasonable settlement procedures). Most of
the Fund's assets will be denominated in foreign
currencies. For more information about the International
Equity Index Fund's investment strategies, please read
"More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INTERNATIONAL EQUITY
INDEX FUND? The main risks of investing in the International Equity
Index Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the International Equity Index Fund will change
every day in response to market conditions. You may lose
money if you invest in the International Equity Index
Fund.
(1) Gross Domestic Product Weighted Morgan Stanley
Capital International Europe, Australasia and Far
East Index. MSCI EAFE GDP Index is a registered
service mark of Morgan Stanley Capital
International, which does not sponsor and is in
no way affiliated with the Fund.
<PAGE> 56
51
- ---------------------------
International Equity Index Fund
MAIN RISKS
- --------------------------------
Index Investing. The Fund attempts to track the
performance of the MSCI EAFE GDP Index. Therefore,
securities may be purchased, retained and sold by the
Fund at times when an actively managed fund would not do
so. If the value of securities that are heavily weighted
in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully
invested in such securities.
Foreign Securities. Investments in foreign securities
involve risks in addition to those of U.S. investments.
These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed
settlement, and less stringent investor protection and
disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and
potentially less liquid than U.S. investments.
Emerging Market Risk. The Fund may invest up to 10% of
its net assets in securities of emerging international
markets. The risks associated with foreign securities
are magnified in countries in "emerging markets." These
countries may have relatively unstable governments and
less established market economies than developed
countries. Emerging markets may face greater social,
economic, regulatory, and political uncertainties. These
risks make emerging market securities more volatile and
less liquid than securities issued in more developed
countries.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
stocks comprising the MSCI EAFE GDP Index in particular)
may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 57
52
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
International Equity Index Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE INTERNATIONAL
EQUITY INDEX FUND
PERFORMED? By showing the variability of the International Equity
Index Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INTERNATIONAL EQUITY INDEX FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
<S> <C>
1993 29.6
1994 3.9
1995 10.2
1996 6.61
1997 5.68
1998 21.57
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
12.70%.
- --------------------------------------------------------------------------------
Best Quarter: 20.46% 4Q1998 Worst Quarter: -14.47% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 4/23/93)
<S> <C> <C> <C>
One Group International
Equity Index Fund 15.02% 8.01% 8.77%
-------------------------------------------------------------------
Morgan Stanley EAFE/GDP
Index(1) 26.71% 12.99% 11.89%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group International
Equity Index Fund 15.37% 7.87%
-------------------------------------------------------------------
Morgan Stanley EAFE/GDP
Index(1) 26.71% 10.11%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group International
Equity Index Fund 20.15% 16.96%
-------------------------------------------------------------------
Morgan Stanley EAFE/GDP
Index(1) 26.71% 26.08%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 10/28/92)
<S> <C> <C> <C>
One Group International
Equity Index Fund 21.57% 9.41% 12.28%
-------------------------------------------------------------------
Morgan Stanley EAFE/GDP
Index(1) 26.71% 12.99% 14.62%
</TABLE>
(1) The Morgan Stanley Capital International EAFE/GDP
Index is an unmanaged index generally
representative of the performance of
international stock markets. The performance of
the index does not reflect the deduction of
expenses associated with a mutual fund, such as
investment management. By contrast, the
performance of the Fund reflects the deduction of
these services as well as the deduction of sales
charges on Class A Shares and applicable
contingent deferred sales charges on Class B and
Class C Shares.
<PAGE> 58
53
- ---------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
International Equity Index Fund
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE(2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .55% .55% .55% .55%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .40% .40% .40% .40%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.30% 1.95% 1.95% .95%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(4) (.10%) NONE NONE NONE
------------------------------------------------------------------------------------------------
Net Expenses 1.20% 1.95% 1.95% .95%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.20% for Class A shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B(2) CLASS B(2) CLASS C CLASS C CLASS I
ASSUMING NO ASSUMING ASSUMING NO ASSUMING
REDEMPTION REDEMPTION AT REDEMPTION REDEMPTION AT
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year(1) $ 641 $ 198 $ 698 $ 198 $ 298 $ 97
------------------------------------------------------------------------------------------------------------------------------
3 Years 906 612 912 612 612 303
------------------------------------------------------------------------------------------------------------------------------
5 Years 1,191 1,052 1,252 1,052 1,052 525
------------------------------------------------------------------------------------------------------------------------------
10 Years 2,002 2,107 2,107 2,275 2,275 1,166
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class A Shares would be $650.
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 59
54
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified
International Fund
WHAT IS THE GOAL OF THE
DIVERSIFIED
INTERNATIONAL
FUND? The Fund seeks long-term capital growth by investing
primarily in equity securities of foreign issuers.
WHAT ARE THE DIVERSIFIED
INTERNATIONAL FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in the securities of companies
located in Europe, Asia, and Latin America. The Fund
also will invest in other regions and countries that
present attractive investment opportunities, including
developing countries. In selecting a country for
investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the
securities market of selected countries. In selecting
individual securities, Banc One Investment Advisors
selects a representative sampling of the companies
comprising the individual country's stock market index.
For more information about the Diversified International
Fund's investment strategies, please read "More About
The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
DIVERSIFIED
INTERNATIONAL
FUND? The main risks of investing in the Diversified
International Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of the Diversified International Fund
will change every day in response to market conditions.
You may lose money if you invest in the Diversified
International Fund.
MAIN RISKS
- --------------------------------
Foreign Securities. Investments in foreign securities
involve risks in addition to those of U.S. investments.
These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed
settlement, and less stringent investor protection and
disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and
potentially less liquid than U.S. investments. Because
the Fund may invest over 25% of its total assets in a
single country, political and economic developments in
that country will have a greater impact on the
performance of the Fund than would be the case if the
Fund were more widely diversified.
Emerging Market Risk. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
<PAGE> 60
55
- ---------------------------
Diversified International Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE DIVERSIFIED
INTERNATIONAL FUND
PERFORMED? By showing the variability of the Diversified
International Fund performance from year to year, the
charts below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
DIVERSIFIED INTERNATIONAL FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED INTERNATIONAL FUND
------------------------------
<S> <C>
1989 17.97
1990 -14.35
1991 6.57
1992 -6.65
1993 29.66
1994 0
1995 11.46
1996 7.74
1997 3.97
1998 16.44
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
11.20%. The above quoted performance data
includes the performance of a common trust fund,
the predecessor to the Pegasus International
Equity Fund and the Pegasus International Equity
Fund for the period prior to the consolidation
with One Group Diversified International Fund on
March 22, 1999. The predecessor to the Pegasus
International Equity Fund commenced operations on
December 3, 1994 subsequent to the transfer of
assets from a common trust fund with materially
equivalent investment objectives, policies,
guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the
performance of the common trust fund for periods
prior to the commencement of operations of the
predecessor to the Pegasus International Equity
Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 20.72% 4Q1998 Worst
Quarter: -22.67% 3Q1990
- --------------------------------------------------------------------------------
<PAGE> 61
56
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Diversified International Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 4/30/86)
<S> <C> <C> <C> <C>
One Group Diversified
International Fund 10.05% 6.45% 5.94% 8.83%
--------------------------------------------------------------------------------------------
MSCI EAFE (Cap-Weighted) (3) 20.00% 9.19% 5.54% 10.03%
--------------------------------------------------------------------------------------------
MSCI EAFE + EMF Index (4) 15.25% 7.83% 5.57% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS B(2) (since 4/30/86)
<S> <C> <C> <C> <C>
One Group Diversified
International Fund 10.43% 6.81% 6.27% 9.10%
--------------------------------------------------------------------------------------------
MSCI EAFE (Cap-Weighted) (3) 20.00% 9.19% 5.54% 10.03%
--------------------------------------------------------------------------------------------
MSCI EAFE + EMF Index (4) 15.25% 7.83% 5.57% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 4/30/86)
<S> <C> <C> <C> <C>
One Group Diversified
International Fund 16.43% 7.77% 6.60% 9.37%
--------------------------------------------------------------------------------------------
MSCI EAFE (Cap-Weighted) (3) 20.00% 9.19% 5.54% 10.03%
--------------------------------------------------------------------------------------------
MSCI EAFE + EMF Index (4) 15.25% 7.83% 5.57% *
</TABLE>
(1) The above quoted performance data includes the
performance of a common trust fund, the
predecessor to the Pegasus International Equity
Fund and the Pegasus International Equity Fund
for the period prior to the consolidation with
One Group Diversified International Fund on March
22, 1999. The predecessor to the Pegasus
International Equity Fund commenced operations on
December 3, 1994 subsequent to the transfer of
assets from a common trust fund with materially
equivalent investment objectives, policies,
guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the
performance of the common trust fund for periods
prior to the commencement of operations of the
predecessor to the Pegasus International Equity
Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower. The Fund also offers Class C
Shares. Class C Shares commenced operations on
March 22, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus.
(2) After December 3, 1994, but prior to the
commencement of operations of Class B shares on
August 26, 1996, performance for Class B shares
is based on Class A share performance adjusted to
reflect the difference in expenses and sales
charges.
(3) The Morgan Stanley Capital International (MSCI)
EAFE (Cap-Weighted) Index is an unmanaged index
generally representative of the foreign equity
market as a whole. Investors are unable to
purchase the index directly, although they can
invest in the underlying securities. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these value-added services as well
as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B Shares. The benchmark index
for the Diversified International Fund has
changed from the MSCI EAFE (Cap-Weighted) Index
to the MSCI EAFE + EMF Index in order to better
represent the investment policies for comparison
purposes.
(4) The Morgan Stanley Capital International (MSCI)
EAFE + EMF Index is an unmanaged index generally
representative of the performance of
international stock markets and of emerging
markets. Investors are unable to purchase the
index directly, although they can invest in the
underlying securities. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management fees. By contrast, the performance of
the Fund reflects the deduction of these
value-added services as well as the deduction of
sales charges on Class A Shares and applicable
contingent deferred sales charges on Class B
Shares.
* Index did not exist.
<PAGE> 62
57
- ---------------------------
Diversified International Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .80% .80% .80% .80%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .26% .26% .26% .26%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.41% 2.06% 2.06% 1.06%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.11%) (.01%) (.01%) (.01%)
------------------------------------------------------------------------------------------------
Net Expenses 1.30% 2.05% 2.05% 1.05%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.30% for Class A shares, 2.05% for Class B
shares, 2.05% for Class C shares, and 1.05% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 650 $ 708 $ 208 $ 308 $ 208 $ 107
--------------------------------------------------------------------------------------------------------------------------------
3 Years 938 945 645 645 645 336
--------------------------------------------------------------------------------------------------------------------------------
5 Years 1,246 1,308 1,108 1,108 1,108 584
--------------------------------------------------------------------------------------------------------------------------------
10 Years 2,118 2,222 2,222 2,389 2,389 1,293
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $661
Class B (no redemption) $209
Class B (with redemption) $709
Class C (no redemption) $209
Class C (with redemption) $309
Class I $108
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 63
58
LOGO
ONE GROUP(R)
- ------------------------------------
More About The Funds
Each of the fourteen funds described in this Prospectus
is a series of One Group Mutual Funds and is managed by
Banc One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual
Funds" and the Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES This Prospectus describes fourteen mutual funds with a
variety of investment objectives, including total
return, capital appreciation, current income, and
long-term capital growth. The principal investment
strategies that are used to meet each Fund's investment
objective are described in Fund Summaries: Investments,
Risk, & Performance in the front of this prospectus.
They are also described below. There can be no assurance
that the Funds will achieve their investment objectives.
Please note that each Fund may also use strategies that
are not described below, but which are described in the
Statement of Additional Information.
- -----
ONE GROUP SMALL CAP GROWTH FUND. The Fund may invest in
common stocks, debt securities, preferred stocks,
convertible securities, warrants, and other equity
securities of small capitalization companies. The Fund
may occasionally hold securities of companies with large
capitalizations if doing so contributes to the Fund's
investment objective.
- The Fund invests at least 65% of its total assets in
the securities of small capitalization companies.
Small capitalization companies have market
capitalizations ranging from $100 million to $3
billion.
- Although the Fund may invest up to 35% of its total
assets in U.S. Government Securities, other investment
grade fixed income securities, cash, and cash
equivalents, the Fund's main investment strategy is to
invest in equity securities of small capitalization
companies.
- -----
ONE GROUP SMALL CAP VALUE FUND. The Fund invests mainly
in equity securities of small domestic issuers with
market capitalizations of $100 million to $3 billion.
- The Fund invests at least 65% of its total assets in
common and preferred stocks, rights, warrants,
convertible securities, and other equity securities of
small capitalization companies.
- Although the Fund may invest up to 25% of the Fund's
total assets in foreign securities, the Fund's main
investment strategy is to invest in securities of
small capitalization companies.
- Up to 20% of the Fund's total assets may be invested
in U.S. government securities, other investment grade
fixed income securities, cash and cash equivalents.
<PAGE> 64
59
- -----
ONE GROUP MID CAP GROWTH FUND. The Fund invests in
securities of companies that have the potential to
produce above-average earnings growth per share over a
one-to-three year period.
- At least 80% of the Fund's total assets will be
invested in equity securities of mid cap companies,
including common stocks and debt securities and
preferred stocks that are convertible to common
stocks. Mid cap companies are defined as companies
with market capitalizations of $500 million to $10
billion.
- A portion of the Fund's assets will be held in cash
equivalents.
- -----
ONE GROUP MID CAP VALUE FUND. The Fund invests mainly in
equity securities of companies with below-market average
price-to-earnings and price-to-book value ratios and mid
cap companies with market capitalizations of $500
million to $10 billion.
- At least 80% of the Fund's total assets will be
invested in equity securities, including common stock
and debt securities and preferred stocks that are
convertible into common stocks.
- A portion of the Fund's assets will be held in cash
equivalents.
- -----
ONE GROUP DIVERSIFIED MID CAP FUND. The Fund invests
mainly in equity securities of mid capitalization
companies. Mid cap companies are defined as companies
with market capitalizations of $500 million to $10
billion.
- At least 65% of the Fund's total assets normally will
be invested in common and preferred stocks, rights,
warrants, convertible securities, and other equity
securities of mid capitalization companies.
- Up to 25% of the Fund's total assets may be invested
in foreign securities. Up to 20% of the Fund's total
assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash
and cash equivalents. Although the Fund may use these
strategies more in the future, the Fund's main
strategy is to invest in equity securities of mid
capitalization companies.
- -----
ONE GROUP LARGE CAP GROWTH FUND. The Fund invests mainly
in equity securities of large, well-established
companies. The weighted average capitalization of
companies in which the Fund invests normally will exceed
the median market capitalization of the Standard &
Poor's 500 Composite Stock Price Index.
- At least 65% of the Fund's total assets will be
invested in the equity securities of large,
well-established companies.
- -----
ONE GROUP LARGE CAP VALUE FUND. The Fund invests in
equity securities of large capitalization companies that
are believed to be selling below their long-term
investment values, including:
- At least 65% of the Fund's total assets will be
invested in equity securities of large cap companies
described above, including common stocks, and debt
securities and preferred stocks which are convertible
to common stock.
- A portion of the Fund's assets will be held in cash
equivalents.
<PAGE> 65
60
- -----
ONE GROUP EQUITY INCOME FUND. The Fund invests in the
equity securities of corporations which regularly pay
dividends, as well as stocks with favorable long-term
fundamental characteristics:
- The Fund normally invests at least 65% of its total
assets in the equity securities of corporations
described above, including common stocks, and debt
securities and preferred stock convertible to common
stock.
- A portion of the Fund's assets will be held in cash
equivalents.
- -----
ONE GROUP DIVERSIFIED EQUITY FUND. The Fund invests
mainly in common stocks of overlooked or undervalued
companies that have the potential for earnings growth
over time.
- At least 65% of the Fund's total assets will be
invested in equity securities.
- Although the Fund may invest up to 35% of the Fund's
total assets in U.S. government securities, other
investment grade fixed income securities, cash, and
cash equivalents, the Fund's main investment strategy
is to invest in equity securities.
- -----
ONE GROUP BALANCED FUND. The Fund invests in a
combination of stocks, fixed income securities and money
market instruments. Normally, the Fund will invest:
- between 40% and 75% of its total assets in all types
of equity securities (including stock of both large
and small capitalization companies and growth and
value securities). Up to 20% of the equities may be
foreign securities, including American Depository
Receipts.
- between 25% and 60% of its total assets in mid to
long-term fixed income securities, including bonds,
notes, and other debt securities. The balance will be
invested in cash equivalents.
HOW DOES BANC ONE INVESTMENT ADVISORS
SELECT
FIXED INCOME SECURITIES FOR THE BALANCED
FUND?
Banc One Investment Advisors selects fixed
income securities for the Balanced
Portfolio by analyzing both individual
securities and different industry sectors.
Rather than attempting to time the market,
Banc One Investment Advisors looks for
sectors and securities that it believes
will perform consistently well over time
as measured by total return. The fixed
income portion of the Balanced Fund
attempts to enhance total return by
selecting market sectors that offer
risk/reward advantages based on structural
risks and credit trends. Individual
securities that are purchased by the Fund
are subject to a disciplined risk/reward
analysis both at the time of purchase and
on an ongoing basis. This analysis
includes an evaluation of interest rate
risk, credit risk, and risks associated
with the structure of the investment
(e.g., asset-backed securities).
<PAGE> 66
61
- -----
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks
included in the S&P 500 Index. (The Fund also invests in
stock index futures.) Banc One Investment Advisors seeks
to achieve a correlation of 0.95% between the
performance of the Fund and that of the S&P 500 Index.
The Fund may hold up to 10% of its net assets in cash or
cash equivalents.
- The percentage of stock that the Fund holds will be
approximately the same percentage that the stock
represents in the S&P 500 Index.
- Banc One Investment Advisors generally picks stock in
the order of their weightings in the S&P 500 Index,
starting with the heaviest weighted stock.
- The Fund attempts to achieve a correlation between the
performance of its Fund and that of the S&P 500 Index
of at least 0.95, without taking into account Fund
expenses. Perfect correlation would be 1.00.
- -----
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests
in stocks included in the S&P Small Cap 600 Index and
S&P Mid Cap 400 Index.
- The Fund may also invest up to 25% of its total assets
in foreign securities through Depository Receipts.
- Up to 5% of the Fund's total assets may be held in
cash and cash equivalents.
- Up to 5% of the Fund's total assets may be invested in
futures contracts and related options.
- -----
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund
invests in stocks included in the MSCI EAFE GDP Index.
(The Fund also invests in stock index futures.) Banc One
Investment Advisors seeks to achieve a correlation
between the performance of the Fund and that of the MSCI
EAFE GDP Index of at least 0.90, without taking into
account expenses. Perfect correlation would be 1.00.
- At least 65% of the Fund's total assets will be
invested in foreign equity securities, consisting of
common stocks (including American Depository Receipts)
and preferred stocks, securities convertible to common
stock (provided they are traded on an exchange or
over-the-counter), warrants and receipts.
- No more than 10% of the Fund's assets will be held in
cash or cash equivalents.
- Up to 10% of the Fund's net assets may be invested in
securities of emerging international markets such as
Mexico, Chile and Brazil included in the Morgan
Stanley Market Free Index. These investments may be
made directly or through local exchanges, through
publicly traded closed-end country funds, or through
"passive foreign investment companies."
- Up to 20% of the Fund's total assets may be invested
in debt securities issued or guaranteed by foreign
governments or any of their political subdivisions,
agencies, or instrumentalities, or by supranational
issuers rated in one of the three highest rating
categories.
- A substantial portion of the Fund's assets will be
denominated in foreign currencies.
<PAGE> 67
62
- -----
ONE GROUP DIVERSIFIED INTERNATIONAL FUND. The Fund
invests mainly in the securities of companies located in
Europe, Asia and Latin America.
- At least 65% of the Fund's total assets normally will
be invested in foreign equity securities, consisting
of common stock (including American Depository
Receipts), preferred stocks, rights, warrants,
convertible securities, foreign currencies and options
on foreign currency, and other equity securities.
- Up to 20% of the Fund's total assets may be invested
in U.S. government securities, other investment grade
fixed income securities, cash and cash equivalents.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in the Equity Funds
are described below and in Fund Summaries: Investments,
Risk, & Performance at the front of this prospectus.
- -----
DERIVATIVES. The Funds may invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of
derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use
such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
- -----
SMALL CAPITALIZATION COMPANIES. Investments in smaller,
younger companies may be riskier and more volatile than
investments in larger, more established companies. These
companies may be more vulnerable to changes in economic
conditions, specific industry conditions, market
fluctuations, and other factors effecting the
profitability of other companies. Because economic
events may have a greater impact on smaller companies,
there may be a greater and more frequent fluctuation in
their stock price. This may cause frequent and
unexpected increases or decreases in the value of your
investment.
- -----
FOREIGN SECURITIES. Investments in foreign securities
involve risks different from investments in U.S.
securities. These risks include the 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
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.
Because of these risk factors, the share price of the
International Equity Index Fund and the Diversified
International Fund is expected to be volatile, and you
should be able to sustain sudden, and sometimes
substantial, fluctuations in the value of your
investment.
<PAGE> 68
63
- -----
EUROPE. Europe includes countries with highly developed
markets as well as countries with emerging markets. Many
developed countries in Western Europe are members of the
European Union and the EMU which requires compliance
with stringent fiscal and monetary controls. The markets
of Eastern European countries continue to remain
relatively undeveloped and are sensitive to political
and economic developments.
- -----
ASIA. Asia includes countries in all stages of economic
development from the highly developed market economy of
Japan to the emerging market economy of the People's
Republic of China. Generally, Asian economies face
over-extension of credit, currency devaluation, rising
unemployment, decreased exports, and economic
recessions. Currency devaluation in any one country may
have a negative affect on the entire region. Recently,
the markets in each Asian country suffered significant
downturns and volatility. Although the Asian market
appears to be recovering, continued volatility may
persist.
- -----
LATIN AMERICA. Latin America countries are considered to
be emerging market economies that are marked by high
interest rates, inflation, and unemployment. Currency
devaluation in any one country may have an adverse
affect on the entire region. Recently, the markets in
many Latin American countries have experienced
significant downturns as well as significant volatility.
Although the Latin American market appears to be
recovering, continued volatility may persist. A small
number of companies and industries, including the
telecommunications sector, represent a large portion of
the market in many Latin America countries.
For more information about risks associated with the
types of investments that the Equity Funds purchase,
please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
INVESTMENT
POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
Each Fund may not:
1. Purchase an issuer's securities if as a result more
than 5% of its total assets would be invested in the
securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or
guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements
involving these securities. This restriction applies
with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one
or more issuers conducting their principal business
in a particular industry or group of industries. This
does not include obligations issued or guaranteed by
the U.S. government or its agencies and
instrumentalities and repurchase agreements involving
such securities.
<PAGE> 69
64
3. Make loans, except that a Fund may (i) purchase or
hold debt instruments in accordance with its
investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities
lending.
- -----
One Group Equity Index Fund may not:
1.Invest more than 10% of its total assets in securities
issued or guaranteed by the United States, its
agencies or instrumentalities.
Additional investment policies can be found in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to securities. Equity securities, which will make up the
bulk of the Funds' investments, are not rated by rating
organizations. Generally, ratings are divided into two
main categories: "Investment Grade Securities" and
"Non-Investment Grade Securities." Although there is
always a risk of default, rating agencies believe that
issuers of Investment Grade Securities have a high
probability of making payments on such securities.
Non-Investment Grade Securities include securities that,
in the opinion of the rating agencies, are more likely
to default than Investment Grade Securities. The Funds
only purchase securities that meet the rating criteria
described below. Banc One Investment Advisors will look
at a security's rating at the time of investment. If the
securities are unrated, Banc One Investment Advisors
must determine that they are of comparable quality to
rated securities.
- -----
RATINGS OF THE FUNDS' SECURITIES
- If a Fund invests in municipal bonds, the bonds must
be rated as investment grade.
- Other municipal securities, such as tax-exempt
commercial paper, notes and variable rate demand
obligations, must be rated in one of the two highest
investment grade categories at the time of investment.
- Corporate bonds generally will be rated in one of the
three highest investment grade categories.
- Banc One Investment Advisors reserves the right to
invest in corporate bonds which present attractive
opportunities and are rated in the lowest investment
grade category. These corporate bonds are usually
riskier than higher rated bonds.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
<PAGE> 70
65
- --------------------------------------------------------------------------------
TEMPORARY
DEFENSIVE
POSITIONS To respond to unusual market conditions, the Funds may
invest their assets in cash and CASH EQUIVALENTS (see
below) for temporary defensive purposes. These
investments may result in a lower yield than
lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
The percentage of total assets that each Fund may invest
in cash and cash equivalents is as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
-------------------------------------------------------
<S> <C> <C>
Small Cap Growth Fund 100%
-------------------------------------------------------
Small Cap Value Fund 20%
-------------------------------------------------------
Mid Cap Growth Fund 100%
-------------------------------------------------------
Mid Cap Value Fund 100%
-------------------------------------------------------
Diversified Mid Cap Fund 20%
-------------------------------------------------------
Large Cap Growth Fund 100%
-------------------------------------------------------
Large Cap Value Fund 100%
-------------------------------------------------------
Equity Income Fund 100%
-------------------------------------------------------
Diversified Equity Fund 100%
-------------------------------------------------------
Balanced Fund 100%
-------------------------------------------------------
Equity Index Fund 10%
-------------------------------------------------------
Market Expansion Index Fund 5%
-------------------------------------------------------
International Equity Index Fund 10%
-------------------------------------------------------
Diversified International Fund 20%
</TABLE>
- --------------------------------------------------------------------------------
PORTFOLIO
TURNOVER The Funds may engage in active and frequent trading of
portfolio securities to achieve their principal
investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds and may result in
additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights. To
the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at
ordinary income tax rates.
<PAGE> 71
66
[PHOTO]
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES? - Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close
before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the
following business day.
- Purchase orders may be cancelled if the Fund's
Custodian, State Street Bank and Trust Company, does
not receive "federal funds" by 4:00 p.m. ET (i) on the
business day after the order is placed if you are
buying Class I shares, and (ii) on the third business
day if you are purchasing Class A, Class B or Class C
shares.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
WHAT KIND OF SHARES CAN
I BUY? One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to
the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
<PAGE> 72
67
- When deciding what class of shares to buy, you should
consider the amount of your investment, the length of
time you intend to hold the shares, and the sales
charges and expenses applicable to each class of
shares. If you intend to hold your shares for seven or
more years, Class A shares may be more appropriate for
you. If you intend to hold your shares for less than
seven years, you may want to consider Class B or Class
C shares. Sales charges are discussed in the section
of this prospectus entitled SALES CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers
retirement plans. These plans allow participants to
defer taxes while their retirement savings grow. Call
The One Group Services Company at 1-800-480-4111 for an
Adoption Agreement.
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV") plus a
sales charge, if any.
- Each class of shares in each Fund has a different NAV.
This is primarily because each class has different
distribution expenses.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4
p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
HOW DO I OPEN AN
ACCOUNT? 1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund
($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an
IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per
Fund.
- You may purchase no more than $249,999 of Class B
shares. This is because Class A shares offer a
reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY?
provides information that can help you choose the
appropriate share class.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
4. Send the completed application and a personal check
(unless you choose to pay by wire) payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
Contributions to Fund Direct IRAs should be made
payable to "State Street Bank and Trust Company for
the Benefit of (your name)."
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
<PAGE> 73
68
5. All checks must be in U.S. dollars. One Group does
not accept "third party checks." Checks made payable
to any individual and endorsed to One Group Mutual
Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those
listed above will be returned to the address provided
on the account application.
6. If you redeem shares purchased under the systematic
investment plan (see below) or that were purchased by
check, One Group will delay forwarding you redemption
proceeds until payment has been collected from your
bank. One Group generally receives payment within ten
(10) calendar days of purchase.
7. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-800-480-4111.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-800-480-4111 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP 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
<PAGE> 74
69
CAN I AUTOMATICALLY
INVEST ON A
SYSTEMATIC BASIS? Yes. After your Account is established, you may purchase
additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account.
The minimum initial investment is still $1,000 per Fund,
but minimum automatic additions are only $25 per Fund.
The One Group Services Company may waive these minimums.
To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the
Account Application Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future. However, your
bank may impose a charge for debiting your bank
account.
- You may revoke your right to make systematic
investments by calling The One Group Services Company
at 1-800-480-4111 or by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CONVERSION FEATURE Your Class B shares automatically convert to Class A
shares after eight years (measured from the end of the
month in which they were purchased).
- After conversion, your shares will be subject to the
lower distribution and shareholder servicing fees
charged on Class A shares.
- You will not be assessed any sales charges or fees for
conversion of shares, nor will you be subject to any
Federal income tax.
- Because the share price of the Class A shares may be
higher than that of the Class B shares at the time of
conversion, you may receive fewer Class A shares;
however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for
Class B shares of another, the time you held the
shares in each Fund will be added together.
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group.
Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own
resources. The tables below show the charges for each
class of shares and the percentage of your investment
that is paid as a commission to a Shareholder Servicing
Agent.
<PAGE> 75
70
CLASS A SHARES
- --------------------------------
This table shows the amount of sales charge you pay and
the commissions paid to Shareholder Servicing Agents.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $50,000 5.25% 5.54% 4.75%
-------------------------------------------------------------------------------
$50,000-$99,999 4.50% 4.71% 4.05%
-------------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
-------------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
-------------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
-------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares
and are not assessed a sales charge at the time of
purchase, you will be charged the equivalent of 1% of
the purchase price if you redeem any or all of the
Class A shares within one year of purchase and 0.50%
of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company
receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
- --------------------------------
Class B shares are offered at NAV, without any up-front
sales charges. However, if you redeem these shares
within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC")
according to the following schedule:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
-----------------------------------
1-2 4.00%
-----------------------------------
2-3 3.00%
-----------------------------------
3-4 3.00%
-----------------------------------
4-5 2.00%
-----------------------------------
5-6 1.00%
-----------------------------------
MORE THAN 6 0.00%
-----------------------------------
</TABLE>
The One Group Services Company pays a commission of
4.00% of the original purchase price to Shareholder
Servicing Agents who sell Class B shares.
CLASS C SHARES
- --------------------------------
Class C shares are offered at NAV, without any up-front
sales charge. However, if you redeem your shares within
one year of the purchase date, you will be assessed a
CDSC as follows:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
-----------------------------------
AFTER FIRST
YEAR NONE
-----------------------------------
</TABLE>
<PAGE> 76
71
Shareholder Servicing Agents selling Class C shares
receive a commission of 1.00% of the original purchase
price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given
month were made on the first day of the month.
- The CDSC is based on the current market value or the
original cost of the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a
CDSC imposed on shares acquired through reinvestment
of dividends or capital gains distributions.
- To keep your CDSC as low as possible, the Fund first
will redeem the shares you have held for the longest
time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an
unrelated mutual fund for Class B or Class C shares of
One Group in connection with a fund reorganization,
the CDSC applicable to your original shares (including
the period of time you have held those shares) will be
applied to One Group shares you receive in the
reorganization.
12B-1 FEES
- --------------------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees for the sale and distribution of shares
of the Funds. These fees are called 12b-1 fees. 12b-1
fees are paid by One Group Mutual Funds to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average
daily net assets of the Fund, which is currently
being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00%
of the average daily net assets of the Fund. This
will cause expenses for Class B and Class C shares to
be higher and dividends to be lower than for Class A
shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help The One Group
Services Company sell Class B and Class C shares without
an "up-front" sales charge by defraying the costs of
advancing brokerage commissions and other expenses paid
to Shareholder Servicing Agents.
- The One Group Services Company may use up to .25% of
the fees for shareholder servicing and up to .75% for
distribution. During the last fiscal year, The One
Group Services Company received 12b-1 fees totaling
.25%, 1.00%, and 1.00% of the average daily net assets
of Class A, Class B and Class C shares, respectively.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor).
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE> 77
72
- --------------------------------------------------------------------------------
SALES CHARGE
REDUCTIONS AND
WAIVERS
REDUCING YOUR CLASS A There are several ways you can reduce the sales charges
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 No sales charge is imposed on Class A shares of the
SALES CHARGE Funds if the shares were:
- --------------------------------
1. Bought with the reinvestment of dividends and capital
gains distributions.
2. Acquired in exchange for other Fund shares if a
comparable sales charge has been paid for the
exchanged shares.
3. Bought by officers, directors or trustees, retirees
and employees (and their spouses and immediate family
members) of:
- One Group.
- Bank One Corporation and its subsidiaries and
affiliates.
- The One Group Services Company and its subsidiaries
and affiliates.
- State Street Bank and Trust Company and its
subsidiaries and affiliates.
- Broker/dealers who have entered into dealer
agreements with One Group and their subsidiaries and
affiliates.
- An investment sub-advisor of a fund of One Group and
such sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain
accounts (other than IRA Accounts) for which an
Intermediary acts in a fiduciary, advisory, agency,
custodial or Accounts which participate in select
affinity programs with Bank One Corporation and its
affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges
an asset allocation fee, provided the bank or
broker-dealer has an agreement with The One Group
Services Company.
<PAGE> 78
73
- 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 Class A shares of a One Group
Fund, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution
from an employee benefit plan, but only if the
purchase is made within 60 days of the sale or
distribution and, at the time of the distribution,
the employee benefit plan had plan assets invested in
a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of
a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B No sales charge is imposed on redemptions of Class B
SALES CHARGE shares of the Funds:
- --------------------------------
1. If you withdraw no more than 10% of the value of your
account in a 12 month period. Shares received from
dividend and capital gains reinvestment are included
in calculating amounts eligible for this waiver. You
need to participate in the Systematic Withdrawal Plan
to take advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I pay a Sales Charge on an Exchange?.
<PAGE> 79
74
WAIVER OF THE
CLASS C No sales charge is imposed on redemptions of Class C
SALES CHARGE shares of the Funds:
- --------------------------------
1. If you withdraw no more than 10% of the value of your
account. Shares received from dividend and capital
gains reinvestment are included in calculating
amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I pay a Sales Charge on an Exchange?.
7. If The One Group Services Company receives notice
before you invest indicating that your Shareholder
Servicing Agent, due to the type of account that you
have, is waiving its commission.
To take advantage of any of these sales charge waivers,
you must qualify for such waiver in advance. To see if
you qualify, contact The One Group Services Company at
1-800-480-4111 or your Shareholder Servicing Agent.
These waivers will not continue indefinitely and may be
discontinued at any time without notice.
- --------------------------------------------------------------------------------
EXCHANGING FUND
SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
- 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.
<PAGE> 80
75
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by 4:00 p.m., ET.
- You have provided One Group with all of the
information necessary to process the exchange.
- You have received a current prospectus of the Fund or
Funds in which you wish to invest.
- You have contacted your Shareholder Servicing Agent,
if necessary.
DO I PAY A SALES CHARGE
ON AN EXCHANGE? Generally, you will not pay a sales charge on an
exchange. However:
- You will pay a sales charge if you own Class I shares
of a Fund and you want to exchange those shares for
Class A shares, unless you qualify for a sales charge
waiver (see above).
- You will pay a sales charge if you bought Class A
shares of a Fund:
1. That does not charge a sales charge and you want to
exchange them for shares of a Fund that does, in
which case you would pay the sales charge
applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund
into which you are exchanging, in which case you
would pay the difference between that Fund's sales
charge and all other sales charges you have already
paid.
- If you exchange Class B or Class C shares of a Fund,
you will not pay a sales charge at the time of the
exchange, however:
1. Your new Class B or Class C shares will be subject
to the higher CDSC of either the Fund from which
you exchanged, the Fund into which you exchanged,
or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class
B or Class C shares is carried over to your new
shares.
<PAGE> 81
76
ARE EXCHANGES TAXABLE? Generally:
- An exchange between classes of shares of the same Fund
is not taxable for Federal income tax purposes.
- An exchange between Funds is considered a sale and
generally results in a capital gain or loss for
Federal income tax purposes.
- You should talk to your tax advisor before making an
exchange.
ARE THERE LIMITS ON
EXCHANGES? Yes. The exchange privilege is not intended as a way for
you to speculate on short term movements in the market.
Therefore:
- To prevent disruptions in the management of the Funds,
One Group limits excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO
SUBSTANTIVE EXCHANGE REDEMPTIONS (WITHIN 30 DAYS OF
EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- In addition, One Group reserves the right to reject
any exchange request (even those that are not
excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
- --------------------------------------------------------------------------------
REDEEMING FUND
SHARES
WHEN CAN I REDEEM
SHARES? You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
HOW DO I REDEEM
SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
ONE GROUP
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
- All requests for redemptions from IRA accounts must be
in writing.
- You may request redemption forms by calling The One
Group Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or
less;
2. the redemption is payable to the shareholder of
record;
3. the redemption check is mailed to the shareholder
at the record address; or
<PAGE> 82
77
4. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- Your redemption proceeds will be paid within seven
days after receipt of the redemption request.
WHAT WILL MY SHARES BE
WORTH? - If you own Class A and Class I shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV.
- If you own Class B or Class C shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-800-480-4111 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the
Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
<PAGE> 83
78
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy
additional Class A shares while participating in a
Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than
10% of your account value annually. Shares received
from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable
Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually.
Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales
load.
3. If you are age 70 1/2, you may elect to receive
payments to the extent that the payment represents
a minimum required distribution from a One Group
IRA or other One Group qualifying retirement plan.
4. If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- --------------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more of a
Fund's assets, the Fund reserves the right to pay part
or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is
made in securities, the Fund will value the securities
selected in the same manner in which it computes its
NAV. This process minimizes the effect of large
redemptions on the Fund and its remaining
shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $800 that are not participating in
a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account
fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
<PAGE> 84
79
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
DIVIDEND POLICIES
- --------------------------------
DIVIDENDS. Except for the Balanced Fund, the Equity
Income Fund, the International Equity Index Fund, and
the Diversified International Fund, the Funds generally
declare dividends on the last business day of each
quarter. The Balanced Fund and the Equity Income Fund
generally declare dividends on the last business day of
the month. The International Equity Index Fund and the
Diversified International Fund generally declare
dividends on the last business day of each year.
Dividends for the Funds are distributed on the first
business day of the next month after they are declared.
Capital gains, if any, for all Funds are distributed at
least annually.
The Funds pay dividends and distributions on a per-share
basis. This means that the value of your shares will be
reduced by the amount of the payment. If you purchase
shares shortly before the record date for a dividend or
the distribution of capital gains, you will pay the full
price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than
those payable on other classes of shares. This is
because Class A, Class B and Class C shares have higher
distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call The One Group Services Company at
1-800-480-4111 to make this change.
<PAGE> 85
80
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B
shares received as dividends and capital gains
distributions will be accounted for separately. Each
time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of
the Class B shares in the sub-account will also convert
to Class A shares. (See "Conversion Feature.")
TAX TREATMENT
OF SHAREHOLDERS
- --------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
TAXATION OF
DISTRIBUTIONS
- --------------------------------
Each Fund will distribute substantially all of its net
investment income (including, for this purpose, the
excess of net short-term capital gains over net
long-term capital losses) and net capital gains (i.e.,
the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis.
Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from
a Fund's net investment income will be taxable as
ordinary income and distributions from a Fund's
long-term capital gains will be taxable to you as such,
regardless of how long you have held the shares.
Distributions are taxable to you even if they are paid
from income or gains earned by a Fund prior to your
investment (and thus were included in the price you
paid).
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
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> 86
81
SHAREHOLDER INQUIRIES
- --------------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
- --------------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 87
82
[PHOTO]
ONE GROUP(R)
- ---------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Small
Cap Growth Fund .74%
------------------------------------------------
One Group(R) Small
Cap Value
Fund(2) .64%
------------------------------------------------
One Group(R) Mid
Cap Growth Fund .74%
------------------------------------------------
One Group(R) Mid
Cap Value Fund .74%
------------------------------------------------
One Group(R)
Diversified Mid
Cap Fund(2) .60%
------------------------------------------------
One Group(R) Large
Cap Growth Fund .72%
------------------------------------------------
One Group(R) Large
Cap Value Fund .74%
------------------------------------------------
One Group(R)
Equity Income
Fund .69%
------------------------------------------------
One Group(R)
Diversified
Equity Fund .73%
------------------------------------------------
One Group(R)
Balanced Fund .56%
------------------------------------------------
One Group(R)
Equity Index
Fund .14%
------------------------------------------------
One Group(R)
International
Equity Index
Fund(1) .55%
------------------------------------------------
One Group(R)
Diversified
International
Fund(2) .77%
------------------------------------------------
</TABLE>
(1) Includes fees paid by Banc One Investment
Advisors to Independence International, the
former sub-advisor to the International Equity
Index Fund.
(2) In March 1999, the Pegasus Funds and One Group
Mutual Funds consolidated. The investment
advisory fee includes fees paid to First Chicago
NBD Investment Management Company, an affiliate
of Banc One Investment Advisors, as advisor to
the Pegasus Funds.
<PAGE> 88
83
The Market Expansion Index Fund began operations on July
30, 1998 and does not have a full fiscal year of
advisory fees. Under the investment advisory agreement
with the Fund, Banc One Investment Advisors is entitled
to a fee, which is calculated daily and paid monthly, of
.35% of the average daily net assets of the Market
Expansion Index Fund.
- --------------------------------------------------------------------------------
THE FUND
MANAGERS The Funds are managed by teams of Fund managers,
research analysts, and other investment management
professionals. For all the Funds, except the
International Equity Index Fund, the Equity Index Fund,
and the Market Expansion Index Fund, each team member
makes recommendations about the securities in the Funds.
The research analysts provide in-depth industry analysis
and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings,
and cash positions.
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 89
84
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Small Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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>
SEVEN MONTHS YEAR ENDED
YEAR ENDED JUNE 30, ENDED NOVEMBER 30,
------------------------------- JUNE 30, ------------------
CLASS A 1999 1998 1997 1996(A) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.02 $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.02) (0.03) (0.04) (0.07) (0.04) (0.04)
Net realized and unrealized gains (losses) from
investments (0.20) 2.44 1.35 1.40 2.35 (0.63)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.22) 2.41 1.31 1.33 2.31 (0.67)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (1.19) (1.33) (1.10) (2.10) (0.17) (0.08)
Total Distributions (1.19) (1.33) (1.10) (2.10) (0.17) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.61 $ 12.02 $ 10.94 $ 10.73 $ 11.50 $ 9.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.53%) 23.28% 13.52% 12.85%(B) 25.07% (6.66%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 22,081 $ 21,634 $17,299 $18,356 $95,467 $77,540
Ratio of expenses to average net assets 1.31% 1.31% 1.27% 1.05%(C) 1.03% 1.00%
Ratio of net investment income to average net
assets (0.24%) (0.31%) (0.41%) (0.33%)(C) (0.36%) (0.38%)
Ratio of expenses to average net assets* 1.44% 1.44% 1.45% 1.07%(C) 1.03% 1.00%
Ratio of net investment income to average net
assets* (0.37%) (0.44%) (0.59%) (0.35%)(C) (0.36%) (0.38%)
Portfolio turnover(D) 127.83% 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 $15.70 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.
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR SEPTEMBER 12,
YEAR ENDED JUNE 30, ENDED ENDED 1994 TO
------------------------------ JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(A) 1995 1994(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.79 $ 10.84 $ 10.72 $ 11.56 $ 9.47 $ 10.40
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment loss (0.06) (0.03) (0.10) (0.06) (0.07) (0.01)
Net realized and unrealized gains
(losses) from investments (0.28) 2.31 1.32 1.35 2.33 (0.92)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.34) 2.28 1.22 1.29 2.26 (0.93)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (1.19) (1.33) (1.10) (2.13) (0.17) -
Total Distributions (1.19) (1.33) (1.10) (2.13) (0.17) -
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 11.79 $ 10.84 $ 10.72 $ 11.56 $ 9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.69%) 22.24% 12.74% 12.47%(C) 24.21% (9.08%)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 10,278 $ 8,567 $ 3,835 $ 2,545 $ 1,814 $ 231
Ratio of expenses to average net
assets 2.06% 2.06% 2.02% 1.87%(D) 1.78% 1.75%(D)
Ratio of net investment income to
average net assets (1.00%) (1.02%) (1.16%) (1.10%)(D) (1.16%) (0.90%)(D)
Ratio of expenses to average net
assets* 2.09% 2.09% 2.12% 1.92%(D) 1.78% 1.75%(D)
Ratio of net investment income to
average net assets* (1.03%) (1.05%) (1.26%) (1.15%)(D) (1.16%) (0.90%)(D)
Portfolio turnover(E) 127.83% 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) Period from commencement of operations. (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.
<PAGE> 90
85
- -------------------------------------
Small Cap Growth Fund
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.97 $ 13.03
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.08) (0.02)
Net realized and unrealized gains (losses) from
investments (0.27) 0.29
- ------------------------------------------------------------------------------------------------
Total from Investment Activities (0.35) 0.27
- ------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (1.19) (1.33)
Total Distributions (1.19) (1.33)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.43 $ 11.97
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.75%) 3.08%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 129 $ 90
Ratio of expenses to average net assets 2.06% 2.05%(C)
Ratio of net investment income to average net assets (1.02%) (0.85%)(C)
Ratio of expenses to average net assets* 2.09% 2.07%(C)
Ratio of net investment income to average net assets* (1.05%) (0.87%)(C)
Portfolio turnover(D) 127.83% 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.
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996 TO
---------------------------------- JUNE 30,
CLASS I 1999 1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.05 $ 10.94 $ 10.75 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) - - (0.02) -
Net realized and unrealized gains from investments (0.24) 2.44 1.31 0.78
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.24) 2.44 1.29 0.78
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
From net realized gains (1.19) (1.33) (1.10) (0.03)
Total Distributions (1.19) (1.33) (1.10) (0.03)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 12.05 $ 10.94 $ 10.75
- ------------------------------------------------------------------------------------------------------------------------
Total Return (0.72%) 23.58% 13.44% 13.39%(B)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $130,974 $ 114,951 $78,318 $ 83,371
Ratio of expenses to average net assets 1.06% 1.06% 1.02% 0.96%(D)
Ratio of net investment income to average net assets 0.00% (0.05%) (0.16%) (0.16%)(D)
Ratio of expenses to average net assets* 1.09% 1.09% 1.12% 1.05%(D)
Ratio of net investment income to average net assets* (0.03%) (0.08%) (0.26%) (0.25%)(D)
Portfolio turnover(E) 127.83% 83.77% 92.01% 59.57%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from date reorganized as a fund of the One Group. (B) 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 from March
26, 1996 through June 30, 1996. (D) Annualized. (E) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
<PAGE> 91
86
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Small Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' report, along with the Fund's financial
statements are incorporated by reference in the Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 27,
ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, -------------------------------- DECEMBER 31,
CLASS A 1999(E) 1998 1997 1996 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.81 $ 16.03 $ 13.70 $ 12.20 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.05) (0.10) (0.06) (0.02) 0.02
Net realized and unrealized gains (losses) from
investments (0.64) (0.59) 4.16 3.02 2.45
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.69) (0.69) 4.10 3.00 2.47
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - - - (0.02)
Net realized gains (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net realized gain - (0.07) - - -
Total Distributions (0.08) (0.53) (1.77) (1.50) (0.27)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.04 $ 14.81 $ 16.03 $ 13.70 $ 12.20
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Load) (4.61%)(B) (4.29%) 30.16% 24.59% 24.80%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 26,592 $32,217 $21,836 $ 6,697 $ 672
Ratio of expenses to average net assets 1.17%(C) 1.19% 1.18% 1.13% 1.25%(C)
Ratio of net investment income to average net assets (0.58%)(C) (0.73%) (0.68%) (0.29%) 0.19%(C)
Ratio of expenses to average net assets* 1.29%(C) 1.19% 1.18% 1.24% 2.56%(C)
Ratio of net investment income to average net assets* (0.70%)(C) (0.73%) (0.68%) (0.40%) (1.12%)(C)
Portfolio turnover(D) 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus Small-Cap Opportunity
Fund became One Group Small Cap Value Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Small-Cap Opportunity
Fund.
<TABLE>
<CAPTION>
SIX MONTHS JANUARY 27,
ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, -------------------------------- DECEMBER 31,
CLASS B 1999(E) 1998 1997 1996 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.41 $ 15.74 $ 13.58 $ 12.12 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.11) (0.17) (0.07) (0.04) (0.03)
Net realized and unrealized gains (losses) from
investments (0.59) (0.63) 4.00 3.00 2.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.70) (0.80) 3.93 2.96 2.37
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net realized gain - (0.07) - - -
Total Distributions (0.08) (0.53) (1.77) (1.50) (0.25)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.63 $ 14.41 $ 15.74 $ 13.58 $ 12.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Load) (4.81%)(B) (5.11%) 29.17% 24.42% 23.76%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 3,320 $ 4,014 $ 1,799 $ 110 $ 15
Ratio of expenses to average net assets 1.94%(C) 1.94% 1.93% 1.88% 2.00%(C)
Ratio of net investment income to average net assets (1.34%)(C) (1.48%) (1.43%) (1.04%) (0.51%)(C)
Ratio of expenses to average net assets* 2.02%(C) 1.94% 1.93% 3.04% 9.52%(C)
Ratio of net investment income to average net assets* (1.42%)(C) (1.48%) (1.43%) (2.20%) (8.03%)(C)
Portfolio turnover(D) 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus Small-Cap Opportunity
Fund became One Group Small Cap Value Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Small-Cap Opportunity
Fund.
<PAGE> 92
87
- -------------------------------------
Small Cap Value Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.07
- ----------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 1.53
- ----------------------------------------------------------------------------------
Total from Investment Activities 1.53
- ----------------------------------------------------------------------------------
Distributions:
Total Distributions -
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.60
- ----------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.68%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 19
Ratio of expenses to average net assets 1.94%(C)
Ratio of net investment income to average net assets (1.13%)(C)
Ratio of expenses to average net assets* 2.11%(C)
Ratio of net investment income to average net assets* (1.30%)(C)
Portfolio turnover(D) 50.90%
</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) 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>
SIX MONTHS JANUARY 27,
ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, -------------------------------- DECEMBER 31,
CLASS I 1999(E) 1998 1997 1996 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.02 $ 16.22 $ 13.80 $ 12.19 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.02) (0.07) (0.05) (0.01) 0.06
Net realized and unrealized gains (losses) from
investments (0.66) (0.60) 4.24 3.13 2.44
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.68) (0.67) 4.19 3.12 2.50
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - - - (0.06)
In excess of net investment income - - - (0.01) -
Net realized gains (0.08) (0.46) (1.77) (1.50) (0.25)
In excess of net realized gains - (0.07) - - -
Total Distributions (0.08) (0.53) (1.77) (1.51) (0.31)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.26 $ 15.02 $ 16.22 $ 13.80 $ 12.19
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (4.48%)(B) (4.11%) 30.60% 25.63% 25.08%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $246,712 $276,754 $217,908 $125,840 $92,926
Ratio of expenses to average net assets 0.94%(C) 0.94% 0.93% 0.88% 0.85%(C)
Ratio of net investment income to average net assets (0.35%)(C) (0.48%) (0.43%) (0.04%) 0.59%(C)
Ratio of expenses to average net assets* 1.03%(C) 0.94% 0.93% 1.02% 1.09%(C)
Ratio of net investment income to average net assets* (0.44%)(C) (0.48%) (0.43%) (0.18%) (0.35%)(C)
Portfolio turnover(D) 50.90% 42.39% 58.29% 93.82% 38.89%
</TABLE>
* 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus Small-Cap Opportunity
Fund became One Group Small Cap Value Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Small-Cap Opportunity
Fund.
<PAGE> 93
88
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Mid Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.36 $ 19.37 $ 18.76 $ 18.36 $ 15.93
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.10) (0.08) 0.21 0.17 0.02
Net realized and unrealized gains (losses) from
investments 5.46 5.65 3.58 3.80 2.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.36 5.57 3.79 3.97 3.00
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.24) (0.15) (0.01)
In excess of net investment income - - (0.02) - (0.02)
Net realized gains (2.70) (2.58) (2.92) (3.42) (0.54)
Total Distributions (2.70) (2.58) (3.18) (3.57) (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.02 $ 22.36 $ 19.37 $ 18.76 $ 18.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.87% 30.95% 22.52% 24.32% 19.50%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $159,292 $ 95,647 $ 43,370 $ 28,052 $ 11,178
Ratio of expenses to average net assets 1.24% 1.25% 1.25% 1.25% 1.23%
Ratio of net investment income (loss) to average net
assets (0.60%) (0.60%) 0.92% 0.90% 0.12%
Ratio of expenses to average net assets* 1.34% 1.35% 1.34% 1.36% 1.33%
Ratio of net investment income to average net assets* (0.70%) (0.70%) 0.83% 0.79% 0.02%
Portfolio turnover(A) 141.46% 158.43% 301.35% 435.30% 132.63%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.44 $ 18.82 $ 18.43 $ 18.14 $ 15.85
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.18) (0.15) 0.11 0.09 (0.07)
Net realized and unrealized gains (losses) from
investments 5.11 5.35 3.44 3.69 2.90
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.93 5.20 3.55 3.78 2.83
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.22) (0.07) -
In excess of net investment income - - (0.02) - -
Net realized gains (2.70) (2.58) (2.92) (3.42) (0.54)
Total Distributions (2.70) (2.58) (3.16) (3.49) (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.67 $ 21.44 $ 18.82 $ 18.43 $ 18.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 26.96% 29.79% 21.73% 23.53% 18.47%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $147,600 $ 90,930 $ 37,409 $ 12,910 $ 2,787
Ratio of expenses to average net assets 1.99% 2.00% 2.00% 2.00% 1.98%
Ratio of net investment income to average net assets (1.35%) (1.35%) 0.01% 0.15% (0.63%)
Ratio of expenses to average net assets* 1.99% 2.00% 2.00% 2.01% 1.98%
Ratio of net investment income to average net assets* (1.35%) (1.35%) 0.01% 0.14% (0.63%)
Portfolio turnover(A) 141.46% 158.43% 301.35% 435.30% 132.63%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 94
89
- -------------------------------------
Mid Cap Growth Fund
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.42 $ 21.47
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.15) (0.04)
Net realized and unrealized gains (losses) from
investments 5.47 2.77
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 5.32 2.73
- ------------------------------------------------------------------------------------------------
Distributions:
Net realized gains (2.70) (1.78)
Total Distributions (2.70) (1.78)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.04 $ 22.42
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.57% 14.27%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 16,597 $ 1,088
Ratio of expenses to average net assets 1.99% 2.01%(C)
Ratio of net investment income to average net assets (1.32%) (1.31%)(C)
Portfolio turnover(D) 141.46% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.51 $ 19.46 $ 18.81 $ 18.40 $ 15.96
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.07) 0.25 0.20 0.06
Net realized and unrealized gains (losses) from
investments 5.58 5.70 3.59 3.83 2.98
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.51 5.63 3.84 4.03 3.04
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.25) (0.20) (0.06)
In excess of net investment - - (0.02) - -
Net realized gains (2.70) (2.58) (2.92) (3.42) (0.54)
Total Distributions (2.70) (2.58) (3.19) (3.62) (0.60)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.32 $ 22.51 $ 19.46 $ 18.81 $ 18.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 28.39% 31.11% 22.75% 24.63% 19.75%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,164,884 $868,901 $623,911 $ 532,525 $ 413,518
Ratio of expenses to average net assets 0.99% 1.00% 0.99% 1.00% 0.98%
Ratio of net investment income to average net
assets (0.35%) (0.36%) 1.32% 1.15% 0.38%
Ratio of expenses to average net assets* 0.99% 1.00% 0.99% 1.01% 0.98%
Ratio of net investment income to average net
assets* (0.35%) (0.36%) 1.32% 1.14% 0.38%
Portfolio turnover(A) 141.46% 158.43% 301.35% 435.30% 132.63%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 95
90
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Mid Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.93 $ 15.68 $ 14.72 $ 13.22 $ 11.91
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.10 0.19 0.25 0.24
Net realized and unrealized gains (losses) from
investments 0.26 3.99 2.57 2.28 1.59
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.35 4.09 2.76 2.53 1.83
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.09) (0.10) (0.19) (0.25) (0.24)
Net realized gains (2.26) (2.74) (1.61) (0.78) (0.26)
In excess of net realized gains - - - - (0.02)
Total Distributions (2.35) (2.84) (1.80) (1.03) (0.52)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.93 $ 16.93 $ 15.68 $ 14.72 $ 13.22
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.70% 27.90% 20.21% 19.80% 15.43%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $122,392 $ 29,443 $23,909 $20,838 $ 13,560
Ratio of expenses to average net assets 1.21% 1.21% 1.23% 1.24% 1.26%
Ratio of net investment income to average net assets 0.28% 0.60% 1.26% 1.79% 1.99%
Ratio of expenses to average net assets* 1.31% 1.31% 1.31% 1.35% 1.36%
Ratio of net investment income to average net assets* 0.18% 0.50% 1.18% 1.68% 1.89%
Portfolio turnover(A) 115.65% 106.41% 92.66% 90.55% 176.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.85 $ 15.64 $ 14.69 $ 13.19 $ 11.90
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) - (0.02) 0.08 0.15 0.15
Net realized and unrealized gains (losses) from
investments 0.22 3.98 2.55 2.27 1.58
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.22 3.96 2.63 2.42 1.73
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.01) (0.01) (0.07) (0.14) (0.15)
In excess of net investment income - - - - (0.01)
Net realized gains (2.26) (2.74) (1.61) (0.78) (0.28)
Total Distributions (2.27) (2.75) (1.68) (0.92) (0.44)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.80 $ 16.85 $ 15.64 $ 14.69 $ 13.19
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.76% 26.97% 19.19% 18.93% 14.92%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 41,380 $ 30,094 $20,499 $16,305 $ 11,222
Ratio of expenses to average net assets 1.95% 1.96% 1.98% 1.99% 2.00%
Ratio of net investment income to average net assets (0.25%) (0.15%) 0.51% 1.04% 1.26%
Ratio of expenses to average net assets* 1.96% 1.96% 1.98% 2.00% 2.01%
Ratio of net investment income to average net assets* (0.26%) (0.15%) 0.51% 1.03% 1.25%
Portfolio turnover(A) 115.65% 106.41% 92.66% 90.55% 176.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 96
91
- -------------------------------------
Mid Cap Value Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
1999(A)
CLASS C ---------
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.34
- -------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 1.46
- -------------------------------------------------------------------------------
Total from Investment Activities 1.46
- -------------------------------------------------------------------------------
Distributions:
Total Distributions --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.80
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.98%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 48
Ratio of expenses to average net assets 1.95%(C)
Ratio of net investment income to average net assets (0.44%)(C)
Ratio of expenses to average net assets* 1.96%(C)
Ratio of net investment income to average net assets* (0.45%)(C)
Portfolio turnover(D) 115.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.90 $ 15.65 $ 14.69 $ 13.20 $ 11.90
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.13 0.14 0.22 0.29 0.28
Net realized and unrealized gains (losses) from
investments 0.24 3.99 2.57 2.27 1.57
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.37 4.13 2.79 2.56 1.85
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.13) (0.14) (0.22) (0.29) (0.27)
Net realized gains (2.26) (2.74) (1.61) (0.78) (0.28)
Total Distributions (2.39) (2.88) (1.83) (1.07) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.88 $ 16.90 $ 15.65 $ 14.69 $ 13.20
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.82% 28.27% 20.56% 20.10% 16.03%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,057,827 $634,672 $562,302 $ 522,474 $448,530
Ratio of expenses to average net assets 0.95% 0.96% 0.98% 0.99% 1.00%
Ratio of net investment income to average net assets 0.94% 0.85% 1.52% 2.04% 2.21%
Ratio of expenses to average net assets* 0.96% 0.96% 0.98% 1.00% 1.10%
Ratio of net investment income to average net assets* 0.93% 0.85% 1.52% 2.03% 2.11%
Portfolio turnover(A) 115.65% 106.41% 92.66% 90.55% 176.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 97
92
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Diversified Mid Cap Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
CLASS A 1999(E) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.35 $ 20.89 $ 17.61 $ 15.15 $ 13.34 $ 14.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.04) (0.07) (0.03) 0.02 0.06 0.07
Net realized and unrealized gains (losses)
from investments 1.70 0.92 4.87 3.74 2.57 (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.66 0.85 4.84 3.76 2.63 (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.02) (0.06) (0.07)
Net realized gain (0.05) (1.39) (1.56) (1.28) (0.76) (0.49)
In excess of net realized gain - - - - - (0.02)
Return of capital - - - - - (0.10)
Total Distributions (0.05) (1.39) (1.56) (1.30) (0.82) (0.68)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.96 $ 20.35 $ 20.89 $ 17.61 $ 15.15 $ 13.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.21%(A) 4.30% 27.56% 24.91% 19.88% (3.27%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $242,528 $278,279 $234,020 $91,516 $71,858 $64,326
Ratio of expenses to average net assets 1.10%(B) 1.15% 1.09% 0.93% 0.89% 0.90%
Ratio of net investment income to average
net assets (0.30%)(B) (0.33%) (0.20%) 0.12% 0.37% 0.53%
Ratio of expenses to average net assets* 1.22%(B) 1.15% 1.09% 0.93% 0.89% 0.90%
Ratio of net investment income to average
net assets* (0.42%)(B) (0.33%) (0.20%) 0.12% 0.37% 0.53%
Portfolio turnover(C) 23.53% 26.89% 37.54%(D) 34.87% 53.55% 37.51%
</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) Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the classes
of shares issued. (D) 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. (E) Upon reorganizing as a fund of One Group, the Pegasus Mid-Cap
Opportunity Fund became One Group Diversified Mid Cap Fund. Financial
highlights for the periods prior to March 22, 1999 represent the Pegasus
Mid-Cap Opportunity Fund.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED SEPTEMBER 23,
ENDED DECEMBER 31, 1996 TO
JUNE 30, ------------------- DECEMBER 31,
CLASS B 1999(F) 1998 1997 1996(A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.55 $ 10.58 $ 9.57 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.09) (0.03) -
Net realized and unrealized gains (losses) from
investments 0.80 0.45 2.60 0.79
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.73 0.36 2.57 0.79
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.01)
Net realized gains (0.05) (1.39) (1.56) (1.21)
Total Distributions (0.05) (1.39) (1.56) (1.22)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.23 $ 9.55 $ 10.58 $ 9.57
- --------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.76%(B) 3.79% 27.10% 7.94%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,283 $ 7,108 $ 3,965 $ 154
Ratio of expenses to average net assets 1.88%(C) 1.90% 1.84% 1.81%(C)
Ratio of net investment income to average net assets (1.08%)(C) (1.08%) (0.95%) (0.59%)(C)
Ratio of expenses to average net assets* 1.95%(C) 1.90% 1.84% 1.81%(C)
Ratio of net investment income to average net assets* (1.15%)(C) (1.08%) (0.95%) (0.59%)(C)
Portfolio turnover(D) 23.53% 26.89% 37.54%(E) 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) 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. (E)
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 for the Fund was approximately $4 million. (F) Upon
reorganizing as a fund of One Group, the Pegasus Mid-Cap Opportunity Fund
became One Group Diversified Mid Cap Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Mid-Cap Opportunity
Fund.
<PAGE> 98
93
- -------------------------------------
Diversified Mid Cap Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.93
- ------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 1.30
- ------------------------------------------------------------------------------
Total from Investment Activities 1.30
- ------------------------------------------------------------------------------
Distributions:
Total Distributions -
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.23
- ------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 14.56%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 15
Ratio of expenses to average net assets 1.88%(C)
Ratio of net investment income to average net assets (1.20%)(C)
Ratio of expenses to average net assets* 1.99%(C)
Ratio of net investment income to average net assets* (1.31%)(C)
Portfolio turnover(D) 23.53%
</TABLE>
* 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>
SIX MONTHS
ENDING YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
CLASS I 1999(E) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.46 $ 20.93 $ 17.61 $ 15.15 $ 13.34 $ 14.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.01) (0.01) 0.01 0.04 0.06 0.07
Net realized and unrealized gains (losses) from
investments 1.70 0.93 4.88 3.74 2.57 (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.69 0.92 4.89 3.78 2.63 (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.01) (0.04) (0.06) (0.07)
Net realized gains (0.05) (1.39) (1.56) (1.28) (0.76) (0.49)
In excess of net realized gains - - - - - (0.02)
Return of capital - - - - - (0.10)
Total Distributions (0.05) (1.39) (1.57) (1.32) (0.82) (0.68)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.10 $ 20.46 $ 20.93 $ 17.61 $ 15.15 $ 13.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 8.32%(A) 4.61% 27.91% 25.03% 19.88% (3.27%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $987,059 $987,256 $803,670 $677,608 $579,094 $460,673
Ratio of expenses to average net assets 0.90%(B) 0.90% 0.84% 0.81% 0.89% 0.90%
Ratio of net investment income to average net
assets (0.09%)(B) (0.08%) 0.05% 0.24% 0.37% 0.53%
Ratio of expenses to average net assets* 0.97%(B) 0.90% 0.84% 0.81% 0.89% 0.90%
Ratio of net investment income to average
net assets* (0.16%)(B) (0.08%) 0.05% 0.24% 0.37% 0.53%
Portfolio turnover (C) 23.53% 26.89% 37.54%(D) 34.87% 53.55% 37.51%
</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) Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the classes
of shares issued. (D) 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 for the Fund was
approximately $4 million. (E) Upon reorganizing as a fund of One Group, the
Pegasus Mid-Cap Opportunity Fund became One Group Diversified Mid Cap Fund.
Financial highlights for the periods prior to March 22, 1999 represent the
Pegasus Mid-Cap Opportunity Fund.
<PAGE> 99
94
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Large Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 23.32 $ 19.92 $ 15.83 $ 13.83 $ 11.62
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.01) 0.08 0.14 0.17
Net realized and unrealized gains (losses) from
investments 5.97 6.30 4.88 2.17 3.10
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.90 6.29 4.96 2.31 3.27
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.07) (0.14) (0.16)
In excess of net investment income - (0.01) - - (0.01)
Net realized gains (2.36) (2.88) (0.80) (0.17) (0.89)
Total Distributions (2.36) (2.89) (0.87) (0.31) (1.06)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.86 $ 23.32 $ 19.92 $ 15.83 $ 13.83
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 28.43% 35.43% 32.57% 16.85% 21.52%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $447,209 $199,052 $125,910 $75,114 $ 27,428
Ratio of expenses to average net assets 1.21% 1.24% 1.24% 1.21% 1.26%
Ratio of net investment income to average net assets (0.43%) (0.04%) 0.44% 0.95% 1.49%
Ratio of expenses to average net assets* 1.31% 1.34% 1.32% 1.34% 1.36%
Ratio of net investment income to average net assets* (0.53%) (0.14%) 0.36% 0.82% 1.39%
Portfolio turnover(A) 86.34% 117.34% 57.17% 35.51% 14.22%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.73 $ 19.61 $ 15.63 $ 13.63 $ 11.47
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.09) (0.10) (0.04) 0.05 0.09
Net realized and unrealized gains (losses) from
investments 5.64 6.10 4.82 2.17 3.06
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.55 6.00 4.78 2.22 3.15
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - - (0.05) (0.09)
In excess of net investment income - - - - (0.01)
Net realized gains (2.36) (2.88) (0.80) (0.17) (0.89)
Total Distributions (2.36) (2.88) (0.80) (0.22) (0.99)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.92 $ 22.73 $ 19.61 $ 15.63 $ 13.63
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.54% 34.39% 31.74% 16.41% 20.65%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) 617,672 $280,563 $132,268 $56,261 $ 6,918
Ratio of expenses to average net assets 1.96% 1.99% 2.00% 1.96% 2.01%
Ratio of net investment income to average net assets (0.98%) (0.80%) (0.33%) 0.20% 0.74%
Ratio of expenses to average net assets* 1.96% 1.99% 2.00% 1.99% 2.01%
Ratio of net investment income to average net assets* (0.98%) (0.80%) (0.33%) 0.17% 0.74%
Portfolio turnover(A) 86.34% 117.34% 57.17% 35.51% 14.22%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 100
95
- -------------------------------------
Large Cap Growth Fund
<TABLE>
<CAPTION>
YEAR NOVEMBER 4,
ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.57 $ 18.98
- ---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.04) (0.06)
Net realized and unrealized gains (losses) from
investments 5.54 4.99
- ---------------------------------------------------------------------------------------------
Total from Investment Activities 5.50 4.93
- ---------------------------------------------------------------------------------------------
Distributions:
Net realized gains (2.36) (1.34)
Total Distributions (2.36) (1.34)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.71 $ 22.57
- ---------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.52% 27.63%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 8,328 $ 492
Ratio of expenses to average net assets 1.95% 1.98%(C)
Ratio of net investment income to average net assets (0.94%) (0.87%)(C)
Portfolio turnover(D) 86.34% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.71 $ 19.44 $ 15.44 $ 13.47 $ 11.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) - 0.04 0.12 0.18 0.20
Net realized and unrealized gains (losses) from
investments 5.80 6.13 4.79 2.14 3.04
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.80 6.17 4.91 2.32 3.24
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - (0.02) (0.11) (0.18) (0.20)
Net realized gains (2.36) (2.88) (0.80) (0.17) (0.89)
Total Distributions (2.36) (2.90) (0.91) (0.35) (1.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.15 $ 22.71 $ 19.44 $ 15.44 $ 13.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 28.78% 35.75% 33.11% 17.36% 21.85%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $3,052,729 $1,510,521 $1,142,864 $745,986 $531,595
Ratio of expenses to average net assets 0.96% 0.99% 0.99% 0.96% 1.00%
Ratio of net investment income to average net
assets 0.07% 0.21% 0.69% 1.20% 1.72%
Ratio of expenses to average net assets* 0.96% 0.99% 0.99% 0.99% 1.00%
Ratio of net investment income to average net
assets* 0.07% 0.21% 0.69% 1.17% 1.72%
Portfolio turnover(A) 86.34% 117.34% 57.17% 35.51% 14.22%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 101
96
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Large Cap Value Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.77 $ 14.85 $ 12.87 $ 12.89 $ 11.34
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.14 0.18 0.23 0.27 0.28
Net realized and unrealized gains (losses) from
investments 2.52 2.84 3.04 1.22 2.20
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.66 3.02 3.27 1.49 2.48
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.14) (0.17) (0.23) (0.27) (0.27)
In excess of net investment income - - - - (0.02)
Net realized gains (1.05) (0.93) (1.06) (1.24) (0.64)
Total Distributions (1.19) (1.10) (1.29) (1.51) (0.93)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.24 $ 16.77 $ 14.85 $ 12.87 $ 12.89
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 17.39% 21.14% 26.90% 12.40% 22.64%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $28,448 $15,699 $14,832 $ 9,380 $ 3,481
Ratio of expenses to average net assets 1.20% 1.20% 1.22% 1.22% 1.25%
Ratio of net investment income to average net assets 0.90% 1.10% 1.72% 2.18% 2.52%
Ratio of expenses to average net assets* 1.30% 1.30% 1.31% 1.33% 1.37%
Ratio of net investment income to average net assets* 0.80% 1.00% 1.63% 2.07% 2.41%
Portfolio turnover(A) 40.69% 47.35% 77.05% 186.84% 203.13%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.84 $ 14.95 $ 12.98 $ 12.96 $ 11.41
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 0.07 0.14 0.18 0.17
Net realized and unrealized gains (losses) from
investments 2.48 2.84 3.04 1.26 2.19
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.51 2.91 3.18 1.44 2.36
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.09) (0.15) (0.18) (0.17)
Net realized gains (1.05) (0.93) (1.06) (1.24) (0.64)
Total Distributions (1.10) (1.02) (1.21) (1.42) (0.81)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.25 $ 16.84 $ 14.95 $ 12.98 $ 12.96
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.30% 20.18% 25.86% 11.95% 22.28%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $24,877 $17,154 $ 9,288 $ 4,135 $ 861
Ratio of expenses to average net assets 1.95% 1.95% 1.97% 1.97% 2.00%
Ratio of net investment income to average net assets 0.15% 0.33% 0.96% 1.43% 1.74%
Ratio of expenses to average net assets* 1.95% 1.95% 1.97% 1.98% 2.01%
Ratio of net investment income to average net assets* 0.15% 0.33% 0.96% 1.42% 1.72%
Portfolio turnover(A) 40.69% 47.35% 77.05% 186.84% 203.13%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 102
97
- -------------------------------------
Large Cap Value Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- ------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.96
- ------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03
Net realized and unrealized gains (losses) from
investments 1.28
- ------------------------------------------------------------------------------
Total from Investment Activities 1.31
- ------------------------------------------------------------------------------
Distributions:
Net investment income (0.03)
Total Distributions (0.03)
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.24
- ------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.74%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 135
Ratio of expenses to average net assets 1.95%(C)
Ratio of net investment income to average net assets 0.34%(C)
Portfolio turnover(D) 40.69%
</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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.70 $ 14.79 $ 12.83 $ 12.87 $ 11.34
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.18 0.21 0.27 0.31 0.31
Net realized and unrealized gains (losses) from
investments 2.44 2.84 3.01 1.20 2.18
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.62 3.05 3.28 1.51 2.49
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.18) (0.21) (0.26) (0.31) (0.32)
Net realized gains (1.05) (0.93) (1.06) (1.24) (0.64)
Total Distributions (1.23) (1.14) (1.32) (1.55) (0.96)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.09 $ 16.70 $ 14.79 $ 12.83 $ 12.87
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 17.26% 21.46% 27.10% 12.71% 23.42%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,095,686 $792,649 $686,156 $584,527 $365,376
Ratio of expenses to average net assets 0.95% 0.95% 0.97% 0.97% 1.00%
Ratio of net investment income to average net assets 1.15% 1.34% 1.99% 2.43% 2.74%
Ratio of expenses to average net assets* 0.95% 0.95% 0.97% 0.98% 1.01%
Ratio of net investment income to average net assets* 1.15% 1.34% 1.99% 2.42% 2.73%
Portfolio turnover(A) 40.69% 47.35% 77.05% 186.84% 203.13%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 103
98
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Equity Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.04 $ 21.90 $ 17.64 $ 15.11 $ 13.20
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.27 0.25 0.31 0.38 0.03
Net realized and unrealized gains (losses) from
investments 2.08 4.37 4.87 3.20 2.29
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.35 4.62 5.18 3.58 2.32
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.26) (0.25) (0.31) (0.35) (0.03)
In excess of net investment income - - - - (0.01)
Net realized gains (1.68) (2.23) (0.61) (0.70) (0.37)
Total Distributions (1.94) (2.48) (0.92) (1.05) (0.41)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.45 $ 24.04 $ 21.90 $ 17.64 $ 15.11
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.94% 22.91% 30.39% 24.23% 20.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $135,420 $117,682 $78,976 $44,284 $13,793
Ratio of expenses to average net assets 1.18% 1.25% 1.25% 1.23% 1.26%
Ratio of net investment income to average net assets 1.17% 1.15% 1.65% 2.19% 2.61%
Ratio of expenses to average net assets* 1.34% 1.35% 1.34% 1.36% 1.36%
Ratio of net investment income to average net assets* 1.01% 1.05% 1.56% 2.06% 2.51%
Portfolio turnover(A) 16.22% 14.64% 28.18% 14.92% 4.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.08 $ 21.95 $ 17.68 $ 15.14 $ 13.23
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.09 0.26 0.17 0.24 0.26
Net realized and unrealized gains (losses) from
investments 2.10 4.36 4.89 3.23 2.29
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.19 4.62 5.06 3.47 2.55
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.09) (0.26) (0.18) (0.23) (0.25)
In excess of net investment income - - - - (0.02)
Net realized gains (1.68) (2.23) (0.61) (0.70) (0.37)
Total Distributions (1.77) (2.49) (0.79) (0.93) (0.64)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.50 $ 24.08 $ 21.95 $ 17.68 $ 15.14
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.18% 21.97% 29.48% 23.41% 19.91%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $197,016 $165,813 $79,518 $29,169 $ 3,468
Ratio of expenses to average net assets 1.93% 1.99% 2.00% 1.98% 2.01%
Ratio of net investment income to average net assets 0.40% 0.39% 0.89% 1.44% 1.88%
Ratio of expenses to average net assets* 1.99% 1.99% 2.00% 2.01% 2.02%
Ratio of net investment income to average net assets* 0.34% 0.39% 0.89% 1.41% 1.87%
Portfolio turnover(A) 16.22% 14.64% 28.18% 14.92% 4.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 104
99
- -------------------------------------
Equity Income Fund
<TABLE>
<CAPTION>
YEAR NOVEMBER 4,
ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.08 $ 21.40
- ---------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.10 0.06
Net realized and unrealized gains (losses) from
investments 2.11 3.39
- ---------------------------------------------------------------------------------------------
Total from Investment Activities 2.21 3.45
- ---------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.10) (0.07)
Net realized gains (1.68) (0.70)
Total Distributions (1.78) (0.77)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.51 $ 24.08
- ---------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.24% 16.57%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 658 $ 795
Ratio of expenses to average net assets 1.94% 1.98%(C)
Ratio of net investment income to average net assets 0.36% 0.38%(C)
Ratio of expenses to average net assets* 1.99% 1.98%(C)
Ratio of net investment income to average net assets* 0.31% 0.38%(C)
Portfolio turnover(D) 16.22% 14.64%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 24.07 $ 21.93 $ 17.65 $ 15.13 $ 13.22
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.31 0.32 0.36 0.40 0.40
Net realized and unrealized gains (losses) from
investments 2.11 4.36 4.89 3.22 2.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.42 4.68 5.25 3.62 2.68
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.31) (0.31) (0.36) (0.40) (0.40)
Net realized gains (1.68) (2.23) (0.61) (0.70) (0.37)
Total Distributions (1.99) (2.54) (0.97) (1.10) (0.77)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.50 $ 24.07 $ 21.93 $ 17.65 $ 15.13
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 11.29% 23.18% 30.90% 24.53% 21.04%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,120,181 $691,878 $649,007 $321,827 $170,919
Ratio of expenses to average net assets 0.91% 1.00% 1.00% 0.98% 1.01%
Ratio of net investment income to average net assets 1.40% 1.39% 1.91% 2.44% 2.85%
Ratio of expenses to average net assets* 0.98% 1.00% 1.00% 1.01% 1.01%
Ratio of net investment income to average net assets* 1.33% 1.39% 1.91% 2.41% 2.85%
Portfolio turnover(A) 16.22% 14.64% 28.18% 14.92% 4.03%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 105
100
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Diversified Equity Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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>
SEVEN MONTHS YEAR ENDED
YEAR ENDED JUNE 30, ENDED NOVEMBER 30,
----------------------------- JUNE 30, ---------------------------
CLASS A 1999 1998 1997 1996(A) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.50 $ 11.50 $ 10.39 $ 11.15 $ 9.00 $ 10.02
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.02 0.05 0.09 0.94 0.12 0.13
Net realized and unrealized gains (losses)
from investments 2.51 3.36 2.83 0.08 2.44 (0.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.53 3.41 2.92 1.02 2.56 (0.43)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.03) (0.05) (0.08) (0.94) (0.12) (0.14)
In excess of net investment income - - - (0.01) - -
Net realized gains (0.84) (1.36) (1.73) (0.83) (0.29) (0.45)
Total Distributions (0.87) (1.41) (1.81) (1.78) (0.41) (0.59)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.16 $ 13.50 $ 11.50 $ 10.39 $ 11.15 $ 9.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.36% 31.96% 31.53% 10.40%(B) 29.57% (4.32%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $340,736 $80,500 $ 47,306 $35,984 $217,978 $173,198
Ratio of expenses to average net assets 1.20% 1.23% 1.23% 0.97%(C) 0.95% 0.96%
Ratio of net investment income to average
net assets 0.10% 0.40% 0.83% 0.85%(C) 1.25% 1.34%
Ratio of expenses to average net assets* 1.30% 1.33% 1.34% 1.05%(C) 0.95% 0.96%
Ratio of net investment income to average
net assets* 0.00% 0.30% 0.72% 0.77%(C) 1.25% 1.35%
Portfolio turnover(D) 50.82% 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 $15.26 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.
<TABLE>
<CAPTION>
SEVEN MONTHS YEAR SEPTEMBER 9,
YEAR ENDED JUNE 30, ENDED ENDED 1994 TO
----------------------------- JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(A) 1995 1994(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.40 $ 11.47 $ 10.39 $ 11.16 $ 9.01 $ 9.85
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.02) 0.01 0.91 0.05 0.02
Net realized and unrealized gains (losses)
from investments 2.48 3.31 2.82 0.07 2.46 (0.84)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.41 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 (0.84) (1.36) (1.73) (0.83) (0.29) -
Total Distributions (0.84) (1.36) (1.75) (1.75) (0.36) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.97 $ 13.40 $ 11.47 $ 10.39 $ 11.16 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.52% 30.89% 30.52% 9.96%(C) 28.74% (8.31%)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 52,004 $25,501 $ 10,517 $ 4,673 $ 2,923 $ 412
Ratio of expenses to average net assets 1.96% 1.98% 1.98% 1.86%(D) 1.70% 1.71%(D)
Ratio of net investment income to average
net assets (0.80%) (0.35%) 0.07% 0.13%(D) 0.38% 0.76%(D)
Ratio of expenses to average net assets* 1.96% 1.98% 2.00% 1.94%(D) 1.70% 1.71%(D)
Ratio of net investment income to average
net assets* (0.80%) (0.35%) 0.05% 0.05%(D) 0.38% 0.76%(D)
Portfolio turnover(E) 50.82% 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) Period from commencement of operations. (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.
<PAGE> 106
101
- -------------------------------------
Diversified Equity Fund
<TABLE>
<CAPTION>
YEAR NOVEMBER 4,
ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.47 $ 11.76
- ----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.03) -
Net realized and unrealized gains (losses) from
investments 2.46 2.35
- ----------------------------------------------------------------------------------------------
Total from Investment Activities 2.43 2.35
- ----------------------------------------------------------------------------------------------
Distributions:
Net investment income - (0.01)
Net realized gains (0.84) (0.63)
Total Distributions (0.84) (0.64)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.06 $ 13.47
- ----------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.57% 20.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 8,058 $ 1,234
Ratio of expenses to average net assets 1.96% 1.99%(C)
Ratio of net investment income to average net assets (0.57%) (0.43%)(C)
Portfolio turnover(D) 50.82% 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.
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996 TO
------------------------------------ JUNE 30,
CLASS I 1999 1998 1997 1996(A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.51 $ 11.51 $ 10.39 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.05 0.08 0.11 0.03
Net realized and unrealized gains (losses) from
investments 2.52 3.36 2.85 0.39
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.57 3.44 2.96 0.42
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.08) (0.11) (0.03)
Net realized gains (0.84) (1.36) (1.73) -
Total Distributions (0.89) (1.44) (1.84) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.19 $ 13.51 $ 11.51 $ 10.39
- --------------------------------------------------------------------------------------------------------------------------
Total Return 20.72% 32.26% 31.97% 10.49%(B)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,089,940 $630,340 $430,837 $191,212
Ratio of expenses to average net assets 0.95% 0.98% 0.98% 0.95%(D)
Ratio of net investment income to average net assets 0.42% 0.66% 1.06% 1.13%(D)
Ratio of expenses to average net assets* 0.95% 0.98% 1.00% 1.04%(D)
Ratio of net investment income to average net assets* 0.42% 0.66% 1.04% 1.04%(D)
Portfolio turnover(E) 50.82% 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.
<PAGE> 107
102
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Balanced Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.81 $ 13.00 $ 11.72 $ 10.74 $ 9.65
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.31 0.36 0.39 0.37 0.35
Net realized and unrealized gains (losses) from
investments 1.28 2.24 1.83 1.16 1.13
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.59 2.60 2.22 1.53 1.48
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.31) (0.36) (0.40) (0.37) (0.34)
In excess of net investment income - - - - (0.01)
Net realized gains (0.95) (1.43) (0.54) (0.18) (0.04)
Total Distributions (1.26) (1.79) (0.94) (0.55) (0.39)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.14 $ 13.81 $ 13.00 $ 11.72 $ 10.74
- -------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.45% 21.71% 19.85% 14.48% 15.76%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $80,819 $ 50,456 $31,379 $17,849 $ 4,745
Ratio of expenses to average net assets 1.10% 1.10% 1.05% 1.19% 1.31%
Ratio of net investment income to average net assets 2.33% 2.77% 3.30% 3.33% 3.57%
Ratio of expenses to average net assets* 1.30% 1.38% 1.34% 1.54% 1.66%
Ratio of net investment income to average net assets* 2.13% 2.49% 3.01% 2.98% 3.22%
Portfolio turnover(A) 85.81% 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.87 $ 13.04 $ 11.76 $ 10.76 $ 9.67
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.21 0.26 0.30 0.28 0.27
Net realized and unrealized gains (losses) from
investments 1.28 2.26 1.83 1.18 1.14
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.49 2.52 2.13 1.46 1.41
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.21) (0.26) (0.31) (0.28) (0.27)
In excess of net investment income - - - - (0.01)
Net realized gains (0.95) (1.43) (0.54) (0.18) (0.04)
Total Distributions (1.16) (1.69) (0.85) (0.46) (0.32)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.20 $ 13.87 $ 13.04 $ 11.76 $ 10.76
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.59% 20.95% 18.90% 13.79% 14.90%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $238,490 $114,957 $43,900 $18,575 $ 3,019
Ratio of expenses to average net assets 1.85% 1.85% 1.81% 1.94% 2.07%
Ratio of net investment income to average net assets 1.58% 2.01% 2.54% 2.58% 2.77%
Ratio of expenses to average net assets* 1.95% 2.03% 2.01% 2.19% 2.31%
Ratio of net investment income to average net assets* 1.48% 1.83% 2.34% 2.33% 2.52%
Portfolio turnover(A) 85.81% 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 108
103
- -------------------------------------
Balanced Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.80 $ 12.98 $ 11.71 $ 10.73 $ 9.64
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.34 0.40 0.43 0.41 0.38
Net realized and unrealized gains (losses) from
investments 1.28 2.24 1.81 1.16 1.12
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.62 2.64 2.24 1.57 1.50
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.34) (0.39) (0.43) (0.41) (0.37)
Net realized gains (0.95) (1.43) (0.54) (0.18) (0.04)
Total Distributions (1.29) (1.82) (0.97) (0.59) (0.41)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.13 $ 13.80 $ 12.98 $ 11.71 $ 10.73
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 12.74% 22.12% 20.16% 14.87% 16.06%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $229,008 $105,243 $94,971 $ 50,323 $ 37,658
Ratio of expenses to average net assets 0.85% 0.85% 0.80% 0.94% 1.06%
Ratio of net investment income to average net assets 2.59% 3.03% 3.55% 3.58% 3.72%
Ratio of expenses to average net assets* 0.95% 1.03% 1.00% 1.19% 1.31%
Ratio of net investment income to average net assets* 2.49% 2.85% 3.35% 3.33% 3.47%
Portfolio turnover(A) 85.81% 46.04% 80.96% 73.38% 115.36%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated: (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 109
104
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02 $ 11.59
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.22 0.26 0.29 0.27 0.29
Net realized and unrealized gains (losses) from
investments 5.56 5.97 5.28 3.18 2.58
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.78 6.23 5.57 3.45 2.87
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.23) (0.26) (0.28) (0.27) (0.28)
In excess of net investment income - - - (0.01) -
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (1.15) (0.89) (0.43) (0.80) (0.44)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.78 $ 27.15 $ 21.81 $ 16.67 $ 14.02
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.22% 29.33% 33.94% 25.16% 25.43%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $732,325 $218,518 $ 98,338 $32,186 $ 3,003
Ratio of expenses to average net assets 0.60% 0.60% 0.55% 0.55% 0.56%
Ratio of net investment income to average net assets 0.79% 1.11% 1.59% 1.93% 2.38%
Ratio of expenses to average net assets* 0.92% 0.96% 0.95% 0.94% 1.01%
Ratio of net investment income to average net assets* 0.47% 0.75% 1.19% 1.54% 1.94%
Portfolio turnover(A) 5.37% 4.32% 5.81% 9.08% 2.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05 $ 11.61
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.04 0.10 0.16 0.16 0.18
Net realized and unrealized gains (losses) from
investments 5.53 5.97 5.27 3.16 2.61
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.57 6.07 5.43 3.32 2.79
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.06) (0.11) (0.16) (0.16) (0.19)
In excess of net investment income - - - (0.01) -
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.98) (0.74) (0.31) (0.69) (0.35)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.72 $ 27.13 $ 21.80 $ 16.68 $ 14.05
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.32% 28.47% 32.93% 24.05% 24.58%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $534,777 $351,624 $168,699 $38,538 $ 1,408
Ratio of expenses to average net assets 1.35% 1.35% 1.30% 1.30% 1.34%
Ratio of net investment income to average net assets 0.12% 0.36% 0.83% 1.18% 1.60%
Ratio of expenses to average net assets* 1.57% 1.61% 1.61% 1.59% 1.67%
Ratio of net investment income to average net assets* (0.10%) 0.10% 0.52% 0.89% 1.27%
Portfolio turnover(A) 5.37% 4.32% 5.81% 9.08% 2.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 110
105
- -------------------------------------
Equity Index Fund
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.14 $ 22.60
- -----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.07 0.07
Net realized and unrealized gains (losses) from
investments 5.55 4.67
- -----------------------------------------------------------------------------------------------
Total from Investment Activities 5.62 4.74
- -----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.08) (0.08)
Net realized gains (0.92) (0.12)
Total Distributions (1.00) (0.20)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.76 $ 27.14
- -----------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.52% 21.07%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $59,042 $ 3,214
Ratio of expenses to average net assets 1.35% 1.35%(C)
Ratio of net investment income to average net assets 0.11% 0.27%(C)
Ratio of expenses to average net assets* 1.57% 1.60%(C)
Ratio of net investment income to average net assets* (0.11%) 0.02%(C)
Portfolio turnover(D) 5.37% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.31 0.33 0.35 0.33 0.32
Net realized and unrealized gains (losses) from
investments 5.54 5.98 5.27 3.16 2.59
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.85 6.31 5.62 3.49 2.91
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.32) (0.33) (0.33) (0.29)
In excess of net investment income - - - (0.01) (0.02)
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (1.22) (0.95) (0.48) (0.86) (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 22.50% 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,855,947 $671,422 $480,819 $321,058 $234,895
Ratio of expenses to average net assets 0.35% 0.35% 0.30% 0.30% 0.33%
Ratio of net investment income to average net assets 1.14% 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to average net assets* 0.57% 0.62% 0.61% 0.59% 0.66%
Ratio of net investment income to average net assets* 0.92% 1.10% 1.56% 1.89% 2.24%
Portfolio turnover(A) 5.37% 4.32% 5.81% 9.08% 2.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 111
106
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Market Expansion Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS JULY 31,
ENDED 1998 TO
JUNE 30, DECEMBER 31,
CLASS A 1999(E) 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.00
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 -
Net realized and unrealized gains (losses) from
investments 0.39 0.95
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 0.42 0.95
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.03) (0.01)
Net realized gains (0.29) (0.41)
Total Distributions (0.32) (0.42)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 10.53
- -------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.39%(B) 9.30%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 277 $ 30
Ratio of expenses to average net assets 0.85%(C) 0.77%(C)
Ratio of net investment income to average net assets 0.43%(C) 0.47%(C)
Ratio of expenses to average net assets* 1.42%(C) 1.24%(C)
Ratio of net investment income to average net assets* (0.14%)(C) 0.00%(C)
Portfolio turnover(D) 36.50% 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) 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus Market Expansion
Index Fund became One Group Market Expansion Index Fund. Financial
highlights for the period prior to March 22, 1999 represent the Pegasus
Market Expansion Index Fund.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
JUNE 30, DECEMBER 31,
CLASS B 1999(F) 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.49 $ 10.00
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.02 (0.02)
Net realized and unrealized gains (losses) from
investments and futures 0.54 0.92
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 0.56 0.90
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.02) -
Net realized gains (0.29) (0.41)
Total Distributions (0.31) (0.41)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.74 $ 10.49
- -------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.75%(B) 9.85%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 309 $ -(C)
Ratio of expenses to average net assets 1.60%(D) 1.87%(D)
Ratio of net investment income to average net assets (0.34%)(D) (0.59%)(D)
Ratio of expenses to average net assets* 2.13%(D) 2.14%(D)
Ratio of net investment income to average net assets* (0.87%)(D) (0.86%)(D)
Portfolio turnover(E) 36.50% 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) Period from commencement of operations. (B) Not annualized. (C) Amount
is less than $1,000. (D) Annualized. (E) Portfolio turnover is calculated
on the basis of the Fund as a whole without distinguishing among the
classes of shares issued. (F) Upon reorganizing as a fund of One Group, the
Pegasus Market Expansion Index Fund became One Group Market Expansion Index
Fund. Financial highlights for the period prior to March 22, 1999 represent
the Pegasus Market Expansion Index Fund.
<PAGE> 112
107
- -------------------------------------
Market Expansion Index Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.32
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.02
Net realized and unrealized gains (losses) from
investments 1.25
- -------------------------------------------------------------------------------
Total from Investment Activities 1.27
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.02)
Total Distributions (0.02)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.57
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 13.64%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 18
Ratio of expenses to average net assets 1.58%(C)
Ratio of net investment income to average net assets (0.33%)(C)
Ratio of expenses to average net assets* 2.17%(C)
Ratio of net investment income to average net assets* (0.92%)(C)
Portfolio turnover(D) 36.50%
</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) 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>
SIX MONTHS JULY 31,
ENDED 1998 TO
JUNE 30, DECEMBER 31,
CLASS I 1999(E) 1998(A)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.52 $ 10.00
- ---------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 0.03
Net realized and unrealized gains (losses) from
investments 0.40 0.93
- ---------------------------------------------------------------------------------------------------
Total from Investment Activities 0.43 0.96
- ---------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.03) (0.03)
Net realized gains (0.29) (0.41)
Total Distributions (0.32) (0.44)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 10.52
- ---------------------------------------------------------------------------------------------------
Total Return 4.54%(B) 9.91%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $28,871 $27,483
Ratio of expenses to average net assets 0.57%(C) 0.56%(C)
Ratio of net investment income to average net assets 0.68%(C) 0.75%(C)
Ratio of expenses to average net assets* 0.97%(C) 1.12%(C)
Ratio of net investment income to average net assets* 0.28%(C) 0.19%(C)
Portfolio turnover(D) 36.50% 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) 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus Market Expansion
Index Fund became One Group Market Expansion Index Fund. Financial
highlights for the period prior to March 22, 1999 represent the Pegasus
Market Expansion Index Fund.
<PAGE> 113
108
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
International Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.99 $ 16.92 $ 15.16 $ 13.92 $13.49
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.29 0.19 0.11 0.14 0.12
Net realized and unrealized gains (losses) from
investments 1.60 1.31 2.03 1.40 0.43
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.89 1.50 2.14 1.54 0.55
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.35) - (0.13) (0.16) (0.08)
In excess of net investment income - - (0.10) (0.02) -
Net realized gains (0.85) (0.43) (0.15) (0.12) (0.04)
Total Distributions (1.20) (0.43) (0.38) (0.30) (0.12)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.68 $ 17.99 $ 16.92 $ 15.16 $13.92
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.21% 9.34% 14.31% 11.20% 3.87%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $55,691 $24,060 $12,562 $10,789 $5,028
Ratio of expenses to average net assets 1.10% 1.13% 1.11% 1.22% 1.28%
Ratio of net investment income to average net assets 1.06% 1.11% 0.73% 0.79% 1.09%
Ratio of expenses to average net assets* 1.20% 1.23% 1.19% 1.35% 1.38%
Ratio of net investment income to average net assets* 0.96% 1.01% 0.65% 0.66% 0.99%
Portfolio turnover(A) 33.99% 9.90% 9.61% 6.28% 4.67%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.33 $ 16.44 $ 14.79 $ 13.73 $13.40
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.10 0.08 0.09 0.03 0.03
Net realized and unrealized gains (losses) from
investments 1.55 1.24 1.86 1.32 0.41
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.65 1.32 1.95 1.35 0.44
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.24) - (0.08) (0.15) (0.07)
In excess of net investment income - - (0.07) (0.02) -
Net realized gains (0.85) (0.43) (0.15) (0.12) (0.04)
Total Distributions (1.09) (0.43) (0.30) (0.29) (0.11)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.89 $ 17.33 $ 16.44 $ 14.79 $13.73
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.15% 8.48% 13.37% 9.97% 3.17%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $18,489 $13,307 $10,033 $ 5,856 $3,687
Ratio of expenses to average net assets 1.83% 1.88% 1.86% 1.97% 2.04%
Ratio of net investment income to average net assets 0.10% 0.26% 0.08% 0.04% 0.25%
Ratio of expenses to average net assets* 1.83% 1.88% 1.86% 2.00% 2.04%
Ratio of net investment income to average net assets* 0.10% 0.26% 0.08% 0.01% 0.25%
Portfolio turnover(A) 33.99% 9.90% 9.61% 6.28% 4.67%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 114
109
- -------------------------------------
International Equity Index Fund
<TABLE>
<CAPTION>
NOVEMBER 4,
YEAR ENDED 1997 TO
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.91 $ 15.70
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.30 0.06
Net realized and unrealized gains (losses) from
investments 1.51 2.45
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 1.81 2.51
- ------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.32) -
Net realized gains (0.85) (0.30)
Total Distributions (1.17) (0.30)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.55 $ 17.91
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.78% 16.34%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 2,339 $ 119
Ratio of expenses to average net assets 1.86% 1.87%(C)
Ratio of net investment income to average net assets 0.73% 2.88%(C)
Portfolio turnover(D) 33.99% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93 $ 13.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.19 0.21 0.15 0.11 0.13
Net realized and unrealized gains (losses) from
investments 1.71 1.32 2.02 1.43 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.90 1.53 2.17 1.54 0.59
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.02) (0.17) (0.16) (0.08)
In excess of net investment income - - (0.13) (0.02) -
Net realized gains (0.85) (0.43) (0.15) (0.12) (0.04)
Total Distributions (1.24) (0.45) (0.45) (0.30) (0.12)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.63 $ 17.97 $ 16.89 $ 15.17 $ 13.93
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 11.27% 9.54% 14.64% 11.22% 4.20%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $657,902 $586,741 $449,949 $347,790 $218,299
Ratio of expenses to average net assets 0.85% 0.88% 0.86% 0.97% 1.04%
Ratio of net investment income to average net assets 1.03% 1.29% 1.00% 1.04% 1.25%
Ratio of expenses to average net assets* 0.85% 0.88% 0.86% 1.00% 1.04%
Ratio of net investment income to average net assets* 1.03% 1.29% 1.00% 1.01% 1.25%
Portfolio turnover(A) 33.99% 9.90% 9.61% 6.28% 4.67%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 115
110
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Diversified International Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------
CLASS A 1999(E) 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.89 $ 12.11 $ 11.77 $ 11.05 $ 10.01
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.08 0.11 0.07 0.10 0.10
Net realized and unrealized gains (losses) from
investments 1.11 1.84 0.36 0.72 1.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.19 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) - - -
Total Distributions - (0.17) (0.09) (0.10) (0.11)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.08 $ 13.89 $ 12.11 $ 11.77 $ 11.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.57%(A) 16.12% 3.69% 7.50% 11.47%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $34,900 $44,232 $26,703 $10,836 $ 988
Ratio of expenses to average net assets 1.29%(B) 1.34% 1.35% 1.23% 1.16%
Ratio of net investment income to average net assets 1.25%(B) 0.79% 0.80% 0.88% 1.43%
Ratio of expenses to average net assets* 1.37%(B) 1.34% 1.35% 1.23% 1.24%
Ratio of net investment income to average net assets* 1.17%(B) 0.79% 0.80% 0.88% 1.35%
Portfolio turnover(C) 2.96% 8.50% 3.56%(D) 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) Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the classes
of shares issued. (D) 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. (E) Upon reorganizing as a
fund of One Group, the Pegasus International Equity Fund became One Group
Diversified International Fund. Financial highlights for the period prior
to March 22, 1999 represent the Pegasus International Equity Fund.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED AUGUST 24,
ENDED DECEMBER 31, 1996 TO
JUNE 30, ------------------- DECEMBER 31,
CLASS B 1999(E) 1998 1997 1996(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.01 $ 11.37 $11.08 $10.84
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 0.01 0.01 0.04
Net realized and unrealized gains (losses) from
investments 1.04 1.74 0.34 0.24
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.07 1.75 0.35 0.28
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - (0.08) (0.06) (0.04)
In excess of net investment income - (0.03) - -
Total Distributions - (0.11) (0.06) (0.04)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.08 $ 13.01 $11.37 $11.08
- -------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.22%(B) 15.43% 2.90% 2.62%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,478 $ 2,545 $1,763 $1,131
Ratio of expenses to average net assets 2.05%(C) 2.09% 2.10% 2.05%(C)
Ratio of net investment income to average net assets 0.57%(C) 0.04% 0.05% 0.75%(C)
Ratio of expenses to average net assets* 2.08%(C) 2.09% 2.10% 2.05%(C)
Ratio of net investment income to average net assets* 0.54%(C) 0.04% 0.05% 0.75%(C)
Portfolio turnover(D) 2.96% 8.50% 3.56% 6.37%
</TABLE>
* 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. (E)
Upon reorganizing as a fund of One Group, the Pegasus International Equity
Fund became One Group Diversified International Fund. Financial highlights
for the period prior to March 22, 1999 represent the Pegasus International
Equity Fund.
<PAGE> 116
111
- -------------------------------------
Diversified International Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- ---------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.47
- ---------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 0.61
- ---------------------------------------------------------------------------------
Total from Investment Activities 0.61
- ---------------------------------------------------------------------------------
Distributions:
Total Distributions -
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.08
- ---------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.53%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 5
Ratio of expenses to average net assets 2.00%(C)
Ratio of net investment income to average net assets 1.58%(C)
Portfolio turnover(D) 2.96%
</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.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, DECEMBER 3,
JUNE 30, ---------------------------------------------- 1994 TO
CLASS I 1999(E) 1998 1997 1996 1995 DECEMBER 31,
- --------------------------------------------------------------------------------------------------------- 1994(A)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.93 $ 12.14 $ 11.79 $ 11.05 $ 10.01 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.11 0.14 0.10 0.11 0.10 0.01
Net realized and unrealized gains
(losses) from investments 1.09 1.85 0.37 0.74 1.05 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.20 1.99 0.47 0.85 1.15 0.01
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - (0.15) (0.12) (0.11) (0.11) -
Net realized gains - (0.05) - - - -
Total Distributions - (0.20) (0.12) (0.11) (0.11) -
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.13 $ 13.93 $ 12.14 $ 11.79 $ 11.05 $ 10.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 8.61%(C) 16.43% 3.98% 7.90% 11.47% 1.26%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $599,310 $569,522 $487,986 $389,997 $106,300 $36,545
Ratio of expenses to average net assets 1.06%(B) 1.09% 1.10% 1.10% 1.16% 1.15%(B)
Ratio of net investment income to
average net assets 1.59%(B) 1.04% 1.05% 1.01% 1.43% 1.18%(B)
Ratio of expenses to average net assets* 1.09%(B) 1.09% 1.10% 1.10% 1.24% 1.92%(B)
Ratio of net investment income to
average net assets* 1.56%(B) 1.04% 1.05% 1.01% 1.35% 0.41%(B)
Portfolio turnover(D) 2.96% 8.50% 3.56% 6.37% 2.09% 0.30%
</TABLE>
* 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. (C) Not
annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued. (E)
Upon reorganizing as a fund of One Group, the Pegasus International Equity
Fund became One Group Diversified International Fund. Financial highlights
for the period prior to March 22, 1999 represent the Pegasus International
Equity Fund.
<PAGE> 117
112
[PHOTO]
ONE GROUP(R)
- ------------------------------------
Appendix A
--------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Equity
securities are subject mainly to market risk. Fixed
income securities are primarily influenced by market,
credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Small Cap Growth Fund 1
------------------------------------------------------
One Group(R) Small Cap Value Fund 2
------------------------------------------------------
One Group(R) Mid Cap Growth Fund 3
------------------------------------------------------
One Group(R) Mid Cap Value Fund 4
------------------------------------------------------
One Group(R) Diversified Mid Cap Fund 5
------------------------------------------------------
One Group(R) Large Cap Growth Fund 6
------------------------------------------------------
One Group(R) Large Cap Value Fund 7
------------------------------------------------------
One Group(R) Equity Income Fund 8
------------------------------------------------------
One Group(R) Diversified Equity Fund 9
------------------------------------------------------
One Group(R) Balanced Fund 10
------------------------------------------------------
One Group(R) Equity Index Fund 11
------------------------------------------------------
One Group(R) Market Expansion Index Fund 12
------------------------------------------------------
One Group(R) International Equity Index
Fund 13
------------------------------------------------------
One Group(R) Diversified International
Fund 14
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-14 Market
STRIPS, and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. 1-14 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1-14 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 118
113
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Certificates of Deposit: Negotiable instruments 1-14 Market
with a stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1-14 Liquidity
bank in exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 1-14 Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security 1-14 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1-14 Market
security and the simultaneous commitment to buy Leverage
the security back at an agreed upon price on an
agreed upon date. This is treated as a borrowing
by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% 1-14 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-14 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1-14 Market
mutual funds, including One Group money market
funds and shares of other money market funds for
which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as
investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock 1-14 Market
that convert to common stock. Credit
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 119
114
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call and Put Options: A call option gives the 1-14 Management
buyer the right to buy, and obligates the seller Liquidity
of the option to sell, a security at a specified Credit
price. A put option gives the buyer the right to Market
sell, and obligates the seller of the option to Leverage
buy, a security at a specified price. The Funds
will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing 1-14 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of Credit
securities, or an index at a specified time in the Liquidity
future and at a specified price. Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled 1-14 Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1-14 Credit
drafts drawn on and accepted by a commercial bank Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-14 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign 1-14 Market
companies, as well as commercial paper of foreign Political
issuers and obligations of foreign banks, overseas Liquidity
branches of U.S. banks and supranational entities. Foreign
Includes American Depository Receipts and Global Investment
Depository Receipts, and American Depository
Securities.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-14 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A
securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-14 Credit
Obligations with interest rates which are reset Liquidity
daily, weekly, quarterly or some other period and Market
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 120
115
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warrants: Securities, typically issued with 1, 2, 5-7, Market
preferred stock or bonds, that give the holder the 9-14 Credit
right to buy a proportionate amount of common
stock at a specified price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally 1-14 Market
pays a dividend at a specified rate and has
preference over common stock in the payment of
dividends and in liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 2, 5, 10, 14 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and 6, 10 Market
non-convertible debt securities. Credit
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 10 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 2, 5, 10, 14 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
-------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a 2, 5, 10, 14 Pre-payment
Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in 10 Pre-payment
a mortgage pool which provide for a fixed initial Market
mortgage interest rate for a specified period of Credit
time, after which the rate may be subject to Regulatory
periodic adjustments.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 121
116
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps, Caps and Floors: A Fund may enter into 1-14 Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two parties. Market
Caps and floors entitle a purchaser to a principal
amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls
below a predetermined interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 1-14 Management
contracts and other financial products continue to Credit
be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 1-10, Market
agencies and instrumentalities of the U.S. 12-14 Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign currency Foreign
exchange rates, interest rates, or one or more Investment
other referenced indices.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 10 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Project Notes,
other short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations 2, 5, 10, Credit
of supranational agencies who are chartered to 13, 14 Foreign
promote economic development and are supported by Investment
various governments and governmental agencies.
-------------------------------------------------------------------------------
Currency Futures and Related Options: The Funds 13, 14 Management
may engage in transactions in financial futures Liquidity
and related options, which are generally described Credit
above. The Funds will enter into these Market
transactions in foreign currencies for hedging Political
purposes only. Leverage
Foreign
Investment
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 122
117
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forward Foreign Exchange Transactions: Contractual 13, 14 Management
agreement to purchase or sell one specified Liquidity
currency for another currency at a specified Credit
future date and price. The Funds will enter into Market
forward foreign exchange transactions for hedging Political
purposes only. Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Index Shares: Ownership interests in unit 1, 3, 4 Market
investment trusts and other pooled investment 6-12
vehicles that hold a portfolio of securities or
stocks designed to track the price performance and
dividend yield of a particular index such as
Standard & Poor's Depository Receipts ("SPDRs")
and Nasdaq 100's. The Equity Index Fund invests
only in SPDRs.
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt 2, 5, 10, 14 Credit
that pay no interest, but are issued at a discount Market
from their value at maturity. When held to Zero-Coupon
maturity, their entire return equals the
difference between their issue price and their
maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon 10 Credit
debt securities which convert on a specified date Market
to interest bearing debt securities. Zero
Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative 10 Pre-payment
multi-class mortgage securities usually structured Market
with two classes of shares that receive different Credit
proportions of the interest and principal from a Regulatory
pool of mortgage-backed obligations. These Funds
only invest in Stripped Mortgage-Backed Securities
issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Leveraged 10 Market
variable rate debt instruments with interest rates Leverage
that reset in the opposite direction from the Credit
market rate of interest to which the inverse
floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: 10 Credit
Participations in, or assignments of all or a Political
portion of loans to corporations or to Liquidity
governments, including governments of the less Foreign
developed countries ("LDC's"). Investment
Market
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 123
118
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Rate Mortgage Loans: Investment in fixed 10 Credit
rate mortgage loans or mortgage pools which bear Pre-payment
simple interest at fixed annual rates and have Regulatory
short to long term final maturities. Market
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Investments in 10 Credit
short-term funding agreements issued by banks and Liquidity
highly rated U.S. insurance companies such as Market
Guaranteed Investment Contracts ("GIC's") and Bank
Investment Contracts ("BIC's").
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price of a
security can be adversely affected prior to actual
default as its credit status deteriorates and the
probability of default rises.
- Leverage Risk. The risk associated with securities or
practices that multiply small index or market
movements into large changes in value. Leverage is
often associated with investments in derivatives, but
also may be embedded directly in the characteristics
of other securities.
Hedged. When a derivative (a security whose value is
based on another security or index) is used as a hedge
against an opposite position that the Fund also holds,
any loss generated by the derivative should be
substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce
or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying
security, and there can be no assurance that a Fund's
hedging transactions will be effective.
Speculative. To the extent that a derivative is not
used as a hedge, the Fund is directly exposed to the
risks of that derivative. Gains or losses from
speculative positions in a derivative may be
substantially greater than the derivative's original
cost.
- Liquidity Risk. The risk that certain securities may
be difficult or impossible to sell at the time and the
price that would normally prevail in the market. The
seller may have to lower the price, sell other
securities instead or forego an investment
opportunity, any of which could have a negative effect
on Fund management or performance. This includes the
risk of missing out on an investment opportunity
because the assets necessary to take advantage of it
are tied up in less advantageous investments.
<PAGE> 124
119
- 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 may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing
credit risk.
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws which may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
- Zero Coupon Risk. The market prices of securities
structured as zero coupon or pay-in-kind securities
are generally affected to a greater extent by interest
rate changes. These securities tend to be more
volatile than securities which pay interest
periodically.
<PAGE> 125
(Intentionally Left Blank)
<PAGE> 126
(Intentionally Left Blank)
<PAGE> 127
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling 1
800-480-4111, or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-120 [ONE GROUP LOGO]
<PAGE> 128
[WHEAT GRAPHIC BACKGROUND]
BOND FUNDS
PROSPECTUS
November 1, 1999
[ONE GROUP LOGO]
One Group(R) Ultra Short-Term Bond Fund
One Group(R) Short-Term Bond Fund
One Group(R) Intermediate Bond Fund
One Group(R) Bond Fund
One Group(R) Income Bond Fund
One Group(R) Government Bond Fund
One Group(R) Treasury & Agency Fund
One Group(R) High Yield Bond Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SHARES OF ANY OF THE FUNDS AS AN INVESTMENT OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
<PAGE> 129
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Ultra Short-Term Bond Fund 2
---------
One Group Short-Term Bond Fund 6
---------
One Group Intermediate Bond Fund 10
---------
One Group Bond Fund 14
---------
One Group Income Bond Fund 18
---------
One Group Government Bond Fund 22
---------
One Group Treasury & Agency Fund 26
---------
One Group High Yield Bond Fund 30
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 34
---------
Investment Risks 37
---------
Investment Policies 40
---------
Portfolio Quality 41
---------
Temporary Defensive Positions 42
---------
Portfolio Turnover 42
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 43
---------
Sales Charges 47
---------
Sales Charge Reductions and Waivers 50
---------
Exchanging Fund Shares 53
---------
Redeeming Fund Shares 55
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 57
---------
Dividend Policies 58
---------
Tax Treatment of Shareholders 58
---------
Shareholder Inquiries 60
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 62
---------
The Sub-Advisor 62
---------
Advisory Fees 62
---------
The Fund Managers 63
---------
Banc One High Yield Partners -- Prior Performance of 63
Pacholder Associates, Inc.
---------
Year 2000 Readiness Disclosure 65
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 66
---------
APPENDIX A: INVESTMENT PRACTICES 82
---------
</TABLE>
<PAGE> 130
FUND SUMMARIES
INVESTMENTS, RISK AND PERFORMANCE
<PAGE> 131
2
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ultra Short-Term
Bond Fund
WHAT IS THE GOAL OF THE
ULTRA SHORT-TERM
BOND FUND? The Fund seeks a high level of current income consistent
with low volatility of principal by investing in a
diversified portfolio of short-term investment grade
securities.
WHAT ARE THE ULTRA
SHORT-TERM BOND FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund mainly invests in all types of debt securities,
including money market instruments and taxable and
tax-exempt municipal securities. As part of its main
investment strategy, the Fund invests in adjustable rate
mortgage pass-through securities and other securities
representing an interest in or secured by mortgages with
periodic interest rate resets. Banc One Investment
Advisors selects securities for the Fund by analyzing
both individual securities and different market sectors.
Banc One Investment Advisors looks for market sectors
and individual securities that it believes will perform
well over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical
nature of the transaction. For more information about
the Ultra Short-Term Bond Fund's investment strategies,
please read "More About the Funds" and "Principal
Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE ULTRA
SHORT-TERM BOND FUND? The main risks of investing in the Ultra Short-Term Bond
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Ultra Short-Term Bond Fund and its yield will change
every day in response to interest rates and other market
conditions. You may lose money if you invest in the
Ultra Short-Term Bond Fund. For additional information
on risk, please read "Investment Risks."
<PAGE> 132
3
- ---------------------------
Ultra Short-Term Bond Fund
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and asset
backed securities. The issuers of these securities and
other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes
in pre-payment rates can affect return on investment and
yield of mortgage and asset-backed securities. When
mortgage and other obligations are pre-paid and when
securities are called, the Fund may have to reinvest in
securities with a lower yield. The Fund may also fail to
recover premiums paid for the securities, resulting in
an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments. The Fund also uses investment
management hedging techniques that may expose the Fund
to additional risks.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE ULTRA
SHORT-TERM BOND FUND
PERFORMED? By showing the variability of the Ultra Short-Term Bond
Fund's performance from year to year, the chart and the
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE ULTRA
SHORT-TERM BOND FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
<PAGE> 133
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Ultra Short-Term Bond Fund
The Bar Chart shows changes in
the Fund's performance from
year to year. Total returns
assume reinvestment of
dividends and distributions.
The returns shown DO NOT
reflect applicable sales
charges. If these charges were
included, the returns would be
lower than those shown.
The Average Annual Total
Return Table shows how the
Fund's average annual returns
for the periods indicated
compare to those of a broad
measure of market
performance. Average annual
total returns for more than
one year tend to smooth out
variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS ONE SHARES
----------------
<S> <C>
1994 1.94
1995 6.98
1996 6.14
1997 6.64
1998 5.33
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.36%.
- --------------------------------------------------------------------------------
Best Quarter: 2.02% 2Q1997 Worst Quarter: 0.60% 4Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 3/10/93)
<S> <C> <C> <C>
One Group Ultra Short-Term Bond Fund 1.86% 4.50% 4.39%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.96% 5.73%
----------------------------------------------------------------------------------------------------------
Merrill Lynch 1 Year Treasury Bill Index (2) 5.89% 5.53% 5.24%
----------------------------------------------------------------------------------------------------------
Lipper ARM and Ultra Short-Term Combined Index (3) 4.80% 5.15% 4.90%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Ultra Short-Term Bond Fund 1.59% 4.63%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.93%
----------------------------------------------------------------------------------------------------------
Merrill Lynch 1 Year Treasury Bill Index (2) 5.89% 5.54%
----------------------------------------------------------------------------------------------------------
Lipper ARM and Ultra Short-Term Combined Index (3) 4.80% 5.12%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 2/2/93)
<S> <C> <C> <C>
One Group Ultra Short-Term Bond Fund 5.33% 5.39% 5.18%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.96% 5.70%
----------------------------------------------------------------------------------------------------------
Merrill Lynch 1 Year Treasury Bill Index (2) 5.89% 5.53% 5.21%
----------------------------------------------------------------------------------------------------------
Lipper ARM and Ultra Short-Term Combined Index (3) 4.80% 5.15% 4.88%
</TABLE>
(1) The Lehman Brothers 1-3 Year Government Index is
comprised of U.S. Government and agency
securities with maturities of one to three years.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management fees. By
contrast, the performance of the Fund reflects
the deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B Shares.
(2) The Merrill Lynch 1 Year Treasury Bill Index is
an unmanaged index which reflects the total
return of a hypothetical Treasury bill with a
discount rate equal to the average rate
established at each of the auctions during a
given year. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as investment management
fees. By contrast, the performance of the Fund
reflects the deduction of these services as well
as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B Shares. The benchmark index
for the Fund was changed from the Lehman Brothers
1-3 Year Government Index to the Merrill Lynch 1
Year Treasury Bill Index in order to better
represent the investment policies for comparison
purposes.
(3) The Lipper ARM and Ultra Short-Term Combined
Index consists of an average of the Lipper ARM
index that invests at least 65% of its assets in
adjustable rate mortgage securities or other
securities collateralized by or representing an
interest in mortgages and the Lipper Ultra Short-
Term Index that invests at least 65% of its
assets in investment grade debt issues or better,
and maintains a portfolio dollar-weighted average
maturities between 91 days and 365 days.
<PAGE> 134
5
- ---------------------------
Ultra Short-Term Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 3.00% NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 3.00% 1.00% NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .55% .55% .55% .55%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.14% 1.79% 1.79% .79%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.39%) (.54%) (.54%) (.29%)
--------------------------------------------------------------------------------------------------
Net Expenses .75% 1.25% 1.25% .50%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.75% for Class A shares, 1.25% for Class B
shares, 1.25 % for Class C shares, and .50% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 374 $ 427 $ 127 $ 227 $ 127 $ 51
---------------------------------------------------------------------------------------------------------
3 Years 614 711 511 511 511 223
---------------------------------------------------------------------------------------------------------
5 Years 872 919 919 919 919 410
---------------------------------------------------------------------------------------------------------
10 Years 1,611 1,732 1,732 2,061 2,061 951
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $413
Class B (no redemption) $182
Class B (with redemption) $482
Class C (no redemption) $182
Class C (with redemption) $282
Class I $81
</TABLE>
(2) Class B shares automatically convert to Class A
shares after six (6) years. Therefore, the number
in the "10 years" example for Class B Shares
represents a combination of Class A and Class B
operating expenses.
<PAGE> 135
6
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Short-Term Bond Fund
WHAT IS THE GOAL OF THE
SHORT-TERM BOND FUND? The Fund seeks current income consistent with
preservation of capital through investment in high- and
medium-grade fixed income securities.
WHAT ARE THE SHORT-TERM
BOND FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund mainly invests in debt securities with short to
intermediate remaining maturities. These include
mortgage-backed and asset-backed securities. Banc One
Investment Advisors selects securities for the Fund by
analyzing both individual securities and different
market sectors. Banc One Investment Advisors looks for
market sectors and individual securities that it
believes will perform well over time. Banc One
Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an
evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the
transaction. For more information about the Short-Term
Bond Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
SHORT-TERM BOND FUND? The main risks of investing in the Short-Term Bond Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Short-Term Bond Fund and its yield will change every day
in response to interest rates and other market
conditions. You may lose money if you invest in the
Short-Term Bond Fund. For additional information on
risk, please read "Investment Risks."
<PAGE> 136
7
- ---------------------------
Short-Term Bond Fund
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and
asset-backed securities. The issuers of these securities
and other callable securities may be able to repay
principal in advance, especially when interest rates
fall. Changes in pre-payment rates can affect return on
investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are pre-
paid and when securities are called, the Fund may have
to reinvest in securities with a lower yield. The Fund
may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 137
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Short-Term Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total
Return Table shows how the
Fund's average annual returns
for the periods indicated
compare to those of a broad
measure of market
performance. Average annual
total returns for more than
one year tend to smooth out
variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE SHORT-TERM
BOND FUND PERFORMED? By showing the variability of the Short-Term Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE SHORT-TERM
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1991 13.43
1992 6.03
1993 6.84
1994 -0.33
1995 11.85
1996 4.31
1997 6.29
1998 6.80
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.37%.
- --------------------------------------------------------------------------------
Best Quarter: 4.43% 4Q1991 Worst Quarter: -.86% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Short-Term Bond Fund 3.37% 4.79% 5.44%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.96% 6.04%
----------------------------------------------------------------------------------------------------------
Lipper Short US Government Bond Funds Index (2) 6.56% 5.63% 5.77%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Short-Term Bond Fund 3.18% 4.92%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.93%
----------------------------------------------------------------------------------------------------------
Lipper Short US Government Bond Funds Index (2) 6.56% 5.58%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 9/4/90)
<S> <C> <C> <C>
One Group Short-Term Bond Fund 6.80% 5.71% 7.02%
----------------------------------------------------------------------------------------------------------
Lehman Brothers 1-3 Year Government Index (1) 6.97% 5.96% 6.83%
----------------------------------------------------------------------------------------------------------
Lipper Short US Government Bond Funds Index (2) 6.56% 5.63% 6.46%
</TABLE>
(1) The Lehman Brothers 1-3 Year Government Index is
an unmanaged index comprised of US Government and
agency securities with maturities of one to three
years. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as investment management. By
contrast, the performance of the Fund reflects
the deduction of these services as well as the
deduction of sales charges on Class A Shares and
applicable contingent deferred sales charges on
Class B Shares.
(2) The Lipper Short US Government Bond Funds Index
consists of the equally weighted average monthly
return of the largest funds within the universe
of all funds in the category.
<PAGE> 138
9
- ---------------------------
Short-Term Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 3.00% NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 3.00% 1.00% NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.16% 1.81% 1.81% .81%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.36%) (.51%) (.51%) (.26%)
--------------------------------------------------------------------------------------------------
Net Expenses .80% 1.30% 1.30% .55%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.80% for Class A shares, 1.30% for Class B
shares, 1.30% for Class C shares, and .55% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 379 $ 432 $ 132 $ 232 $ 132 $ 56
----------------------------------------------------------------------------------------------------------------------------
3 Years 623 720 520 520 520 233
----------------------------------------------------------------------------------------------------------------------------
5 Years 885 932 932 932 932 424
----------------------------------------------------------------------------------------------------------------------------
10 Years 1,636 1,756 1,756 2,085 2,085 977
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $415
Class B (no redemption) $184
Class B (with redemption) $484
Class C (no redemption) $184
Class C (with redemption) $284
Class I $83
</TABLE>
(2) Class B shares automatically convert to Class A
shares after six (6) years. Therefore, the number
in the "10 years" example for Class B Shares
represents a combination of Class A and Class B
operating expenses.
<PAGE> 139
10
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Intermediate Bond Fund
WHAT IS THE GOAL OF THE
INTERMEDIATE BOND FUND?
The Fund seeks current income consistent with the
preservation of capital by investing in high and
medium-grade fixed income securities with intermediate
maturities.
WHAT ARE THE INTERMEDIATE
BOND FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund mainly invests in debt securities of all types,
including bonds, notes, U.S. government obligations, and
taxable and tax-exempt municipal securities with
intermediate maturities. These include mortgage-backed
and asset-backed securities. Banc One Investment
Advisors selects securities for the Fund by analyzing
both individual securities and different market sectors.
Banc One Investment Advisors looks for market sectors
and individual securities that it believes will perform
well over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Intermediate Bond Fund's investment strategies,
please read "More About the Funds" and "Principal
Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INTERMEDIATE BOND FUND?
The main risks of investing in the Intermediate Bond
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Intermediate Bond Fund and its yield will change
every day in response to interest rates and other market
conditions. You may lose money if you invest in the
Intermediate Bond Fund. For additional information on
risk, please read "Investment Risks."
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
<PAGE> 140
11
- ---------------------------
Intermediate Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and
asset-backed securities. The issuers of these securities
and other callable securities may be able to repay
principal in advance, especially when interest rates
fall. Changes in pre-payment rates can affect return on
investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are pre-
paid and when securities are called, the Fund may have
to reinvest in securities with a lower yield. The Fund
may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC Insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
HOW HAS THE INTERMEDIATE
BOND FUND PERFORMED? By showing the variability of the Intermediate Bond
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INTERMEDIATE BOND FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 11.68
1990 9.24
1991 14.78
1992 6.06
1993 8.40
1994 -6.3
1995 19.47
1996 5.74
1997 8.38
1998 7.57
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.58%. The performance information for One Group
Intermediate Bond Fund for periods prior to March
22, 1999 reflects the performance of a common
trust fund, the predecessor to the Pegasus
Intermediate Bond Fund and the Pegasus
Intermediate Bond Fund. The predecessor to the
Pegasus Intermediate Bond Fund commenced
operations on June 1, 1991 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
periods prior to the commencement of operations
of the predecessor to the Pegasus Intermediate
Bond Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower. One Group Intermediate Bond
Fund consolidated with the Pegasus Intermediate
Bond Fund on March 22, 1999. For financial
reporting purposes, the Pegasus Intermediate Bond
Fund was considered the accounting survivor.
- --------------------------------------------------------------------------------
Best Quarter: 6.10% 2Q1995
Worst Quarter: -2.32% 1Q1994
- --------------------------------------------------------------------------------
<PAGE> 141
12
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Intermediate Bond Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total return is a
hypothetical rate of return
that, if achieved annually,
would have produced the same
cumulative total return if
performance had been constant
over the entire period. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A(2) (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Intermediate
Bond Fund 2.58% 5.54% 7.73% 8.42%
--------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate
Bond Index (3) 8.44% 6.60% 8.52% 9.36%
--------------------------------------------------------------------------------------------------------------------------
Lipper Short Intermediate
US Government Bond Funds Index (4) 6.93% 5.54% 7.32% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
CLASS B(2) 1 YEAR 5 YEARS 10 YEARS LIFE
(since 12/31/83)
<S> <C> <C> <C> <C>
One Group Intermediate
Bond Fund 1.43% 5.86% 8.05% 8.64%
--------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate
Bond Index (3) 8.44% 6.60% 8.52% 9.36%
--------------------------------------------------------------------------------------------------------------------------
Lipper Short Intermediate
US Government Bond Funds Index (4) 6.93% 5.54% 7.32% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
(since 12/31/83)
<S> <C> <C> <C> <C>
One Group Intermediate
Bond Fund 7.57% 6.66% 8.33% 8.82%
--------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate
Bond Index (3) 8.44% 6.60% 8.52% 9.36%
--------------------------------------------------------------------------------------------------------------------------
Lipper Short-Intermediate
US Government Bond Funds Index (4) 6.93% 5.54% 7.32% *
</TABLE>
(1) The performance information for One Group
Intermediate Bond Fund for periods prior to March
22, 1999 reflects the performance of a common
trust fund, the predecessor to the Pegasus
Intermediate Bond Fund and the Pegasus
Intermediate Bond Fund. The predecessor to the
Pegasus Intermediate Bond Fund commenced
operations on June 1, 1991 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
periods prior to the commencement of operations
of the predecessor to the Pegasus Intermediate
Bond Fund as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower. One Group Intermediate Bond
Fund consolidated with the Pegasus Intermediate
Bond Fund on March 22, 1999. For financial
reporting purposes, the Pegasus Intermediate Bond
Fund was considered the accounting survivor. The
Fund also offers Class C shares. Class C shares
commenced operations on March 22, 1999 and do not
have a full year of investment returns as of the
date of this prospectus.
(2) After June 1, 1991, but prior to the commencement
of operations for Class A shares on May 1, 1992
and Class B shares on September 23, 1996, the
performance for Class A shares is based on Class
I share performance, and the performance for
Class B shares is based on Class A share
performance adjusted to reflect the difference in
expenses and sales charges.
(3) The Lehman Brothers Intermediate
Government/Corporate Bond Index is an unmanaged
index comprised of US Government agency and
Treasury securities and investment grade
corporate bonds. The performance of the index
does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B Shares.
(4) The Lipper Short Intermediate US Government Bond
Fund Index consists of the equally weighted
average monthly return of the largest funds
within the universe of all funds in the category.
* Index did not exist.
<PAGE> 142
Intermediate Bond Fund
- ---------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases 4.50% NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
-----------------------------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-----------------------------------------------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
-----------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.16% 1.81% 1.81% .81%
-----------------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4)
(.33%) (.33%) (.33%) (.23%)
-----------------------------------------------------------------------------------------------------------
Net Expenses .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, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.83% for Class A shares, 1.48% for Class B
shares, 1.48% for Class C shares, and .58% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 531 $ 151 $ 651 $ 151 $ 251 $ 59
--------------------------------------------------------------------------------------------------------
3 Years 771 537 837 537 537 236
--------------------------------------------------------------------------------------------------------
5 Years 1,029 949 1,149 949 949 427
--------------------------------------------------------------------------------------------------------
10 Years 1,767 1,928 1,928 2,100 2,100 980
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $563
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $83
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
13
<PAGE> 143
14
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Bond Fund
WHAT IS THE GOAL OF THE
BOND FUND? The Fund seeks to maximize total return by investing
primarily in a diversified portfolio of intermediate and
long-term debt securities.
WHAT ARE THE BOND FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in investment grade bonds and
debt securities. These include mortgage-backed and
asset-backed securities. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc
One Investment Advisors looks for market sectors and
individual securities that it believes will perform well
over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
BOND FUND? The main risks of investing in the Bond Fund and the
circumstances likely to adversely affect your investment
are described below. The share price of the Bond Fund
and its yield will change every day in response to
interest rates and other market conditions. You may lose
money if you invest in the Bond Fund. For additional
information on risk, please read "Investment Risks."
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
<PAGE> 144
- ---------------------------
Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and
asset-backed securities. The issuers of these securities
and other callable securities may be able to repay
principal in advance, especially when interest rates
fall. Changes in pre-payment rates can affect the return
on investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are
pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The
Fund may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE BOND FUND
PERFORMED? By showing the variability of the Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 13.03%
1990 9.25%
1991 15.67%
1992 6.57%
1993 11.33%
1994 -6.91%
1995 23.68%
1996 5.08%
1997 9.92%
1998 8.19%
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-.39%. The above quoted performance data also
includes the performance of a common trust fund,
the predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with the One Group Bond Fund on
March 22, 1999. The predecessor to the Pegasus
Bond Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst Quarter: -2.66 1Q1994
- --------------------------------------------------------------------------------
15
<PAGE> 145
16
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Bond Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A(2) (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Bond Fund 3.05% 6.42% 8.75% 9.61%
-----------------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 9.26% 10.31%
-----------------------------------------------------------------------------------------------------------------------
Lipper Intermediate U.S. Government Bond Funds Index (4) 8.17% 6.12% * *
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS B(2) (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Bond Fund 2.14% 6.81% 9.09% 9.84%
-----------------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 9.26% 10.31%
-----------------------------------------------------------------------------------------------------------------------
Lipper Intermediate U.S. Government Bond Funds Index (4) 8.17% 6.12% * *
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Bond Fund 8.19% 7.55% 9.32% 9.99%
-----------------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 9.26% 10.31%
-----------------------------------------------------------------------------------------------------------------------
Lipper Intermediate U.S. Government Bond Funds Index (4) 8.17% 6.12% * *
</TABLE>
(1) The above quoted performance data also includes
the performance of a common trust fund, the
predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with the One Group Bond Fund on
March 22, 1999. The predecessor to the Pegasus
Bond Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower. The Fund also offers Class C
shares. Class C shares commenced operations on
March 22, 1999 and do not have a full year of
investment returns as of the date of this
prospectus.
(2) After June 1, 1991, but prior to the commencement
of operations of Class A shares on May 1, 1992
and Class B shares on August 26, 1996, the
performance of Class A shares is based on Class I
share performance, and the performance for Class
B shares is based on Class A share performance
adjusted to reflect the difference in expenses
and sales charges.
(3) The Lehman Brothers Aggregate Bond Index is an
unmanaged index generally representative of the
bond market as a whole. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management fees. By contrast, the performance of
the Fund reflects the deduction of these services
as well as the deduction of sales charges on
Class A Shares and applicable contingent deferred
sales charges on Class B Shares.
(4) The Lipper Intermediate U.S. Government Bond
Funds Index consists of the equally weighted
average monthly return of the largest funds
within the universe of all funds in the category.
* Index did not exist.
<PAGE> 146
17
- ---------------------------
Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if either
you redeemed all of your shares
or if you continued to hold
them at the end of the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.16% 1.81% 1.81% .81%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.31%) (.31%) (.31%) (.21%)
------------------------------------------------------------------------------------------------
Net Expenses .85% 1.50% 1.50% .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, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.85% for Class A shares, 1.50% for Class B
shares, 1.50% for Class C shares, and .60% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 533 $ 653 $ 153 $ 253 $ 153 $ 61
----------------------------------------------------------------------------------------------------------------------------
3 Years $ 773 $ 839 $ 539 $ 539 $ 539 $238
----------------------------------------------------------------------------------------------------------------------------
5 Years $1,031 $1,151 $ 951 $ 951 $ 951 $429
----------------------------------------------------------------------------------------------------------------------------
10 Years $1,769 $1,930 $1,930 $2,101 $2,101 $982
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $563
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $83
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 147
18
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Income Bond Fund
WHAT IS THE GOAL OF THE
INCOME BOND FUND? The Fund seeks a high level of current income by
investing primarily in a diversified portfolio of high,
medium and low grade debt securities.
WHAT ARE THE INCOME
BOND FUND'S MAIN
INVESTMENT STRATEGIES? The Fund mainly invests in investment grade debt
securities (or unrated debt securities that are
determined to be of comparable quality by Banc One
Investment Advisors). In addition, the Fund may also
invest in convertible securities, preferred stock, loan
participations, and debt securities rated below
investment grade (i.e., junk bonds). (The Fund may not
invest more than 30% of its total assets in these
securities). The Fund also invests in mortgage-backed
and asset-backed securities. The Fund invests in
securities with short to long maturities. Banc One
Investment Advisors selects securities for the Fund by
analyzing both individual securities and different
market sectors. Banc One Investment Advisors looks for
market sectors and individual securities that it
believes will perform well over time. Banc One
Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an
evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the
transaction. For more information about the Income Bond
Fund's investment strategies, please read "More About
the Funds" and "Principal Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations. A "junk bond" is a debt security that is
rated below investment grade. (Junk bonds also include
unrated securities that Banc One Investment Advisors
believes to be of comparable quality to debt securities
that are rated below investment grade). Junk bonds are
also called "high yield bonds" and "non-investment grade
bonds." These securities generally are rated in the
fifth or lower rating categories (for example, BB or
lower by Standard & Poor's Corporation and Ba or lower
by Moody's Investors Service, Inc.) These securities
generally offer a higher yield than investment grade
securities, but involve a high degree of risk.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INCOME BOND FUND? The main risks of investing in the Income Bond Fund and
the circumstances likely to adversely affect your
investment are described below. The share price of the
Income Bond Fund and its yield will change every day in
response to interest rates and other market conditions.
You may lose money if you invest in the Income Bond
Fund. For additional information on risk, please read
"Investment Risks."
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
<PAGE> 148
- ---------------------------
FUND SUMMARY
Income Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and asset
backed securities. The issuers of these securities and
other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes
in pre-payment rates can affect return on investment and
yield of mortgage and asset-backed securities. When
mortgage and other obligations are pre-paid and when
securities are called, the Fund may have to reinvest in
securities with a lower yield. The Fund may also fail to
recover premiums paid for the securities, resulting in
an unexpected capital loss.
Portfolio Quality. The Fund may invest in securities
that are rated in the lowest investment grade. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities. The Fund also may invest in securities that
are rated below investment grade. These securities are
considered to be speculative and may be issued by
companies which are highly leveraged, less creditworthy
or financially distressed.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE INCOME BOND
FUND PERFORMED? By showing the variability of the Income Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE INCOME BOND
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1994 -0.97%
1995 17.51%
1996 3.14%
1997 8.88%
1998 7.77%
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.00%. One Group Income Bond Fund consolidated
with the Pegasus Multi-Sector Bond Fund on March
22, 1999. For financial reporting purposes, the
Pegasus Fund was the accounting survivor.
Therefore, all performance information for One
Group Income Bond Fund for periods prior to March
22, 1999 reflects the performance of the Pegasus
Fund.
- --------------------------------------------------------------------------------
Best Quarter: 5.88% 2Q1995 Worst Quarter: -1.63% 1Q1996
- --------------------------------------------------------------------------------
19
<PAGE> 149
20
- ---------------------------
Income Bond Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 3/5/93)
<S> <C> <C> <C>
One Group Income Bond Fund 2.51% 5.84% 5.67%
-------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate
Bond Index (2) 9.47% 7.30% 7.42%
-------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 7.27%
-------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade
Bond Funds Index (4) 7.87% 6.59% 6.66%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CLASS B (5) 1 YEAR 5 YEARS LIFE
(since 3/5/93)
<S> <C> <C> <C>
One Group Income Bond Fund 1.73% 5.98% 5.92%
-------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate
Bond Index (2) 9.47% 7.30% 7.42%
-------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 7.27%
-------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade
Bond Funds Index (4) 7.87% 6.59% 6.66%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
(since 3/5/93)
<S> <C> <C> <C>
One Group Income Bond Fund 7.77% 7.09% 6.73%
-------------------------------------------------------------------------------------
Lehman Brothers Government/Corporate
Bond Index (2) 9.47% 7.30% 7.42%
-------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (3) 8.69% 7.27% 7.27%
-------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade
Bond Funds Index (4) 7.87% 6.59% 6.66%
</TABLE>
(1) One Group Income Bond Fund consolidated with the
Pegasus Multi-Sector Bond Fund on March 22, 1999.
For financial reporting purposes, the Pegasus
Multi-Sector Bond Fund was the accounting
survivor. The performance information for One
Group Income Bond Fund for periods prior to March
22, 1999 reflects the performance of the Pegasus
Multi-Sector Bond Fund.
(2) The Lehman Brothers Government/Corporate Bond
Index is an unmanaged index generally
representative of the government and corporate
bond market as a whole. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management. By contrast, the performance of the
fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
shares and applicable contingent deferred sales
charges on Class B shares.
(3) The Lehman Brothers Aggregate Bond Index is an
unmanaged index comprised of US Government,
mortgage, corporate and asset-backed securities.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
applicable contingent deferred sales charges on
Class B shares. The benchmark index for the Fund
has changed from the Lehman Brothers
Government/Corporate Bond Index to the Lehman
Brothers Aggregate Bond Index to better represent
the investment policies for comparison purposes.
(4) The Lipper Intermediate Investment Grade Bond
Funds Index consists of the equally weighted
average monthly return of the largest funds
within the universe of all funds in the category.
(5) After March 5, 1993, but prior to the
commencement of operations of Class B shares on
February 8, 1994, the performance for Class B
shares is based on Class A share performance
adjusted to reflect the difference in expenses
and sales charges. The performance for Class B
shares also is based on Class A share performance
for the period from December 2, 1994 to May 30,
1995, adjusted to reflect the difference in
expenses and sales charges.
<PAGE> 150
21
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
FUND SUMMARY
Income Bond Fund
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE(2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .21% .21% .21% .21%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.16% 1.81% 1.81% .81%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.24%) (.24%) (.24%) (.14%)
------------------------------------------------------------------------------------------------
Net Expenses .92% 1.57% 1.57% .67%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.92% for Class A shares, 1.57% for Class B
shares, 1.57% for Class C shares, and .67% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 540 $ 660 $ 160 $ 260 $ 160 $ 68
----------------------------------------------------------------------------------------------------------------------------
3 Years 779 846 546 546 546 245
----------------------------------------------------------------------------------------------------------------------------
5 Years 1,037 1,158 958 958 958 436
----------------------------------------------------------------------------------------------------------------------------
10 Years 1,775 1,936 1,936 2,107 2,107 989
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $563
Class B (no redemption) $184
Class B (with redemption) $684
Class C (no redemption) $184
Class C (with redemption) $284
Class I $83
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 151
22
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Government Bond Fund
WHAT IS THE GOAL OF THE
GOVERNMENT BOND
FUND? The Fund seeks a high level of current income with
liquidity and safety of principal.
WHAT ARE THE GOVERNMENT
BOND FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund limits its investments to securities issued by
the U.S. government and its agencies and
instrumentalities (i.e., government bonds) or related to
securities issued by the U.S. government and its
agencies and instrumentalities. The Fund mainly invests
in government bonds with intermediate to long remaining
maturities. These include mortgage-backed securities.
Banc One Investment Advisors looks for individual
securities that it believes will perform well over
market cycles. The Government Bond Fund spreads its
holdings across various security types within the
Government market sector. Banc One Investment Advisors
selects individual securities after performing a
risk/reward analysis that includes an evaluation of
interest rate risk and the complex legal and technical
structure of the transaction. For more information about
the Government Bond Fund's investment strategies, please
read "More About the Funds" and "Principal Investment
Strategies."
WHAT IS A GOVERNMENT
BOND? A "government bond" is a debt instrument with principal
and interest guaranteed by the U.S. Government and its
agencies and instrumentalities, as well as stripped
government securities and mortgage-related and
mortgage-backed securities.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
GOVERNMENT BOND
FUND? The main risks of investing in the Government Bond Fund
and the circumstances likely to adversely affect your
investment are described below. Like all non-money
market mutual funds, the share price of the Government
Bond Fund and its yield will change every day in
response market conditions. You may lose money if you
invest in the Government Bond Fund. For additional
information on risk, please read "Investment Risks."
<PAGE> 152
23
- ---------------------------
Government Bond Fund
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Prepayment and Call Risk. As part of its main investment
strategies, the Fund invests in mortgage-backed
securities. The issuers of these securities and other
callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in
pre-payment rates can affect the return on investment
and yield of mortgage-backed securities. When mortgage
and other obligations are pre-paid and when securities
are called, the Fund may have to reinvest in securities
with a lower yield. The Fund may also fail to recover
premiums paid for the securities, resulting in an
unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 153
24
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Government Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE GOVERNMENT
BOND FUND PERFORMED? By showing the variability of the Government Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE GOVERNMENT
BOND FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1994 -3.01
1995 18.11
1996 2.59
1997 9.47
1998 8.23
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.52%.
- --------------------------------------------------------------------------------
Best Quarter: 5.70% 2Q1995 Worst Quarter: -2.29% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 3/5/93)
<S> <C> <C> <C>
One Group Government
Bond Fund 3.12% 5.64% 5.28%
------------------------------------------------------------------
Salomon Brothers 3-7
Year Treasury
Index (2) 9.47% 6.76% 6.71%
------------------------------------------------------------------
Lipper US Government
Bond Funds Index (3) 7.85% 6.01% 6.04%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Government
Bond Fund 2.29% 5.53%
------------------------------------------------------------------
Salomon Brothers 3-7
Year Treasury
Index (2) 9.47% 6.62%
------------------------------------------------------------------
Lipper US Government
Bond Funds Index (3) 7.85% 5.84%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 2/8/93)
<S> <C> <C> <C>
One Group Government
Bond Fund 8.23% 6.90% 6.62%
------------------------------------------------------------------
Salomon Brothers 3-7
Year Treasury
Index (2) 9.47% 6.76% 6.68%
------------------------------------------------------------------
Lipper US Government
Bond Funds Index (3) 7.85% 6.01% 6.01%
</TABLE>
(1) The Fund also offers Class C Shares. Class C
Shares commenced operations on March 22, 1999 and
do not have a full year of investment returns as
of the date of this prospectus.
(2) The Salomon Brothers 3 to 7 Year Treasury Index
is an unmanaged index comprised of US Government
agency and Treasury securities and agency
mortgage-backed securities. The performance of
the index does not reflect the deduction of
expenses associated with a mutual fund, such as
investment management. By contrast, the
performance of the Fund reflects the deduction of
these services as well as the deduction of sales
charges on Class A Shares and applicable
contingent deferred sales charges on Class B
Shares.
(3) The Lipper US Government Bond Funds Index
consists of the equally weighted average monthly
return of the largest funds within the universe
of all funds in the category.
<PAGE> 154
25
- ---------------------------
Government Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.00% 1.65% 1.65% .65%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.10%) (.10%) (.10%) NONE
--------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares, and .65% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158
-------------------------------------------------------------------------------------
3 Years 745 811 511 511 511
-------------------------------------------------------------------------------------
5 Years 968 1,088 888 888 888
-------------------------------------------------------------------------------------
10 Years 1,611 1,773 1,773 1,946 1,946
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 66
-----------------------------------
3 Years 208
-----------------------------------------
5 Years 362
-----------------------------------------------
10 Years 810
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $547
Class B (no redemption) $168
Class B (with redemption) $668
Class C (no redemption) $168
Class C (with redemption) $268
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 155
26
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury & Agency
Fund
WHAT IS THE GOAL OF THE
TREASURY & AGENCY FUND? The Fund seeks a high level of current income by
investing in U.S. Treasury and other U.S. agency
obligations with a primary, but not exclusive, focus on
issues that produce income exempt from state income
taxes.
WHAT ARE THE TREASURY &
AGENCY FUND'S MAIN
INVESTMENT STRATEGIES? The Fund invests exclusively in U.S. Treasury and other
U.S. agency obligations including fixed income and
mortgage-related securities and repurchase agreements.
Mortgage-related securities include government
mortgage-backed securities and adjustable rate mortgage
loans known as ARMs. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc
One Investment Advisors looks for individual securities
that it believes will perform well over time. The
Treasury and Agency Fund spreads its holdings across
various security types and concentrates on issues with
short or intermediate remaining maturities. Banc One
Investment Advisors selects individual securities after
performing a risk/reward analysis that includes an
evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the
transaction. For more information about the Treasury &
Agency Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
TREASURY & AGENCY FUND? The main risks of investing in the Treasury & Agency
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Treasury & Agency Fund and its yield will change
every day in response to interest rates and other market
conditions. You may lose money if you invest in the
Treasury & Agency Fund. For additional information on
risk, please read "Investment Risks."
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
<PAGE> 156
Treasury & Agency Fund
- ---------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and asset
backed securities. The issuers of these securities and
other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes
in pre-payment rates can affect the return on investment
and yield of mortgage and asset-backed securities. When
mortgage and other obligations are pre-paid and when
securities are called, the Fund may have to reinvest in
securities with a lower yield. The Fund may also fail to
recover premiums paid for the securities, resulting in
an unexpected capital loss.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE TREASURY &
AGENCY FUND PERFORMED? By showing the variability of the Treasury & Agency
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
TREASURY & AGENCY FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 11.01%
1990 8.94%
1991 11.49%
1992 5.89%
1993 5.06%
1994 1.20%
1995 15.22%
1996 3.30%
1997 7.30%
1998 8.00%
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.11%. The Treasury & Agency Fund commenced
operations on January 20, 1997 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
periods prior to the Fund's commencement of
operations as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 5.24% 2Q1995 Worst Quarter: -1.24% 1Q1996
- --------------------------------------------------------------------------------
2
<PAGE> 157
28
- ---------------------------
ONE GROUP(R)
- ------------------------------------
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include sales charges and
recurring account fees.
FUND SUMMARY
Treasury & Agency Fund
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 4/30/88)
<S> <C> <C> <C> <C>
One Group Treasury & Agency Fund 4.78% 6.11% 7.16% 6.97%
--------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Treasury Index (2) 8.62% 6.46% 8.34% 8.12%
--------------------------------------------------------------------------------------------
Lipper Mix (3) 6.20% 5.25% 6.83% 6.67%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS B (since 4/30/88)
<S> <C> <C> <C> <C>
One Group Treasury & Agency Fund 4.30% 6.21% 6.93% 6.73%
--------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Treasury Index (2) 8.62% 6.46% 8.34% 8.12%
--------------------------------------------------------------------------------------------
Lipper Mix (3) 6.20% 5.25% 6.83% 6.67%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 4/30/88)
<S> <C> <C> <C> <C>
One Group Treasury & Agency Fund 8.00% 6.90% 7.67% 7.48%
--------------------------------------------------------------------------------------------
Lehman Brothers Intermediate
Treasury Index (2) 8.62% 6.46% 8.34% 8.12%
--------------------------------------------------------------------------------------------
Lipper Mix (3) 6.20% 5.25% 6.83% 6.67%
</TABLE>
(1) The Treasury & Agency Fund commenced operations
on January 20, 1997 subsequent to the transfer of
assets from a common trust fund with materially
equivalent investment objectives, policies,
guidelines and restrictions as the Fund. The
quoted performance of the Fund includes the
performance of the common trust fund for periods
prior to the Fund's commencement of operations as
adjusted to reflect the expenses associated with
the Fund. The common trust fund was not
registered with the SEC and was not subject to
the investment restrictions, limitations, and
diversification requirements imposed by law on
registered mutual funds. If the common trust fund
had been registered, its return may have been
lower.
(2) The Lehman Brothers Intermediate Treasury Index
is an unmanaged index comprised of US
Treasury-issued securities with maturities of one
to ten years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B Shares.
(3) The Lipper Mix consists of the average monthly
returns of the Lipper Intermediate Treasury Bond
Funds Index from April 1988 through December
1989. Thereafter, the data is from the Lipper
Short US Government Bond Funds Index which
corresponds with the initiation of the Index on
January 1, 1989. The Lipper Indices consist of
the equally weighted average monthly return of
the largest funds within the universe of all
funds in the category.
<PAGE> 158
29
- ---------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
Treasury & Agency Fund
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 3.00% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 3.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .40% .40% .40% .40%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .25% .25% .25% .25%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.00% 1.65% 1.65% .65%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.30%) (.45%) (.45%) (.20%)
------------------------------------------------------------------------------------------------
Net Expenses .70% 1.20% 1.20% .45%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.70% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares, and .45% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING NO ASSUMING ASSUMING NO ASSUMING
REDEMPTION REDEMPTION AT REDEMPTION REDEMPTION AT
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 369 $ 122 $ 422 $ 122 $ 222
-------------------------------------------------------------------------------------
3 Years 580 476 676 476 476
-------------------------------------------------------------------------------------
5 Years 808 855 855 855 855
-------------------------------------------------------------------------------------
10 Years 1,461 1,583 1,583 1,917 1,917
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 46
-----------------------------------------------------------
3 Years 188
-----------------------------------------------------------------
5 Years 342
-----------------------------------------------------------------------
10 Years 791
-----------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $399
Class B (no redemption) $168
Class B (with redemption) $468
Class C (no redemption) $168
Class C (with redemption) $268
Class I $66
</TABLE>
(2) Class B shares automatically convert to Class A
shares after six (6) years. Therefore, the number
in the "10 years" example for Class B Shares
represents a combination of Class A and Class B
operating expenses.
<PAGE> 159
30
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
High Yield Bond Fund
WHAT IS THE GOAL OF THE
HIGH YIELD BOND FUND? The Fund seeks a high level of current income by
investing primarily in a diversified portfolio of debt
securities which are rated below investment grade or
unrated. Capital appreciation is a secondary objective.
WHAT ARE THE HIGH YIELD
BOND FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests in all types of high yield, high risk
debt securities. The Fund also may invest in convertible
securities, preferred stock, common stock, and loan
participations. The Fund's investments generally will be
rated below investment grade or unrated. Such securities
are also known as junk bonds. The Fund's sub-advisor,
Banc One High Yield Partners, LLC focuses on value in
choosing securities for the Fund by looking at
individual securities against the context of broader
market factors. Banc One High Yield Partners monitors
investments on an ongoing basis by staying abreast of
positive and negative credit developments and having
regular discussions with senior management of issuers of
the Fund's investments. For more information about the
High Yield Bond Fund's investment strategies, please
read "More About the Funds" and "Principal Investment
Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT IS A JUNK BOND? A "junk bond" is a debt security that is rated below
investment grade. (Junk bonds also include unrated
securities that Banc One Investment Advisors or Banc One
High Yield Partners believes to be of comparable quality
to debt securities that are rated below investment
grade.) Junk bonds are also called "high yield bonds"
and "non-investment grade bonds." These securities
generally are rated in the fifth or lower rating
categories (for example, BB or lower by Standard &
Poor's Corporation and Ba or lower by Moody's Investors
Service, Inc.) These securities generally offer a higher
yield than investment grade securities, but involve a
high degree of risk.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
HIGH
YIELD BOND FUND? The main risks of investing in the High Yield Bond Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
High Yield Bond Fund and its yield will change every day
in response to interest rates and other market
conditions. You may lose money if you invest in the High
Yield Bond Fund. For additional information on risk,
please read "Investment Risks."
<PAGE> 160
31
- ---------------------------
High Yield Bond Fund
MAIN RISKS
- --------------------------------
Junk Bond Risk. The Fund's main investment strategy is
to invest in securities which are considered to be
speculative. These investments may be issued by
companies which are highly leveraged, less creditworthy
or financially distressed. While these investments
generally provide a higher yield than higher rated debt
securities, the high degree of risk involved in these
investments can result in substantial or total losses.
The market price of these securities can change suddenly
and unexpectedly. As a result, the Fund is intended as a
long term investment program for investors who are able
and willing to assume a high degree of risk.
Smaller Companies. As part of its high yield strategy,
the Funds invests in debt securities of smaller, newer
companies. These investments may be riskier than
investments in larger, more established companies.
Securities of smaller companies tend to be less liquid
than securities of larger companies. In addition, small
companies may be more vulnerable to economic, market,
and industry changes. Because economic events have a
greater impact on smaller companies, there may be
greater and more frequent changes in the value of their
debt securities. This may cause unexpected decreases in
the value of your investment in the Fund.
Sensitivity to Interest Rates and Economic Changes. The
income and market value of the Funds' securities may
fluctuate more than higher rated securities. Although
non-investment grade securities tend to be less
sensitive to interest rate changes than investment grade
securities, non-investment grade securities are more
sensitive to short-term corporate, economic and market
developments. During periods of economic uncertainty and
change, the market price of the Fund's investments and
the Fund's net asset value may be volatile.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 161
32
- ---------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
High Yield Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
HOW HAS THE HIGH YIELD
BOND FUND PERFORMED? This Section would normally include a bar chart and
average annual total return table. The High Yield Bond
Fund began operations on November 13, 1998 and does not
have a full calendar year of investment returns at the
date of this prospectus.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE(2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .75% .75% .75% .75%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.37% 2.02% 2.02% 1.02%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) (.22%) (.22%) (.22%) (.12%)
------------------------------------------------------------------------------------------------
Net Expenses 1.15% 1.80% 1.80% .90%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.15% for Class A shares, 1.80% for Class B
shares, 1.80% for Class C shares, and .90% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<PAGE> 162
High Yield Bond Fund
- ---------------------------
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 562 $ 683 $ 183 $ 283 $ 183
-----------------------------------------------------------------------------------------
3 Years 844 912 612 612 612
-----------------------------------------------------------------------------------------
5 Years 1,146 1,268 1,068 1,068 1,068
-----------------------------------------------------------------------------------------
10 Years 2,004 2,163 2,163 2,330 2,330
-----------------------------------------------------------------------------------------
<CAPTION>
CLASS I
------------------------
<S> <C>
1 Year (1) $ 92
------------------------
3 Years 313
------------------------
5 Years 552
------------------------
10 Years 1,237
------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $583
Class B (no redemption) $205
Class B (with redemption) $705
Class C (no redemption) $205
Class C (with redemption) $305
Class I $104
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
33
<PAGE> 163
34
[GRAPHIC]
ONE GROUP(R)
- ---------------------------
More About The Funds
Each of the eight funds described in this Prospectus is
a series of One Group Mutual Funds and is managed by
Banc One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual
Funds" and the Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES This Prospectus describes eight mutual funds with a
variety of investment objectives, including total
return, capital appreciation, and current income. Banc
One Investment Advisors selects securities for the Funds
by analyzing both individual securities and different
industry sectors. Banc One Investment Advisors looks for
sectors and securities that it believes will perform
consistently well over time as measured by total return.
The Portfolios attempt to enhance total return by
selecting market sectors that offer risk/reward
advantages based on structural risks and credit trends.
Individual securities that are purchased by the Funds
are subject to a disciplined risk/reward analysis both
at the time of purchase and on an ongoing basis. This
analysis includes an evaluation of interest rate risk,
credit risk and risks associated with the complex legal
and technical structure of the investment (e.g.,
asset-backed securities). In addition, the principal
investment strategies that are used to meet each Fund's
investment objective are described in Fund Summaries:
Investments, Risk, & Performance in the front of this
prospectus. They are also described below.
FUNDAMENTAL POLICIES
Each Fund's investment strategy may
involve "fundamental policies." A policy
is fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
may also use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP ULTRA SHORT-TERM BOND FUND. The Fund invests
in all types of debt securities including money market
instruments, adjustable rate mortgage backed securities
and taxable and tax-exempt municipal securities. The
Fund will maintain a maximum interest rate sensitivity
approximately equal to that of a two year U.S. Treasury
security, although the Fund's actual interest rate
sensitivity is expected to be approximately equal to
that of a one year U.S. Treasury security.
- The Fund normally invests at least 80% of its total
assets in debt securities. Debt securities include
bonds, notes and other obligations.
- Up to 20% of the Fund's total assets may be invested
in preferred stock.
<PAGE> 164
35
- The Fund will invest in adjustable rate mortgage
pass-through securities and other securities
representing an interest in or secured by mortgages
with periodic interest rate resets (some of which may
be subject to repurchase agreements. These securities
often are issued or guaranteed by the U.S. government,
its agencies or instrumentalities. However, the Fund
may also purchase mortgage-backed securities and
asset-backed securities that are issued by
non-governmental entities. Such securities may or may
not have private insurer guarantees of timely
payments.
- -----
ONE GROUP SHORT-TERM BOND FUND. The Fund invests in all
types of debt securities with short to intermediate
maturities.
- The Fund invests at least 80% of its total assets in
debt securities with short to intermediate maturities.
- At least 65% of the Fund's total assets will consist
of bonds.
- The Fund also may purchase taxable or tax-exempt
municipal securities.
- Up to 20% of the Fund's total assets may be invested
in preferred stock.
- The Fund's effective average weighted maturity
ordinarily will be three years or less taking into
account expected amortization and prepayment of
principal on certain investments.
- -----
ONE GROUP INTERMEDIATE BOND FUND. The Fund invests in
debt securities of all types including bonds, notes, U.S
government obligations, and taxable and tax-exempt
municipal securities, rated as investment grade at the
time of investment, (or, if unrated, determined by Banc
One Investment Advisors, to be of comparable quality).
- The Fund normally invests at least 80% of its total
assets in debt securities. Debt securities include
bonds, notes and other obligations.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds and at least
50% of total assets will consist of obligations issued
by the U.S. government or its agencies and
instrumentalities, some of which may be subject to
repurchase agreements.
- Up to 20% of the Fund's total assets may be invested
in preferred stock.
- The Fund's average weighted maturity will ordinarily
range between three and ten years, taking into account
expected prepayment of principal on certain
investments. The Fund may shorten that weighted
average maturity to as little as one year for
temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average maturity is important to bond
investors as an indication of a fund's
sensitivity to changes in interest rates.
Usually, the longer the average maturity,
the more fluctuation in share price you
can expect. The terms "Intermediate" and
"Short-Term" in a fund's name refer to the
average maturity the fund maintains.
<PAGE> 165
- -----
ONE GROUP BOND FUND. The Fund invests in all types of
debt securities rated as investment grade, as well as
convertible securities, preferred stock, and loan
participations.
- The Fund invests at least 65% of its total assets in
debt securities of all types with intermediate to long
maturities.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds.
- The Fund also may purchase taxable or tax-exempt
municipal securities.
- The Fund may invest in debt securities that are rated
in the lowest investment grade category.
- The Fund's average weighted maturity will ordinarily
range between four and twelve years, although the Fund
may shorten its weighted average maturity if deemed
appropriate for temporary defensive purposes.
- -----
ONE GROUP INCOME BOND FUND. The Fund invests in all
types of debt securities rated as investment grade or
below investment grade, as well as convertible
securities, preferred stock, and loan participations.
- The Fund invests at least 70% of its total assets in
debt securities of all types rated as investment grade
at the time of investment or, if unrated, determined
to be of comparable quality by Banc One Investment
Advisors.
- Up to 30% of the Fund's total assets may be invested
in convertible securities, preferred stock, loan
participations and debt securities rated below
investment grade or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality.
- The Fund will not invest more than 20% of its total
assets in securities rated below the fifth rating
category.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds.
- The Fund may also purchase taxable or tax-exempt
municipal securities.
- The Fund's average weighted maturity will ordinarily
range between five and twenty years, although the Fund
may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary
defensive purposes.
- -----
ONE GROUP GOVERNMENT BOND FUND. The Fund limits its
investments to securities issued by the U.S. government
and its agencies and instrumentalities or related to
securities issued by the U.S. government and its
agencies and instrumentalities.
- At least 65% of the Fund's total assets will be
invested in debt instruments with principal and
interest guaranteed by the U.S. government or its
agencies and instrumentalities, some of which may be
subject to repurchase agreements, and other securities
representing an interest in or secured by mortgages
that are issued or guaranteed by certain U.S.
government agencies or instrumentalities.
- The Fund's average weighted maturity will ordinarily
range between three and fifteen years, taking into
account expected prepayment of principal on certain
investments. However, the Fund's average weighted
remaining maturity may be outside this range if
warranted by market conditions.
36
<PAGE> 166
37
- -----
ONE GROUP TREASURY & AGENCY FUND. The Fund invests in
U.S. Treasury and other U.S. agency obligations
including fixed income securities and mortgage-related
securities. At least 65% of the Fund's total assets will
be invested in Treasury & Agency Obligations.
WHAT IS A TREASURY & AGENCY OBLIGATION?
For purposes of the Treasury & Agency
Fund, a Treasury & Agency Obligation
includes U.S. Treasury bills, notes and
other obligations issued or guaranteed by
U.S. government agencies and
instrumentalities, Separately Traded
Registered Interest and Principal
Securities known as STRIPS and Coupons
Under Book Entry Safekeeping known as
CUBES.
- The Fund also invests in other government-only
investment companies, including money market funds of
One Group. The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. The Fund
also may invest in government mortgage-backed
securities and government adjustable rate mortgage
loans known as ARMS, as well as engage in securities
lending.
- Normally, the Fund's average weighted maturity will
range between two and five years.
- -----
ONE GROUP HIGH YIELD BOND FUND. The Fund's sub-advisor,
Banc One High Yield Partners, LLC focuses on value in
choosing securities for the Fund by using a "bottom-up"
research methodology.
WHAT IS A BOTTOM-UP RESEARCH METHODOLOGY?
When Banc One High Yield Partners uses a
bottom-up research methodology, it looks
primarily at individual companies against
the context of broader market factors.
For each issuer, Banc One High Yield Partners performs
an in-depth analysis of the issuer including, business
prospects, management, capital requirements, capital
structure, enterprise value, and security structure and
covenants. In addition, Banc One High Yield Partners
monitors investments on an ongoing basis by staying
abreast of positive and negative credit developments,
expediting the review of the Fund's investments which
are considered to be the most risky, and having regular
discussions with senior management of issuers of the
Fund's investments.
- The Fund invests at least 80% of its total assets in
debt securities, loan participations, convertible
securities and preferred stock which are rated below
investment grade or unrated. The Fund may invest up to
100% of the Fund's total assets in such securities.
- Up to 20% of the Fund's total assets may be invested
in other securities, including investment grade debt
securities.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds.
- The Fund's average weighted maturity will ordinarily
range between five and ten years, although the Fund
may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary
defensive purposes.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in the Bond Funds
are described below and in Fund Summaries: Investments,
Risk, & Performance at the front of this prospectus.
<PAGE> 167
38
- -----
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. The Funds may invest in securities that may
be considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of
derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use
such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
- -----
LOWER RATED SECURITIES. The Intermediate Bond Fund, the
Ultra Short-Term Bond Fund, the Short-Term Bond Fund,
the Bond Fund and the Income Bond Fund may purchase debt
securities rated in the lowest investment grade
category. Securities in this rating category are
considered to have speculative characteristics. Changes
in economic conditions or other circumstances may have a
greater effect on the ability of issuers of these
securities to make principal and interest payments than
they do on issuers of higher grade securities.
- -----
HIGH YIELD/JUNK BONDS. The High Yield Bond Fund and, to
a lesser extent, the Income Bond Fund invest in high
yield securities that are unrated or rated below
investment grade (commonly known as "junk bonds"). These
securities are considered to be high risk investments.
You should not invest in the Funds unless you are
willing to assume the greater risk associated with high
yield securities. These risks include the following:
- Greater Risk of Loss. There is a greater risk that
issuers of lower rated securities will default than
issuers of higher rated securities. Issuers of lower
rated securities may be less creditworthy, highly
indebted, financially distressed, or bankrupt. These
issuers are more vulnerable to real or perceived
economic changes, political changes or adverse
industry developments. If an issuer fails to pay
principal or interest, the Funds would experience a
decrease in income and a decline in the market value
of their investments. The Funds may also incur
additional expenses in seeking recovery from the
issuer.
<PAGE> 168
39
- 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
Statement of Additional Information). Because
investments in lower rated or unrated securities
involve greater investment risk, achievement of the
Funds' investment objectives will be more dependent on
Banc One Investment Advisor's or the Sub-Advisor's
credit analysis than would be the case if the Funds
were investing in higher rated securities. The Funds
may seek to hedge investments through transactions in
options, futures contracts and related options. The
Funds also may use swap agreements to further manage
exposure to lower rated securities.
<PAGE> 169
40
- -----
SMALL CAPITALIZATION COMPANIES. Investments in smaller,
younger companies may be riskier than investments in
larger, more established companies. These companies may
be more vulnerable to changes in economic conditions,
specific industry conditions, market fluctuations, and
other factors effecting the profitability of other
companies. Because economic events may have a greater
impact on smaller companies, there may be a greater and
more frequent fluctuation in their stock price. This may
cause frequent and unexpected increases or decreases in
the value of your investment.
- -----
FOREIGN SECURITIES. Investments in foreign securities
involve risks different from investments in U.S.
securities. These risks include the 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
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.
Because of these risk factors, the share price of Funds
that invest in foreign securities is expected to be
volatile, and you should be able to sustain sudden, and
sometimes substantial, fluctuations in the value of your
investment.
For more information about risks associated with the
types of investments that the Bond Funds purchase,
please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
INVESTMENT
POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
Each Fund may not:
1. Purchase the securities of an issuer if as a result
more than 5% of its total assets would be invested in
the securities of that issuer or the Fund would own
more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued
or guaranteed by the United States, its agencies or
instrumentalities, securities of registered
investment companies, and repurchase agreements
involving these securities. This restriction applies
with respect to 75% of a Fund's total assets.
2. Concentrate their investment in the securities of one
or more issuers conducting their principal business
in a particular industry or group of industries. This
does not include obligations issued or guaranteed by
the U.S. Government or its agencies and
instrumentalities and repurchase agreements involving
such securities.
<PAGE> 170
41
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 QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to securities (other than equity securities). Generally,
ratings are divided into two main categories:
"Investment Grade Securities" and "Non-Investment Grade
Securities." Although there is always a risk of default,
rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include
securities that, in the opinion of the rating agencies,
are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet
the rating criteria described below. Banc One Investment
Advisors (or Banc One High Yield Partners with respect
to the High Yield Bond Fund) will look at a security's
rating at the time of investment. If the securities are
unrated, Banc One Investment Advisors (or Banc One High
Yield Partners with respect to the High Yield Bond Fund)
must determine that they are of comparable quality to
rated securities.
- -----
DEBT SECURITIES
- The Government Bond Fund and the Treasury & Agency
Fund may invest in debt securities rated in any of the
three highest investment grade rating categories.
- The Ultra Short-Term Bond Fund, the Intermediate Bond
Fund, the Short-Term Bond Fund and the Bond Fund may
invest in debt securities rated in any of the four
investment grade rating categories.
- The Income Bond Fund and the High Yield Bond Fund may
purchase securities in ANY rating category. Please
read Fund Summaries: Investments, Risk, & Performance
and "High Yield/Junk Bonds" for more information about
the Income Bond Fund and the High Yield Bond Fund.
- -----
PREFERRED STOCK
- The Ultra Short-Term Bond Fund, the Short-Term Bond
Fund, the Bond Fund and the Intermediate Bond Fund may
only invest in preferred stock rated in any of the
four highest rating categories.
- The Income Bond Fund and the High Yield Bond Fund may
invest in preferred stock in any rating category.
<PAGE> 171
42
- -----
MUNICIPAL SECURITIES
- The Ultra Short-Term Bond Fund, the Short-Term Bond
Fund, Intermediate Bond Fund, and the Bond Fund may
only invest in municipal bonds rated in any of the
four highest rating categories.
- The Ultra Short-Term Bond Fund, the Intermediate Bond
Fund and the Bond Fund may only invest in other
municipal securities, such as tax-exempt commercial
paper, notes, and variable rate demand obligations
which are rated in the highest or second highest
rating categories. The Short-Term Bond Fund may invest
in such securities only if they are rated in the
highest rating category.
- The Income Bond Fund and the High Yield Bond Fund may
invest in municipal securities rated in ANY category.
- -----
COMMERCIAL PAPER
- The Intermediate Bond Fund, the Short-Term Bond Fund,
the Bond Fund and the Ultra Short-Term Bond Fund may
invest in commercial paper rated in the highest or
second highest rating category.
- The High Yield Bond Fund and the Income Bond Fund may
invest in commercial paper in any rating category.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
TEMPORARY
DEFENSIVE
POSITIONS To respond to unusual market conditions, the Funds may
invest all or most of their assets in cash and CASH
EQUIVALENTS (see below) for temporary defensive
purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may
prevent the Funds from meeting their investment
objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
- --------------------------------------------------------------------------------
PORTFOLIO
TURNOVER The Funds may engage in active and frequent trading of
portfolio securities to achieve their principal
investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds and may result in
additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights. To
the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at
ordinary income tax rates.
<PAGE> 172
43
[GRAPHIC]
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES? - Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close
before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the
following business day.
- Purchase orders may be cancelled by the Fund's
Custodian, State Street Bank and Trust Company, if it
does not receive "federal funds" by 4:00 p.m. ET (i)
on the business day after the order is placed if you
are buying Class I shares, and (ii) on the third
business day if you are purchasing Class A, Class B or
Class C shares.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
WHAT KIND OF SHARES CAN
I BUY? One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to
the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
<PAGE> 173
44
- When deciding what class of shares to buy, you should
consider the amount of your investment, the length of
time you intend to hold the shares, and the sales
charges and expenses applicable to each class of
shares. If you intend to hold your shares for seven or
more years, Class A shares may be more appropriate for
you. If you intend to hold your shares for less than
seven years, you may want to consider Class B or Class
C shares. Sales charges are discussed in the section
of this prospectus entitled SALES CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers
retirement plans. These plans allow participants to
defer taxes while their retirement savings grow. Call
The One Group Services Company at 1-800-480-4111 for an
Adoption Agreement.
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV") plus a
sales charge, if any.
- Each class of shares in each Fund has a different NAV.
This is primarily because each class has different
distribution expenses.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4
p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
HOW DO I OPEN AN
ACCOUNT? 1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment for all Funds except
the Treasury & Agency Fund is $1,000 per Fund ($100
for employees of Bank One Corporation and its
affiliates). The minimum initial investment for the
Treasury & Agency Fund is $50,000. The minimum
initial investment for an IRA and 403(b) is $250.
- Subsequent investments for all Funds except the
Treasury & Agency Fund must be at least $25 per
Fund. Subsequent investments for the Treasury &
Agency Fund must be at least $1000.
- You may purchase no more than $249,999 of Class B
shares. This is because Class A shares offer a
reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY?
provides information that can help you choose the
appropriate share class.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
<PAGE> 174
45
4. Send the completed application and a personal check
(unless you choose to pay by wire) payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
Contributions to Fund Direct IRAs should be made
payable to "State Street Bank and Trust Company for
the Benefit of (your name)."
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does
not accept "third party checks." Checks made payable
to any individual and endorsed to One Group Mutual
Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those
listed above will be returned to the address provided
on the account application.
6. If you redeem shares purchased under the systematic
investment plan (see below) or that were purchased by
check, One Group will delay forwarding you redemption
proceeds until payment has been collected from your
bank. One Group generally receives payment within ten
(10) calendar days of purchase.
7. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-800-480-4111.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-800-480-4111 to relay your
purchase instructions.
- Send a personal check made payable to "One Group" to
State Street Bank and Trust Company (see address
above), authorize a bank transfer, or initiate a wire
transfer to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INTERMEDIATE BOND FUND -- A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
<PAGE> 175
46
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the
telephone by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CAN I AUTOMATICALLY
INVEST
ON A SYSTEMATIC BASIS?Yes, except for the Treasury & Agency Fund. After your
Account is established, you may purchase additional
Class A, Class B and Class C shares by making automatic
monthly investments from your bank account. The minimum
initial investment is still $1,000 per Fund, but minimum
automatic additions are only $25 per Fund. The One Group
Services Company may waive these minimums. To establish
a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the
Account Application Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future. However, your
bank may impose a charge for debiting your bank
account.
- You may revoke your right to make systematic
investments by calling The One Group Services Company
at 1-800-480-4111 or by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CONVERSION FEATURE
- Your Class B shares automatically convert to Class A
shares.
- Class B shares of the Intermediate Bond Fund, the
Income Bond Fund, the Government Bond Fund, the High
Yield Bond Fund and the Bond Fund automatically
convert after eight years. Class B shares of the Ultra
Short-Term Bond Fund, the Short-Term Bond Fund, and
the Treasury & Agency Fund automatically convert after
six years.
- Conversion periods are measured from the end of the
month in which Class B shares were purchased.
- After conversion, your shares will be subject to the
lower distribution and shareholder servicing fees
charged on Class A shares.
- You will not be assessed any sales charges or fees for
conversion of shares, nor will you be subject to any
Federal income tax.
<PAGE> 176
47
- Because the share price of the Class A shares may be
higher than that of the Class B shares at the time of
conversion, you may receive fewer Class A shares;
however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for
Class B shares of another, the time you held the
shares in each Fund will be added together for
purposes of calculating the six and eight year time
period.
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group Mutual
Funds. Compensation comes from sales charges, 12b-1 fees
and payments by The One Group Services Company from its
own resources. The tables below show the charges for
each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder
Servicing Agent.
CLASS A SHARES
- --------------------------------
If you buy Class A shares of THE SHORT-TERM BOND FUND,
THE ULTRA SHORT-TERM BOND FUND and THE TREASURY & AGENCY
FUND, the following table shows the amount of sales
charge you pay and the commissions paid to Shareholder
Servicing Agents.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 3.00% 3.09% 2.07%
-------------------------------------------------------------------------------
$100,000-$249,999 2.50% 2.56% 2.18%
-------------------------------------------------------------------------------
$250,000-$499,999 2.00% 2.04% 1.64%
-------------------------------------------------------------------------------
$500,000-$999,999 1.50% 1.52% 1.20%
-------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares
and are not assessed a sales charge at the time of
purchase, you will be charged the equivalent of 1% of
the purchase price if you redeem any or all of the
Class A shares within one year of purchase and 0.50%
of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company
receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
If you buy Class A shares of THE INTERMEDIATE BOND FUND,
THE INCOME BOND FUND, THE GOVERNMENT BOND FUND, THE HIGH
YIELD BOND FUND and THE BOND FUND, the following table
shows the amount of sales charge you pay and the
commissions paid to Shareholder Servicing Agents.
<PAGE> 177
48
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 4.50% 4.71% 4.05%
-------------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
-------------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
-------------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
-------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares
and are not assessed a sales charge at the time of
purchase, you will be charged the equivalent of 1% of
the purchase price if you redeem any or all of the
Class A shares within one year of purchase and 0.50%
of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company
receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
- --------------------------------
Class B shares are offered at NAV, without any up-front
sales charges. However, if you redeem Class B shares of
THE INTERMEDIATE BOND FUND, THE INCOME BOND FUND, THE
GOVERNMENT BOND FUND, THE HIGH YIELD BOND FUND or THE
BOND FUND before the sixth anniversary of purchase, you
will be assessed a Contingent Deferred Sales Charge
("CDSC") according to the following schedule:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
-----------------------------------
1-2 4.00%
-----------------------------------
2-3 3.00%
-----------------------------------
3-4 3.00%
-----------------------------------
4-5 2.00%
-----------------------------------
5-6 1.00%
-----------------------------------
MORE THAN 6 NONE
-----------------------------------
</TABLE>
Or if you redeem Class B shares of THE ULTRA SHORT-TERM
BOND FUND, THE SHORT-TERM BOND FUND or THE TREASURY &
AGENCY FUND prior to the fourth anniversary of purchase,
you will be assessed a CDSC according to the following
schedule:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE 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>
<PAGE> 178
49
The One Group Services Company pays a commission of
4.00% of the original purchase price to Shareholder
Servicing Agents who sell Class B shares of THE
INTERMEDIATE BOND FUND, THE INCOME BOND FUND, THE
GOVERNMENT BOND FUND, THE HIGH YIELD BOND FUND or THE
BOND FUND. Shareholder Servicing Agents who sell Class B
shares of THE ULTRA SHORT-TERM BOND FUND, THE SHORT-TERM
BOND FUND, and THE TREASURY & AGENCY FUND receive a
commission of 2.75% from The One Group Services Company.
CLASS C SHARES
- --------------------------------
Class C shares are offered at NAV, without any up-front
sales charge. However, if you redeem your shares within
one year of the purchase date, you will be assessed a
CDSC as follows:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
-----------------------------------
AFTER FIRST
YEAR NONE
-----------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares
receive a commission of 1.00% of the original purchase
price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given
month were made on the first day of the month.
- The CDSC is based on the current market value or the
original cost of the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a
CDSC assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- To keep your CDSC as low as possible, the Fund first
will redeem the shares you have held for the longest
time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an
unrelated mutual fund for Class B or Class C shares of
One Group in connection with a fund reorganization,
the CDSC applicable to your original shares (including
the period of time you have held those shares) will be
applied to One Group shares you receive in the
reorganization.
12B-1 FEES
- --------------------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees for the sale and distribution of shares
of the Funds. These fees are called 12b-1 fees. 12b-1
fees are paid by One Group Mutual Funds to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average
daily net assets of the Fund, which is currently
being waived to .25%.
<PAGE> 179
50
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 Class A
shares, .90% of the average daily net assets of the
Class B shares and .90% of the average daily net
assets of the Class C shares of the Intermediate Bond
Fund, the Income Bond Fund, the Government Bond Fund,
the High Yield Bond Fund and the Bond Fund, and .25%
of the average daily net assets of Class A shares,
.75% of the average daily net assets of the Class B
shares and .75% of the average daily net assets of the
Class C shares of the Short-Term Bond Fund, the Ultra
Short-term Bond Fund, and the Treasury & Agency Fund.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
- --------------------------------------------------------------------------------
SALES CHARGE
REDUCTIONS AND
WAIVERS
There are several ways you can reduce the sales charges
you pay on Class A shares:
REDUCING YOUR CLASS A
SALES CHARGES
- --------------------------------
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.
<PAGE> 180
51
To take advantage of the accumulation privilege or
letter of intent, complete the appropriate section of
your fund application, or contact your investment
representative. To determine if you are eligible for the
accumulation privilege, contact The One Group Services
Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
- --------------------------------
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital
gains distributions.
2. Acquired in exchange for other Fund shares if a
comparable sales charge has been paid for the
exchanged shares.
3. Bought by officers, directors or trustees, retirees
and employees (and their spouses and immediate family
members) of:
- One Group.
- Bank One Corporation and its subsidiaries and
affiliates.
- The One Group Services Company and its subsidiaries
and affiliates.
- State Street Bank and Trust Company and its
subsidiaries and affiliates.
- Broker/dealers who have entered into dealer
agreements with One Group and their subsidiaries and
affiliates.
- An investment sub-advisor of a fund of One Group and
such sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain
accounts (other than IRA Accounts) for which an
Intermediary acts in a fiduciary, advisory, agency,
or custodial capacity or Accounts which participate
in select affinity programs with Bank One
Corporation and its affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges
an asset allocation fee, provided the bank or
broker-dealer has an agreement with The One Group
Services Company.
- Accounts which participate in select affinity
programs with Bank One Corporation and its
subsidiaries and affiliates.
- Certain retirement and deferred compensation plans
and trusts used to fund those plans, including, but
not limited to, those defined in sections 401(a),
403(b) or 457 of the Internal Revenue Code and
"rabbi trusts."
- Shareholder Servicing Agents who have a dealer
arrangement with The One Group Services Company, who
place trades for their own accounts or for the
accounts of their clients and who charge a
management, consulting or other fee for their
services, as well as clients of such Shareholder
Servicing Agents who place trades for their own
accounts if the accounts are linked to the master
account of such Shareholder Servicing Agent.
5. Bought with proceeds from the sale of Class I shares
of a One Group Fund or acquired in an exchange of
Class I shares of a Fund for Class A shares of the
same Fund, but only if the purchase is made within 60
days of the sale or distribution.
<PAGE> 181
52
6. Bought with proceeds from the sale of shares of a
mutual fund, including Class A shares of a One Group
Fund, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution
from an employee benefit plan, but only if the
purchase is made within 60 days of the sale or
distribution and, at the time of the distribution,
the employee benefit plan had plan assets invested in
a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of
a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B No sales charge is imposed on redemptions of Class B
SALES CHARGE shares of the Funds:
- --------------------------------
1. If you withdraw no more than 10% of the value of your
account in a 12 month period. Shares received from
dividend and capital gains reinvestment are included
in calculating amounts eligible for this waiver. You
need to participate in the Systematic Withdrawal Plan
to take advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I pay a Sales Charge on an Exchange?
WAIVER OF THE CLASS C No sales charge is imposed on redemptions of Class C
SALES CHARGE shares of the Funds:
- --------------------------------
1. If you withdraw no more than 10% of the value of your
account. Shares received from dividend and capital
gains reinvestment are included in calculating
amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
<PAGE> 182
53
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
an IRA Account or other qualifying retirement plan,
but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I pay a Sales Charge on an Exchange?.
7. If The One Group Services Company receives notice
before you invest indicating that your Shareholder
Servicing Agent, due to the type of account that you
have, is waiving its commission.
To take advantage of any of these sales charge waivers,
you must qualify for such waiver in advance. To see if
you qualify, contact The One Group Services Company at
1-800-480-4111 or your Shareholder Servicing Agent.
These waivers will not continue indefinitely and may be
discontinued at any time without notice.
- --------------------------------------------------------------------------------
EXCHANGING FUND
SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I
shares of that Fund or for Class A or Class I shares
of another One Group Fund, but only if you are
eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B
shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C
shares of another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
<PAGE> 183
54
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.
<PAGE> 184
55
- In addition, One Group reserves the right to reject
any exchange request (even those that are not
excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
- --------------------------------------------------------------------------------
REDEEMING FUND
SHARES
WHEN CAN I REDEEM
SHARES? You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
HOW DO I REDEEM SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
ONE GROUP
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
- All requests for redemptions from IRA accounts must be
in writing.
- You may request redemption forms by calling The One
Group Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or
less;
2. the redemption is payable to the shareholder of
record;
3. the redemption check is mailed to the shareholder
at the record address; or
4. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- Your redemption proceeds will be paid within seven
days after receipt of the redemption request.
<PAGE> 185
56
WHAT WILL MY SHARES BE
WORTH? - If you own Class A and Class I shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV.
- If you own Class B or Class C shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-800-480-4111 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the
Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy
additional Class A shares while participating in a
Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than
10% of your account value annually, measured from
the date you begin participating in the Plan.
Shares received from dividend and capital gains
reinvestment are included in calculating the 10%.
The applicable Class B or Class C sales charge is
waived provided your withdrawals do not exceed 10%
annually. Withdrawals in excess of 10% will subject
the entire annual withdrawal to the applicable
sales load.
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 a One Group
IRA or other One Group qualifying retirement plan.
<PAGE> 186
57
4. If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- --------------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $800 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.
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- --------------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
<PAGE> 187
58
DIVIDEND POLICIES
- --------------------------------
DIVIDENDS. The Funds generally declare dividends on each
business day. Dividends are distributed on the first
business day of each month. Capital gains, if any, for
all Funds are distributed at least annually. To maintain
a relatively even rate of distributions from the
Treasury & Agency Fund, the monthly distributions for
that Fund may be fixed from time to time at rates
consistent with Banc One Investment Advisors' long-term
earnings expectations.
The Funds pay dividends and distributions on a per-share
basis. This means that the value of your shares will be
reduced by the amount of the payment. If you purchase
shares shortly before the record date for a dividend or
the distribution of capital gains, you will pay the full
price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than
those payable on other classes of shares. This is
because Class A, Class B and Class C shares have higher
distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call The One Group Services Company at
1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B
shares received as dividends and capital gains
distributions will be accounted for separately. Each
time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of
the Class B shares in the sub-account will also convert
to Class A shares. (See "Conversion Feature.")
TAX TREATMENT
OF SHAREHOLDERS
- --------------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in
cash.
<PAGE> 188
59
TAXATION OF
DISTRIBUTIONS
- --------------------------------
Each Fund will distribute substantially all of its net
investment income (including, for this purpose, the
excess of net short-term capital gains over net
long-term capital losses) and net capital gains (i.e.,
the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis.
Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from
a Fund's net investment income will be taxable as
ordinary income and distributions from a Fund's
long-term capital gains will be taxable to you as such,
regardless of how long you have held the shares.
Distributions are taxable to you even if they are paid
from income or gains earned by a Fund prior to your
investment (and thus were included in the price you
paid).
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
TAXATION OF
ZERO-COUPON SECURITIES
- --------------------------------
Some of the Funds may acquire certain securities issued
with original issue discount (including zero-coupon
securities). Current Federal tax requires that a holder
(such as a Fund) of such a security must include in
taxable income a portion of the original issue discount
which accrues during the tax year on such security even
if a Fund receives no payment in cash on the security
during the year. As an investment company, a Fund must
pay out substantially all of its net investment income
each year, including any original issue discount.
Accordingly, a Fund may be required to pay out in income
distribution each year an amount which is greater than
the total amount of cash interest a Fund actually
received. Such distributions will be made from the cash
assets of a Fund or by liquidation of investments if
necessary. If a distribution of cash necessitates the
liquidation of investments, Banc One Investment Advisors
or the Sub-Advisor will select which securities to sell
and a Fund may realize a gain or loss from those sales.
In the event a Fund realizes net capital gains from
these transactions, you may receive a larger capital
gain distribution, if any, than you would in the absence
of such transactions.
TAXATION OF
RETIREMENT PLANS
- --------------------------------
Distributions by the Funds to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual as described
in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets,
you should consult your tax advisor for a more complete
explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an
investment.
<PAGE> 189
60
TAX INFORMATION
- --------------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- --------------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
- --------------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 190
61
(Intentionally Left Blank)
<PAGE> 191
62
[PHOTO]
ONE GROUP(R)
- ---------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
THE SUB-ADVISOR Banc One High Yield Partners, LLC (1111 Polaris Parkway,
P.O. Box 71021, Columbus, Ohio 43271-0211), is the
sub-advisor to the High Yield Bond Fund. Banc One High
Yield Partners was formed in June, 1998 to provide
investment advisory services related to high yield, high
risk investments to the High Yield Bond Fund and other
advisory clients. Banc One High Yield Partners is
controlled by Banc One Investment Advisors and Pacholder
Associates, Inc. As of June 30, 1999, Banc One High
Yield Partners had approximately $150 million in assets
under management.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Ultra
Short-Term Bond
Fund .23%
------------------------------------------------
One Group(R)
Short-Term Bond
Fund .32%
------------------------------------------------
One Group(R)
Intermediate
Bond Fund* .38%
------------------------------------------------
One Group(R) Bond
Fund* .40%
------------------------------------------------
One Group(R)
Income Bond
Fund* .39%
------------------------------------------------
One Group(R)
Government Bond
Fund .45%
------------------------------------------------
One Group(R)
Treasury &
Agency Fund .20%
------------------------------------------------
</TABLE>
* In March 1999, the Pegasus Funds and One Group
Mutual Funds consolidated. The investment advisory
fee includes fees paid to First Chicago NBD
Investment Management Company, an affiliate of Banc
One Investment Advisors, as advisor to the Pegasus
Funds.
<PAGE> 192
63
The High Yield Bond Fund began operations on November
13, 1998 and does not have a full fiscal year of
advisory fees. Under the investment advisory agreement
with the Fund, Banc One Investment Advisors is entitled
to a fee, which is calculated daily and paid monthly, of
.75% of the average daily net assets of the High Yield
Bond Fund.
- --------------------------------------------------------------------------------
THE FUND
MANAGERS The Funds are managed by teams of Fund managers,
research analysts, and fixed income traders. The team
works together to establish general duration and sector
strategies for the Funds. Each team member makes
recommendations about securities in the Funds. The
research analysts and trading personnel provide
individual security and sector recommendations, while
the portfolio managers select and allocate individual
securities in a manner designed to meet the investment
objectives of the Fund.
Banc One High Yield Partners serves as sub-advisor to
the High Yield Bond Fund. Anthony L. Longi, Jr., an
officer of Banc One High Yield Partners, is the manager
of the Fund. As an officer of Pacholder Associates,
Inc., Mr. Longi has served as portfolio manager of the
Pacholder Fund, Inc. since 1994 and as a high yield
research analyst with Pacholder Associates, Inc. since
1987.
- --------------------------------------------------------------------------------
BANC ONE HIGH
YIELD
PARTNERS -- PRIOR
PERFORMANCE OF
PACHOLDER
ASSOCIATES, INC. Banc One High Yield Partners, the Sub-Advisor of the
High Yield Bond Fund, was formed as a limited liability
company under an agreement between Banc One Investment
Advisors and Pacholder Associates, Inc. Under the
Agreement, Pacholder is responsible for providing
portfolio management services on behalf of Banc One High
Yield Partners for the High Yield Bond Fund. Pacholder
is also responsible for advising the Pacholder Fund,
Inc., a closed-end fund through a limited liability
company known as Pacholder & Company, LLC.(1)
The following table shows historical performance of the
Pacholder Fund, a fund with substantially similar
investment objectives, policies, strategies and risks to
the High Yield Bond Fund as measured against a specified
market index. THE INFORMATION FOR THE PACHOLDER FUND IS
PROVIDED TO SHOW THE PAST PERFORMANCE OF PACHOLDER IN
MANAGING A SUBSTANTIALLY SIMILAR FUND. THIS INFORMATION
DOES NOT REPRESENT THE PERFORMANCE OF THE HIGH YIELD
BOND FUND. YOU SHOULD NOT CONSIDER THIS PERFORMANCE DATA
AS AN INDICATION OF FUTURE PERFORMANCE OF THE HIGH YIELD
BOND FUND OR THE PACHOLDER FUND. THE FIRST COLUMN SHOWS
THE PERFORMANCE OF THE HIGH YIELD BOND FUND FOR THE
PERIOD FROM NOVEMBER 13, 1998 THROUGH SEPTEMBER 30,
1999.
With the exception of 1995 and 1998, the expense ratio
of the Pacholder Fund has been higher than the projected
expense ratio of High Yield Bond Fund. The expense ratio
has an impact on the total return that shareholders in
the fund would realize. Unlike the High Yield Bond Fund,
the Pacholder Fund pays a performance based investment
advisory fee. With the exception of investment advisory
fees paid in 1991, 1995, and 1998, the Pacholder Fund's
investment advisory fees have been higher than the
contractual advisory fees of the High Yield Bond Fund.
(1) Prior to August 21, 1998, Pacholder was
responsible for advising the Pacholder Fund
through a partnership known as Pacholder &
Company.
<PAGE> 193
64
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 return of the High Yield Bond
Fund. The second column shows the NAV return realized by
holders of common shares in the Pacholder Fund after
distributions were made to preferred shareholders. The
third column shows the NAV return that would have been
realized if preferred shares had not been issued. The
fourth column compares the performance of the Pacholder
Fund to a specified market index.
- --------------------------------------------------------------------------------
HISTORICAL
PERFORMANCE(1)
<TABLE>
<CAPTION>
PACHOLDER FUND
------------------------------------
TOTAL RETURN
ASSUMING
COMMON COMMON STOCK
SHAREHOLDER'S IS NOT LEVERAGED CS FIRST BOSTON
HIGH YIELD RETURN BASED THROUGH ISSUANCE OF HIGH YIELD
BOND FUND 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%
-------------------------------------------------------------------------------------------------
1998 (6) 1.13%
-------------------------------------------------------------------------------------------------
1999 1.06%(7) 0.61%(8) 2.28%(8) 1.17%(8)
-------------------------------------------------------------------------------------------------
1 YR Average Annual
Return (9) 4.30% 5.31% 3.95%
-------------------------------------------------------------------------------------------------
3 YR Average Annual
Return (9) 6.05% 6.39% 6.17%
-------------------------------------------------------------------------------------------------
5 YR Average Annual
Return (9) 8.43% 8.20% 8.62%
-------------------------------------------------------------------------------------------------
Average Annual Return since
1990 (4,9) 11.63% 11.21% 11.12%
-------------------------------------------------------------------------------------------------
</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.
(4) The Pacholder Fund commenced operation on
November 23, 1988. However, the Pacholder Fund
was not managed with substantially similar
investment objectives to the High Yield Bond Fund
in 1988 and 1989. Beginning in the first quarter
of 1990, the Pacholder Fund was managed with
substantially similar investment objectives to
the High Yield Bond Fund.
(5) No preferred stock was issued prior to April 6,
1992.
(6) For the period from November 13, 1998 through
December 31, 1998. Returns have not been
annualized. Class I shares only.
(7) For the period from January 1, 1999 through
September 30, 1999. Returns have not been
annualized. Class I shares only.
(8) For the period from January 1, 1999 through
September 30, 1999. Returns have not been
annualized.
(9) Through September 30, 1999.
<PAGE> 194
65
- -----------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 195
66
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Ultra Short-Term Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.87 $ 9.78 $ 9.83 $ 9.84
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.56 0.58 0.58 0.52
Net realized and unrealized gains (losses) from
investments and futures (0.10) (0.01) 0.09 (0.06) (0.06)
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.42 0.55 0.67 0.52 0.46
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.55) (0.58) (0.57) (0.46)
In excess of net investment income - - - - (0.01)
Total Distributions (0.52) (0.55) (0.58) (0.57) (0.47)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.87 $ 9.87 $ 9.78 $ 9.83
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.40% 5.75% 7.00% 5.42% 4.84%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $24,300 $ 24,747 $ 29,643 $ 3,969 $51,050
Ratio of expenses to average net assets 0.57% 0.54% 0.61% 0.70% 0.86%
Ratio of net investment income to average net assets 5.37% 5.66% 5.78% 5.95% 4.88%
Ratio of expenses to average net assets* 1.14% 1.15% 1.17% 1.41% 1.36%
Ratio of net investment income to average net assets* 4.80% 5.05% 5.22% 5.24% 4.38%
Portfolio turnover(A) 38.70% 41.15% 70.36% 67.65% 2.91%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.81 $ 9.81 $ 9.76 $ 9.84 $ 9.86
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.52 0.54 0.52 0.47
Net realized and unrealized gains (losses) from
investments (0.10) (0.01) 0.05 (0.07) (0.04)
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.38 0.51 0.59 0.45 0.43
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.51) (0.54) (0.53) (0.45)
Total Distributions (0.47) (0.51) (0.54) (0.53) (0.45)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.81 $ 9.81 $ 9.76 $ 9.84
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.99% 5.32% 6.22% 4.63% 4.77%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,124 $ 4,531 $ 2,818 $ 1,144 $ 160
Ratio of expenses to average net assets 1.03% 0.99% 1.07% 1.20% 1.31%
Ratio of net investment income to average net assets 4.93% 5.23% 5.18% 5.45% 4.91%
Ratio of expenses to average net assets* 1.76% 1.75% 1.81% 2.06% 1.96%
Ratio of net investment income to average net assets* 4.20% 4.47% 4.44% 4.59% 4.26%
Portfolio turnover(A) 38.70% 41.15% 70.36% 67.65% 2.91%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 196
67
Ultra Short-Term Bond Fund
- -------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 9.87 $ 9.79 $ 9.84 $ 9.85
- ---------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.59 0.62 0.62 0.55
Net realized and unrealized gains (losses) from
investments and futures (0.11) (0.01) 0.05 (0.07) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.45 0.58 0.67 0.55 0.50
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.58) (0.59) (0.60) (0.48)
In excess of net investment income - - - - (0.03)
Total Distributions (0.55) (0.58) (0.59) (0.60) (0.51)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.87 $ 9.87 $ 9.79 $ 9.84
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 4.66% 6.00% 7.14% 5.71% 5.14%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $259,873 $188,133 $114,413 $57,276 $51,050
Ratio of expenses to average net assets 0.32% 0.30% 0.35% 0.45% 0.61%
Ratio of net investment income to average net assets 5.63% 5.92% 6.02% 6.20% 5.18%
Ratio of expenses to average net assets* 0.79% 0.81% 0.81% 1.06% 1.01%
Ratio of net investment income to average net assets* 5.16% 5.41% 5.56% 5.59% 4.78%
Portfolio turnover(A) 38.70% 41.15% 70.36% 67.65% 2.91%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 197
68
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Short-Term Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.50 $ 10.46 $ 10.41 $ 10.52 $ 10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.61 0.61 0.63 0.56
Net realized and unrealized gains (losses) from
investments and futures (0.11) 0.04 0.05 (0.13) 0.21
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.46 0.65 0.66 0.50 0.77
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.61) (0.61) (0.61) (0.56)
In excess of net investment income - - - - (0.01)
Total Distributions (0.57) (0.61) (0.61) (0.61) (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.39 $ 10.50 $ 10.46 $ 10.41 $ 10.52
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.41% 6.32% 6.47% 4.86% 7.67%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $21,450 $ 15,582 $ 20,055 $21,343 $12,516
Ratio of expenses to average net assets 0.78% 0.78% 0.76% 0.76% 0.77%
Ratio of net investment income to average net assets 5.30% 5.77% 5.81% 5.81% 5.57%
Ratio of expenses to average net assets* 1.16% 1.17% 1.16% 1.17% 1.20%
Ratio of net investment income to average net assets* 4.92% 5.38% 5.41% 5.40% 5.14%
Portfolio turnover(A) 37.22% 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57 $ 10.53 $ 10.49 $ 10.60 $ 10.40
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.53 0.58 0.55 0.55 0.53
Net realized and unrealized gains (losses) from
investments (0.11) 0.04 0.04 (0.10) 0.19
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.42 0.62 0.59 0.45 0.72
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.53) (0.58) (0.55) (0.56) (0.52)
Total Distributions (0.53) (0.58) (0.55) (0.56) (0.52)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.46 $ 10.57 $ 10.53 $ 10.49 $ 10.60
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 4.02% 5.98% 5.74% 4.28% 7.18%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 5,047 $ 4,851 $ 4,920 $ 4,923 $ 2,906
Ratio of expenses to average net assets 1.14% 1.11% 1.20% 1.26% 1.28%
Ratio of net investment income to average net assets 4.96% 5.44% 5.21% 5.31% 5.10%
Ratio of expenses to average net assets* 1.65% 1.64% 1.81% 1.82% 1.86%
Ratio of net investment income to average net assets* 4.45% 4.91% 4.60% 4.75% 4.52%
Portfolio turnover(A) 37.22% 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 198
69
- -------------------------------------
Short-Term Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.51 $ 10.47 $ 10.42 $ 10.53 $ 10.33
- ------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.63 0.63 0.64 0.60
Net realized and unrealized gains (losses) from
investments (0.11) 0.04 0.05 (0.11) 0.19
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.48 0.67 0.68 0.53 0.79
- ------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.59) (0.63) (0.63) (0.64) (0.59)
Total Distributions (0.59) (0.63) (0.63) (0.64) (0.59)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.40 $ 10.51 $ 10.47 $ 10.42 $ 10.53
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 4.67% 6.59% 6.75% 5.13% 7.96%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $804,883 $592,669 $563,979 $604,916 $410,746
Ratio of expenses to average net assets 0.53% 0.53% 0.51% 0.51% 0.52%
Ratio of net investment income to average net assets 5.61% 6.01% 6.06% 6.06% 5.82%
Ratio of expenses to average net assets* 0.81% 0.82% 0.81% 0.82% 0.85%
Ratio of net investment income to average net assets* 5.33% 5.72% 5.76% 5.75% 5.49%
Portfolio turnover(A) 37.22% 56.99% 66.61% 75.20% 76.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 199
70
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Intermediate Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers', 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
CLASS A 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.61 $ 10.47 $ 10.29 $ 10.37 $ 9.21 $ 10.41
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.30 0.61 0.62 0.64 0.59 0.56
Net realized and unrealized gains (losses)
from investments (0.33) 0.14 0.18 (0.07) 1.16 (1.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.03 0.75 0.80 0.57 1.75 (0.64)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.61) (0.62) (0.65) (0.59) (0.55)
Net realized gains - - - - - (0.01)
Total Distributions (0.30) (0.61) (0.62) (0.65) (0.59) (0.56)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.61 $ 10.47 $ 10.29 $ 10.37 $ 9.21
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.27%)(A) 7.37% 8.04% 5.65% 19.48% (6.31%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $124,940 $88,072 $42,343 $18,324 $11,654 $ 11,983
Ratio of expenses to average net assets 0.84%(B) 0.91% 0.86% 0.79% 0.73% 0.74%
Ratio of net investment income to average net
assets 5.87%(B) 5.77% 6.01% 6.17% 5.98% 5.73%
Ratio of expenses to average net assets* 1.02%(B) 0.91% 0.86% 0.79% 0.73% 0.74%
Ratio of net investment income to average net
assets* 5.69%(B) 5.77% 6.01% 6.17% 5.98% 5.73%
Portfolio turnover(C) 9.24% 50.32% 31.66% 31.62% 36.47% 54.60%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the classes
of shares issued. (D) One Group Intermediate Bond Fund merged with the
Pegasus Intermediate Bond Fund on March 22, 1999. For financial reporting
purposes, the Pegasus Fund was considered the accounting survivor.
Therefore, prior to March 22, 1999 all financial statement and performance
information for One Group Intermediate Bond Fund reflect that of the
Pegasus Intermediate Bond Fund.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED SEPTEMBER 23,
ENDED DECEMBER 31, 1996 TO
JUNE 30, ------------------- DECEMBER 31,
CLASS B 1999(E) 1998 1997 1996(A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.50 $ 10.38 $ 10.20 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.27 0.47 0.55 0.15
Net realized and unrealized gains (losses) from
investments (0.32) 0.18 0.17 0.20
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.05) 0.65 0.72 0.35
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.27) (0.53) (0.54) (0.15)
Total Distributions (0.27) (0.53) (0.54) (0.15)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.18 $ 10.50 $ 10.38 $ 10.20
- --------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.46%)(B) 6.44% 7.32% 3.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $37,681 $ 857 $ 385 $ 122
Ratio of expenses to average net assets 1.50%(C) 1.66% 1.61% 1.60%(B)
Ratio of net investment income to average net assets 5.15%(C) 5.02% 5.26% 1.52%(B)
Ratio of expenses to average net assets* 1.91%(C) 1.66% 1.61% 1.60%(B)
Ratio of net investment income to average net assets* 4.74%(C) 5.02% 5.26% 1.52%(B)
Portfolio turnover(D) 9.24% 50.32% 31.66% 31.62%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) 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. (E)
One Group Intermediate Bond Fund merged with the Pegasus Intermediate Bond
Fund on March 22, 1999. For financial reporting purposes, the Pegasus Fund
was considered the accounting survivor. Therefore, prior to March 22, 1999
all financial statement and performance information for One Group
Intermediate Bond Fund reflect that of the Pegasus Intermediate Bond Fund.
<PAGE> 200
71
- -------------------------------------
Intermediate Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.38
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.15
Net realized and unrealized gains (losses) from
investments (0.20)
- -------------------------------------------------------------------------------
Total from Investment Activities (0.05)
- -------------------------------------------------------------------------------
Distributions:
Net investment income (loss) (0.15)
Total Distributions (0.15)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.18
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.51%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 16,650
Ratio of expenses to average net assets 1.50%(C)
Ratio of net investment income to average net assets 5.18%(C)
Ratio of expenses to average net assets* 2.13%(C)
Ratio of net investment income to average net assets* 4.55%(C)
Portfolio turnover(D) 9.24%
</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) 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------------
CLASS I 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.61 $ 10.48 $ 10.29 $ 10.37 $ 9.21 $ 10.41
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.32 0.63 0.65 0.64 0.59 0.56
Net realized and unrealized gains
(losses) from investments (0.33) 0.14 0.18 (0.07) 1.16 (1.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.01) 0.77 0.83 0.57 1.75 (0.64)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.32) (0.64) (0.64) (0.65) (0.59) (0.55)
Net realized gain - - - - - (0.01)
Total Distributions (0.32) (0.64) (0.64) (0.65) (0.59) (0.56)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.61 $ 10.48 $ 10.29 $ 10.37 $ 9.21
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (0.08%)(A) 7.62% 8.37% 5.78% 19.48% (6.31%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,385,890 $567,609 $482,679 $395,105 $393,656 $381,036
Ratio of expenses to average net
assets 0.62%(B) 0.66% 0.61% 0.67% 0.73% 0.74%
Ratio of net investment income to
average net assets 6.27%(B) 6.02% 6.26% 6.29% 5.98% 5.73%
Ratio of expenses to average net
assets* 0.77%(B) 0.66% 0.61% 0.67% 0.73% 0.74%
Ratio of net investment income to
average net assets* 6.12%(B) 6.02% 6.26% 6.29% 5.98% 5.73%
Portfolio turnover(C) 9.24% 50.32% 31.66% 31.62% 36.47% 54.60%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among classes of
shares issued. (D) One Group Intermediate Bond Fund merged with the Pegasus
Intermediate Bond Fund on March 22, 1999. For financial reporting purposes,
the Pegasus Fund was considered the accounting survivor. Therefore, prior
to March 22, 1999 all financial statement and performance information for
One Group Intermediate Bond Fund reflect that of the Pegasus Intermediate
Bond Fund.
<PAGE> 201
72
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers', 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
CLASS A 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.34 0.61 0.63 0.67 0.63 0.61
Net realized and unrealized gains (losses)
from investments (0.44) 0.21 0.32 (0.18) 1.45 (1.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.10) 0.82 0.95 0.49 2.08 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.34) (0.63) (0.63) (0.67) (0.64) (0.59)
From net realized gain - - - - - (0.02)
Total Distributions (0.34) (0.63) (0.63) (0.67) (0.64) (0.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.98%)(A) 7.92% 9.65% 4.98% 23.75% (6.99%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $180,058 $226,261 $ 125,515 $46,977 $31,714 $32,053
Ratio of expenses to average net assets 0.86%(B) 0.89% 0.86% 0.78% 0.74% 0.74%
Ratio of net investment income to average
net assets 6.39%(B) 5.85% 6.16% 6.59% 6.39% 6.36%
Ratio of expenses to average net assets* 0.97%(B) 0.89% 0.86% 0.78% 0.74% 0.74%
Ratio of net investment income to average
net assets* 6.28%(B) 5.85% 6.16% 6.59% 6.39% 6.36%
Portfolio turnover(C) 10.89% 34.69% 17.60% 24.92% 41.91% 75.67%
</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)
Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued. (D) Upon reorganizing as a fund of One Group, the Pegasus Bond
Fund became One Group Bond Fund. Financial highlights for periods prior to
March 22, 1999 represent the Pegasus Bond Fund.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED AUGUST 24,
ENDED DECEMBER 31, 1996 TO
JUNE 30, ------------------- DECEMBER 31,
CLASS B 1999(E) 1998 1997 1996(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.47 0.56 0.21
Net realized and unrealized gains (losses) from
investments (0.44) 0.27 0.32 0.27
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.14) 0.74 0.88 0.48
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.55) (0.56) (0.21)
From net realized gain - - -
Total Distributions (0.30) (0.55) (0.56) (0.21)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27
- -------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.35%)(B) 7.16% 8.91% 4.81%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 13,812 $ 9,074 $ 3,394 $ 280
Ratio of expenses to average net assets 1.57%(C) 1.64% 1.61% 1.59%(C)
Ratio of net investment income to average net assets 5.69%(C) 5.10% 5.41% 3.01%(C)
Ratio of expenses to average net assets* 1.70%(C) 1.64% 1.61% 1.59%(C)
Ratio of net investment income to average net assets* 5.56%(C) 5.10% 5.41% 3.01%(C)
Portfolio turnover(D) 10.89% 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)
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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Bond Fund became One Group
Bond Fund. Financial highlights for periods prior to March 22, 1999 represent
the Pegasus Bond Fund.
<PAGE> 202
73
- -------------------------------------
Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)(E)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.59
- --------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.17
Net realized and unrealized gains (losses) from
investments (0.21)
- --------------------------------------------------------------------------------
Total from Investment Activities (0.04)
- --------------------------------------------------------------------------------
Distributions:
Net investment income (0.17)
Total Distributions (0.17)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.38
- --------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.35%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 455
Ratio of expenses to average net assets 1.47%(C)
Ratio of net investment income to average net assets 5.66%(C)
Ratio of expenses to average net assets* 1.69%(C)
Ratio of net investment income to average net assets* 5.44%(C)
Portfolio turnover(D) 10.89%
</TABLE>
* 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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Bond Fund became One Group
Bond Fund. Financial highlights for periods prior to March 22, 1999 represent
the Pegasus Bond Fund.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
CLASS I 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35 0.65 0.66 0.68 0.63 0.61
Net realized and unrealized gains
(losses) from investments (0.44) 0.19 0.32 (0.18) 1.45 (1.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.09) 0.84 0.98 0.50 2.08 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.35) (0.65) (0.66) (0.68) (0.64) (0.59)
From net realized gain - - - - - (0.02)
Total Distributions (0.35) (0.65) (0.66) (0.68) (0.64) (0.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (0.87%)(A) 8.17% 9.97% 5.08% 23.75% (6.99%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,330,527 $ 1,277,246 $1,101,894 $ 757,627 $ 485,851 $395,116
Ratio of expenses to average net
assets 0.64%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income to
average net assets 6.65%(B) 6.10% 6.41% 6.71% 6.39% 6.36%
Ratio of expenses to average net
assets* 0.75%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income to
average net assets* 6.54%(B) 6.10% 6.41% 6.71% 6.39% 6.36%
Portfolio turnover(C) 10.89% 34.69% 17.60% 24.92% 41.91% 75.67%
</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)
Not annualized. (B) Annualized. (C) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued. (D) Upon reorganizing as a fund of One Group, the Pegasus Bond
Fund became One Group Bond Fund. Financial highlights for periods prior to
March 22, 1999 represent the Pegasus Bond Fund.
<PAGE> 203
74
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Income Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers', 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>
SIX MONTHS FEBRUARY 1,
ENDED YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED
JUNE 30, ------------------------------ DECEMBER 31, JANUARY 31,
CLASS A 1999(E) 1998 1997 1996 1995(A) 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.09 $ 8.00 $ 7.84 $ 8.18 $ 7.68 $ 8.25
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.44 0.48 0.41 0.44 0.52
Net realized and unrealized gain (loss)
from investments (0.34) 0.14 0.17 (0.25) 0.72 (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from Investment Activities (0.13) 0.58 0.65 0.16 1.16 (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.22) (0.44) (0.47) (0.40) (0.44) (0.52)
Net realized gain (0.06) (0.05) (0.02) (0.10) (0.22) -
Total Distributions (0.28) (0.49) (0.49) (0.50) (0.66) (0.52)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.68 $ 8.09 $ 8.00 $ 7.84 $ 8.18 $ 7.68
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.62%)(B) 7.44% 8.58% 2.75% 15.55%(B) (0.45%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $31,603 $15,785 $ 7,832 $ 8,798 $ 6,095 $ 69
Ratio of expenses to average net assets 0.87%(C) 0.90% 0.87% 0.84% 0.94%(C) 0.04%
Ratio of net investment income to average
net assets 5.37%(C) 5.57% 5.83% 5.75% 5.72%(C) 6.70%
Ratio of expenses to average net assets* 1.16%(C) 0.90% 0.87% 0.90% 1.15%(C) 2.78%
Ratio of net investment income to average
net assets* 5.08%(C) 5.57% 5.83% 5.69% 5.51%(C) 3.96%
Portfolio turnover(D) 20.55% 41.69% 38.70% 103.93% 173.26% 71.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Effective February 1, 1995, the Fund changed its fiscal year end from
January 31 to December 31. (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) One Group
Income Bond Fund merged with the Pegasus Multi-Sector Bond Fund on March
22, 1999. For financial reporting purposes, the Pegasus Fund was considered
the accounting survivor. Therefore, prior to March 22, 1999, all financial
statement and performance information for One Group Income Bond Fund
reflect that of the Pegasus Multi-Sector Bond Fund.
<TABLE>
<CAPTION>
SIX MONTHS MAY 31, FEBRUARY 8,
ENDED YEAR ENDED DECEMBER 31, 1995 TO 1994 TO
JUNE 30, ------------------------------ DECEMBER 31, DECEMBER 2,
CLASS B 1999(H) 1998 1997 1996 1995(A)(B) 1994(C)(D)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.13 $ 8.00 $ 7.85 $ 8.18 $ 8.13 $ 8.16
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.18 0.39 0.42 0.45 0.24 0.40
Net realized and unrealized gain (loss)
from investments (0.34) 0.14 0.17 (0.23) 0.27 (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.16) 0.53 0.59 0.22 0.51 (0.15)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.20) (0.35) (0.42) (0.45) (0.24) (0.40)
Net realized gain (0.06) (0.05) (0.02) (0.10) (0.22) -
Total Distributions (0.26) (0.40) (0.44) (0.55) (0.46) (0.40)
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion to Class A Shares - - - - - (7.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.71 $ 8.13 $ 8.00 $ 7.85 $ 8.18 $ -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (2.07%)(E) 6.74% 7.75% 2.09% 6.41%(E) (1.82%)(E)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $16,309 $ 638 $ 533 $ 502 $ 259 $ -
Ratio of expenses to average net assets 1.52%(F) 1.65% 1.62% 1.58% 1.60%(F) -%(F)
Ratio of net investment income to average
net assets 5.05%(F) 4.80% 5.08% 5.01% 5.00%(F) 6.48%(F)
Ratio of expenses to average net assets* 2.01%(F) 1.65% 1.62% 1.67% 1.78%(F) 2.58%(F)
Ratio of net investment income to average
net assets* 4.56%(F) 4.80% 5.08% 4.92% 4.82%(F) 3.90%(F)
Portfolio turnover(G) 20.55% 41.69% 38.70% 103.93% 173.26% 71.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Re-offering date of Class B shares was May 31, 1995. (B) Effective February 1,
1995 the Fund changed its fiscal year end from January 31, to December 31. (C)
Period from commencement of operations. (D) On December 2, 1994 the Fund
terminated its offering of Class B shares and such shares converted to Class A
shares. (E) Not annualized. (F) Annualized. (G) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued. (H) One Group Income Bond Fund merged with the
Pegasus Multi-Sector Bond Fund on March 22, 1999. For financial reporting
purposes, the Pegasus Fund was considered the accounting survivor. Therefore,
prior to March 22, 1999, all financial statement and performance information
for One Group Income Bond Fund reflect that of the Pegasus Multi-Sector Bond
Fund.
<PAGE> 204
75
- -------------------------------------
Income Bond Fund
<TABLE>
<CAPTION>
SIX MONTHS FEBRUARY 1,
ENDED YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED
JUNE 30, ------------------------------- DECEMBER 31, JANUARY 31,
CLASS I 1999(E) 1998 1997 1996 1995(A) 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.10 $ 8.01 $ 7.85 $ 8.18 $ 7.68 $ 8.25
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.22 0.47 0.50 0.46 0.47 0.52
Net realized and unrealized gains
(losses) from investments (0.35) 0.14 0.17 (0.24) 0.72 (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from Investment Activities (0.13) 0.61 0.67 0.22 1.19 (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.23) (0.47) (0.49) (0.45) (0.47) (0.52)
Net realized gains (0.06) (0.05) (0.02) (0.10) (0.22) -
Total Distributions (0.29) (0.52) (0.51) (0.55) (0.69) (0.52)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.68 $ 8.10 $ 8.01 $ 7.85 $ 8.18 $ 7.68
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (1.68%)(B) 7.82% 8.86% 3.14% 15.90%(B) (0.48%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,328,702 $385,672 $94,544 $187,112 $191,930 $ 7,101
Ratio of expenses to average net assets 0.62%(C) 0.65% 0.62% 0.57% 0.55%(C) 0.04%
Ratio of net investment income to
average net assets 5.92%(C) 5.79% 6.08% 6.02% 6.34%(C) 6.70%
Ratio of expenses to average net assets* 0.76%(C) 0.65% 0.62% 0.66% 0.67%(C) 2.78%
Ratio of net investment income to
average net assets* 5.78%(C) 5.79% 6.08% 5.93% 6.22%(C) 3.96%
Portfolio turnover(D) 20.55% 41.69% 38.70% 103.93% 173.26% 71.65%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee waiver had not occurred, the ratios would have been as indicated. (A)
Effective February 1, 1995 the Fund changed its fiscal year end from
January 31, to December 31. (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) One Group
Income Bond Fund merged with the Pegasus Multi-Sector Bond Fund on March
22, 1999. For financial reporting purposes, the Pegasus Fund was considered
the accounting survivor. Therefore, prior to March 22, 1999, all financial
statement and performance information for One Group Income Bond Fund
reflect that of the Pegasus Multi-Sector Bond Fund.
<PAGE> 205
76
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Government Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.58 0.60 0.60 0.61
Net realized and unrealized gains (losses) from
investments (0.38) 0.42 0.13 (0.25) 0.45
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.18 1.00 0.73 0.35 1.06
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.58) (0.60) (0.60) (0.59)
In excess of net investment income - - - - (0.01)
Total Distributions (0.56) (0.58) (0.60) (0.60) (0.60)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 10.11 $ 9.69 $ 9.56 $ 9.81
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 1.69% 10.54% 7.83% 3.58% 11.84%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $42,819 $ 31,548 $ 34,727 $ 38,800 $ 8,130
Ratio of expenses to average net assets 0.87% 0.87% 0.87% 0.93% 0.97%
Ratio of net investment income to average net assets 5.52% 5.80% 6.20% 6.09% 6.46%
Ratio of expenses to average net assets* 1.00% 1.02% 1.03% 1.04% 1.09%
Ratio of net investment income to average net assets* 5.39% 5.65% 6.04% 5.98% 6.34%
Portfolio turnover(A) 80.86% 91.49% 60.53% 62.70% 106.14%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.52 0.54 0.54 0.55
Net realized and unrealized gains (losses) from
investments (0.37) 0.42 0.13 (0.25) 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.12 0.94 0.67 0.29 1.01
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.52) (0.54) (0.54) (0.55)
In excess of net investment income (0.49) - - - -
Total Distributions (0.52) (0.54) (0.54) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.74 $ 10.11 $ 9.69 $ 9.56 $ 9.81
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 1.14% 9.86% 7.14% 2.95% 11.20%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $53,384 $ 20,922 $ 11,729 $ 10,782 $ 2,513
Ratio of expenses to average net assets 1.52% 1.52% 1.52% 1.58% 1.62%
Ratio of net investment income to average net assets 4.86% 5.14% 5.55% 5.44% 5.76%
Ratio of expenses to average net assets* 1.65% 1.67% 1.68% 1.69% 1.74%
Ratio of net investment income to average net assets* 4.73% 4.99% 5.39% 5.33% 5.64%
Portfolio turnover(A) 80.86% 91.49% 60.53% 62.70% 106.14%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 206
77
- -------------------------------------
Government Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.03
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14
Net realized and unrealized gains (losses) from
investments (0.29)
- -------------------------------------------------------------------------------
Total from Investment Activities (0.15)
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.14)
Total Distributions (0.14)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.74
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (1.54%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 1,102
Ratio of expenses to average net assets 1.52%(C)
Ratio of net investment income to average net assets 5.06%(C)
Ratio of expenses to average net assets* 1.65%(C)
Ratio of net investment income to average net assets* 4.93%(C)
Portfolio turnover(D) 80.86%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Period from commencement of operations. (B) Not annualized. (C)
Annualized. (D) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.60 0.62 0.62 0.62
Net realized and unrealized gains (losses) from
investments (0.38) 0.42 0.13 (0.25) 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.20 1.02 0.75 0.37 1.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.60) (0.62) (0.62) (0.61)
In excess of net investment income - - - - (0.01)
Total Distributions (0.58) (0.60) (0.62) (0.62) (0.62)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.73 $ 10.11 $ 9.69 $ 9.56 $ 9.81
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.94% 10.81% 8.10% 3.81% 12.04%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $964,576 $851,517 $724,423 $677,326 $379,826
Ratio of expenses to average net assets 0.62% 0.62% 0.62% 0.68% 0.71%
Ratio of net investment income to average net assets 5.77% 6.05% 6.45% 6.34% 6.65%
Ratio of expenses to average net assets* 0.66% 0.67% 0.68% 0.69% 0.73%
Ratio of net investment income to average net assets* 5.73% 6.00% 6.39% 6.33% 6.63%
Portfolio turnover(A) 80.86% 91.49% 60.53% 62.70% 106.14%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 207
78
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Treasury & Agency Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements are incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED 1997
JUNE 30, THROUGH
--------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.09 $ 9.98 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.54 0.63 0.29
Net realized and unrealized gains (losses) from
investments (0.21) 0.16 (0.02)
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.33 0.79 0.27
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.54) (0.63) (0.29)
Net realized gains (0.07) (0.05) -
Total Distributions (0.61) (0.68) (0.29)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 10.09 $ 9.98
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.30% 8.10% 2.78%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 72,941 $ 35,213 $ 94
Ratio of expenses to average net assets 0.60% 0.58% 0.71%(C)
Ratio of net investment income to average net assets 5.30% 5.87% 6.47%(C)
Ratio of expenses to average net assets* 1.00% 0.98% 1.15%(C)
Ratio of net investment income to average net assets* 4.90% 5.47% 6.03%(C)
Portfolio turnover(D) 76.73% 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,
YEAR ENDED 1997
JUNE 30, THROUGH
--------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 9.99 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.58 0.26
Net realized and unrealized gains (losses) from
investments (0.20) 0.14 (0.01)
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.29 0.72 0.25
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.58) (0.26)
Net realized gains (0.07) (0.05) -
Total Distributions (0.56) (0.63) (0.26)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 10.08 $ 9.99
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.89% 7.33% 2.58%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 69,825 $ 12,483 $ 80
Ratio of expenses to average net assets 1.10% 1.08% 1.23%(C)
Ratio of net investment income to average net assets 4.79% 5.39% 6.30%(C)
Ratio of expenses to average net assets* 1.64% 1.63% 1.81%(C)
Ratio of net investment income to average net assets* 4.25% 4.84% 5.72%(C)
Portfolio turnover(D) 76.73% 41.60% 54.44%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 208
79
- -------------------------------------
Treasury & Agency Fund
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED 1997
JUNE 30, THROUGH
--------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.09 $ 9.99 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.57 0.62 0.28
Net realized and unrealized gains (losses) from
investments (0.21) 0.15 (0.01)
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.36 0.77 0.27
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.57) (0.62) (0.28)
Net realized gains (0.07) (0.05) -
Total Distributions (0.64) (0.67) (0.28)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 10.09 $ 9.99
- -----------------------------------------------------------------------------------------------------------
Total Return 3.54% 7.91% 2.78%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 79,958 $ 95,073 $ 110,084
Ratio of expenses to average net assets 0.36% 0.35% 0.45%(C)
Ratio of net investment income to average net assets 5.60% 6.16% 6.44%(C)
Ratio of expenses to average net assets* 0.65% 0.65% 0.78%(C)
Ratio of net investment income to average net assets* 5.31% 5.86% 6.11%(C)
Portfolio turnover(D) 76.73% 41.60% 54.44%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 209
80
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
High Yield Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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>
NOVEMBER 13,
1998 TO
JUNE 30,
CLASS A 1999(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49
Net realized and unrealized gains (losses) from
investments (0.14)
- ----------------------------------------------------------------------------------
Total from Investment Activities 0.35
- ----------------------------------------------------------------------------------
Distributions:
Net investment income (0.49)
Total Distributions (0.49)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.86
- ----------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.53%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 11,405
Ratio of expenses to average net assets 1.13%(C)
Ratio of net investment income to average net assets 8.46%(C)
Ratio of expenses to average net assets* 1.43%(C)
Ratio of net investment income to average net assets* 8.16%(C)
Portfolio turnover(D) 28.02%
</TABLE>
* 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>
NOVEMBER 13,
1998 TO
JUNE 30,
CLASS B 1999(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.45
Net realized and unrealized gains (losses) from
investments (0.12)
- ----------------------------------------------------------------------------------
Total from Investment Activities 0.33
- ----------------------------------------------------------------------------------
Distributions:
Net investment income (0.45)
Total Distributions (0.45)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.88
- ----------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.30%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 3,748
Ratio of expenses to average net assets 1.77%(C)
Ratio of net investment income to average net assets 7.69%(C)
Ratio of expenses to average net assets* 2.06%(C)
Ratio of net investment income to average net assets* 7.40%(C)
Portfolio turnover(D) 28.02%
</TABLE>
* 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> 210
81
- -------------------------------------
High Yield Bond Fund
<TABLE>
<CAPTION>
MARCH 22,
1999 TO
JUNE 30,
CLASS C 1999(A)
- -----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.14
- -----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.22
Net realized and unrealized gains from investments (0.27)
- -----------------------------------------------------------------------------------
Total from Investment Activities (0.05)
- -----------------------------------------------------------------------------------
Distributions:
Net investment income (0.22)
Total Distributions (0.22)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87
- -----------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) (0.56%)(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 9
Ratio of expenses to average net assets 1.76%(C)
Ratio of net investment income to average net assets 7.84%(C)
Ratio of expenses to average net assets* 2.08%(C)
Ratio of net investment income to average net assets* 7.52%(C)
Portfolio turnover(D) 28.02%
</TABLE>
* 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>
NOVEMBER 13,
1998 TO
JUNE 30,
CLASS I 1999(A)
- -----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51
Net realized and unrealized gains (losses) from
investments (0.13)
- -----------------------------------------------------------------------------------
Total from Investment Activities 0.38
- -----------------------------------------------------------------------------------
Distributions:
Net investment income (0.51)
Total Distributions (0.51)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87
- -----------------------------------------------------------------------------------
Total Return 3.80%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $137,433
Ratio of expenses to average net assets 0.89%(C)
Ratio of net investment income to average net assets 8.48%(C)
Ratio of expenses to average net assets* 1.18%(C)
Ratio of net investment income to average net assets* 8.19%(C)
Portfolio turnover(D) 28.02%
</TABLE>
* 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> 211
82
[GRAPHIC]
ONE GROUP(R)
- ------------------------------------
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Equity
securities are subject mainly to market risk. Fixed
income securities are primarily influenced by market,
credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Ultra Short-Term Bond 1
------------------------------------------------------
One Group(R) Short-Term Bond Fund 2
------------------------------------------------------
One Group(R) Intermediate Bond Fund 3
------------------------------------------------------
One Group(R) Bond Fund 4
------------------------------------------------------
One Group(R) Income Bond Fund 5
------------------------------------------------------
One Group(R) Government Bond Fund 6
------------------------------------------------------
One Group(R) Treasury & Agency Fund 7
------------------------------------------------------
One Group(R) High Yield Bond Fund 8
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-8 Market
STRIPS, and CUBES.
------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. 1-8 Market
------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued 1-8 Market
by agencies and instrumentalities of the U.S. Credit
Government. These include Ginnie Mae, Fannie Mae,
and Freddie Mac.
------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with 1-5, 8 Market
a stated maturity. Credit
Liquidity
------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1-5, 8 Liquidity
bank in exchange for the deposit of funds. Credit
Market
------------------------------------------------------------------------------
</TABLE>
<PAGE> 212
83
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreements: The purchase of a security 1-8 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on an Liquidity
agreed upon date. This is treated as a loan.
------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1-8 Market
security and the simultaneous commitment to buy the Leverage
security back at an agreed upon price on an agreed
upon date. This is treated as a borrowing by a Fund.
------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% of 1-8 Credit
the Fund's total assets. In return the Fund will Market
receive cash, other securities, and/or letters of Leverage
credit as collateral.
------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-8 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1-8 Market
mutual funds, including One Group money market funds
and shares of other money market mutual funds for
which Banc One Investment Advisors serves as
investment advisor or administrator. The Treasury &
Agency Fund and the Government Bond Fund will only
purchase shares of investment companies which invest
exclusively in U.S. Treasury and other U.S. agency
obligations. Banc One Investment Advisors will waive
certain fees when investing in funds for which it
serves as investment advisor.
------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock 1, 3-5, 8 Market
that convert to common stock. Credit
------------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer 1-6, 8 Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a Leverage
security at a specified price. The Funds will sell
only covered call and secured put options.
------------------------------------------------------------------------------
Futures and Related Options: A contract providing 1-6, 8 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and at Liquidity
a specified price. Leverage
------------------------------------------------------------------------------
</TABLE>
<PAGE> 213
84
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Investment Trusts ("REITS"): Pooled 2-5, 8 Liquidity
investment vehicles which invest primarily in income Management
producing real estate or real estate related loans Market
or interest. Regulatory
Tax
Pre-payment
------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1-5, 8 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-5, 8 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few days Market
to nine months.
------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign 1-5, 8 Market
companies, as well as commercial paper of foreign Political
issuers and obligations of foreign banks, overseas Liquidity
branches of U.S. banks and supranational entities. Foreign
Includes American Depository Receipts. Investment
------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-5, 8 Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
------------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations 1-8 Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
------------------------------------------------------------------------------
Warrants: Securities, typically issued with 5, 8 Market
preferred stock or bonds, that give the holder the Credit
right to buy a proportionate amount of common stock
at a specified price.
------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally 1-5, 8 Market
pays a dividend at a specified rate and has
preference over common stock in the payment of
dividends and in liquidation.
------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured 1-8 Pre-payment
by real estate loans and pools of loans. These Market
include collateralized mortgage obligations Credit
("CMOs"), and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and 1-5, 8 Market
non-convertible debt securities. Credit
------------------------------------------------------------------------------
</TABLE>
<PAGE> 214
85
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Demand Features: Securities that are subject to puts 1-5, 8 Market
and standby commitments to purchase the securities Liquidity
at a fixed price (usually with accrued interest) Management
within a fixed period of time following demand by a
Fund.
------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1-5, 8 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a Fund 1-8 Pre-payment
sells securities for delivery in a current month and Market
simultaneously contracts with the same party to Regulatory
repurchase similar but not identical securities on a
specified future date.
------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a 1-8 Pre-payment
mortgage pool which provide for a fixed initial Market
mortgage interest rate for a specified period of Credit
time, after which the rate may be subject to Regulatory
periodic adjustments.
------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter into these 1-6, 8 Management
transactions to manage its exposure to changing Credit
interest rates and other factors. Swaps involve an Liquidity
exchange of obligations by two parties. Caps and Market
floors entitle a purchaser to a principal amount
from the seller of the cap or floor to the extent
that a specified index exceeds or falls below a
predetermined interest rate or amount.
------------------------------------------------------------------------------
New Financial Products: New options and futures 1-6, 8 Management
contracts and other financial products continue to Credit
be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 1-8 Market
agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations and Management
other businesses whose interest and/or principal Credit
payments are indexed to foreign currency exchange Foreign
rates, interest rates, or one or more other Investment
referenced indices.
------------------------------------------------------------------------------
</TABLE>
<PAGE> 215
86
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Securities: Securities issued by a state 1-5, 8 Market
or political subdivision to obtain funds for various Credit
public purposes. Municipal securities include Political
private activity bonds and industrial development Tax
bonds, as well as General Obligation Notes, Tax Regulatory
Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Project Notes, other short-term
tax-exempt obligations, municipal leases, and
obligations of municipal housing authorities and
single family revenue bonds.
------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt 1-8 Credit
that pay no interest, but are issued at a discount Market
from their value at maturity. When held to maturity, Zero-Coupon
their entire return equals the difference between
their issue price and their maturity value.
------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero coupon debt 1-8 Credit
securities which convert on a specified date to Market
interest bearing debt securities. Zero
Coupon
------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative 1-6, 8 Pre-payment
multi-class mortgage securities usually structured Market
with two classes of shares that receive different Credit
proportions of the interest and principal from a Regulatory
pool of mortgage-backed obligations. These Funds
only invest in Stripped Mortgage-Backed Securities
issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Leveraged 1-6, 8 Market
variable rate debt instruments with interest rates Leverage
that reset in the opposite direction from the market Credit
rate of interest to which the inverse floater is
indexed.
------------------------------------------------------------------------------
Loan Participations and Assignments: Participations 1-5, 8 Credit
in, or assignments of all or a portion of loans to Political
corporations or to governments, including Liquidity
governments of the less developed countries Foreign
("LDC's"). Investment
Market
------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed rate 1-8 Credit
mortgage loans or mortgage pools which bear simple Pre-payment
interest at fixed annual rates and have short to Regulatory
long term final maturities. Market
------------------------------------------------------------------------------
</TABLE>
<PAGE> 216
87
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Funding Agreements: Investments in short- 1-5, 8 Credit
term funding agreements issued by banks and highly Liquidity
rated U.S. insurance companies such as Guaranteed Market
Investment Contracts ("GIC's") and Bank Investment
Contracts ("BIC's").
------------------------------------------------------------------------------
Common Stock: Shares of ownership of a company. 8 Market
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price of a
security can be adversely affected prior to actual
default as its credit status deteriorates and the
probability of default rises.
- Leverage Risk. The risk associated with securities or
practices that multiply small index or market
movements into large changes in value. Leverage is
often associated with investments in derivatives, but
also may be embedded directly in the characteristics
of other securities.
Hedged. When a derivative (a security whose value is
based on another security or index) is used as a hedge
against an opposite position that the Fund also holds,
any loss generated by the derivative should be
substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce
or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying
security, and there can be no assurance that a Fund's
hedging transactions will be effective.
Speculative. To the extent that a derivative is not
used as a hedge, the Fund is directly exposed to the
risks of that derivative. Gains or losses from
speculative positions in a derivative may be
substantially greater than the derivative's original
cost.
- Liquidity Risk. The risk that certain securities may
be difficult or impossible to sell at the time and the
price that would normally prevail in the market. The
seller may have to lower the price, sell other
securities instead or forego an investment
opportunity, any of which could have a negative effect
on Fund management or performance. This includes the
risk of missing out on an investment opportunity
because the assets necessary to take advantage of it
are tied up in less advantageous investments.
<PAGE> 217
88
- 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 may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing
credit risk.
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws which may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
- Zero Coupon Risk. The market prices of securities
structured as zero coupon or pay-in-kind securities
are generally affected to a greater extent by interest
rate changes. These securities tend to be more
volatile than securities which pay interest
periodically.
<PAGE> 218
(Intentionally Left Blank)
<PAGE> 219
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling 1
800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-122 [ONE GROUP LOGO]
<PAGE> 220
MUNICIPAL BOND FUNDS
PROSPECTUS
November 1, 1999
[ONE GROUP LOGO]
One Group(R) Short -Term Municipal Bond Fund
One Group(R) Intermediate Tax-Free Bond Fund
One Group(R) Tax-Free Bond Fund
One Group(R) Municipal Income Fund
One Group(R) Arizona Municipal Bond Fund
One Group(R) Kentucky Municipal Bond Fund
One Group(R) Louisiana Municipal Bond Fund
One Group(R) Michigan Municipal Bond Fund
One Group(R) Ohio Municipal Bond Fund
One Group(R) West Virginia Municipal Bond Fund
The Securities and Exchange Commission has not approved or disapproved the
shares of any of the Funds as an investment or determined whether this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.
<PAGE> 221
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Short-Term Municipal Bond Fund 2
---------
One Group Intermediate Tax-Free Bond Fund 6
---------
One Group Tax-Free Bond Fund 10
---------
One Group Municipal Income Fund 14
---------
One Group Arizona Municipal Bond Fund 18
---------
One Group Kentucky Municipal Bond Fund 22
---------
One Group Louisiana Municipal Bond Fund 26
---------
One Group Michigan Municipal Bond Fund 30
---------
One Group Ohio Municipal Bond Fund 34
---------
One Group West Virginia Municipal Bond Fund 38
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 42
---------
Investment Risks 45
---------
Investment Policies 46
---------
Portfolio Quality 47
---------
Temporary Defensive Positions 48
---------
Portfolio Turnover 48
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 49
---------
Sales Charges 52
---------
Sales Charge Reductions and Waivers 55
---------
Exchanging Fund Shares 58
---------
Redeeming Fund Shares 60
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 62
---------
Dividend Policies 62
---------
Tax Treatment of Shareholders 63
---------
Shareholder Inquiries 66
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 68
---------
The Fund Managers 69
---------
Year 2000 Readiness Disclosure 69
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 70
---------
APPENDIX A: INVESTMENT PRACTICES 90
---------
</TABLE>
<PAGE> 222
FUND SUMMARIES
Investments, Risk & Performance
<PAGE> 223
[PHOTO]
ONE GROUP(R)
- ------------------------------------
- ------------------------------------
2
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Short-Term Municipal Bond Fund
WHAT IS THE GOAL OF THE
SHORT-TERM MUNICIPAL
BOND FUND? The Fund seeks as high a level of current income exempt
from Federal income tax as is consistent with relative
stability of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF THE SHORT-TERM
MUNICIPAL BOND FUND? The Fund invests in a portfolio of municipal securities
with an average weighted maturity of three years or
less. Banc One Investment Advisors selects securities
for the Fund by analyzing both individual securities and
different market sectors. Taking a long-term approach,
Banc One Investment Advisors looks for individual
securities that it believes will perform well over
market cycles. The Short-Term Municipal Bond Fund
spreads its holdings across various security types
within the municipal securities market. Banc One
Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Fund's investment strategies, please read "More
About The Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
SHORT-TERM MUNICIPAL
BOND FUND? The main risks of investing in the Short-Term Municipal
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Short-Term Municipal Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Short-Term Municipal Bond
Fund.
<PAGE> 224
3
- ------------------------------------
Short-Term Municipal Bond Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 225
4
- ------------------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Short-Term Municipal Bond Fund
HOW HAS THE SHORT-TERM
MUNICIPAL BOND FUND
PERFORMED? This section normally would include a bar chart and an
average annual total return table. However, the
Short-Term Municipal Bond Fund began operations on May
4, 1998 and did not have a full calendar year
performance as of the date of this prospectus.
<PAGE> 226
5
- ------------------------------------
Short-Term Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them to the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 3.00% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 3.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .34% .34% .34% .34%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.29% 1.94% 1.94% .94%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.49%) (.49%) (.49%) (.39%)
------------------------------------------------------------------------------------------------
Net Expense .80% 1.45% 1.45% .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, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.80% for Class A shares, 1.45% for Class B
shares, 1.45% for Class C shares, and .55% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 379 $ 448 $ 148 $ 248 $ 148
-------------------------------------------------------------------------------------
3 Years 650 762 562 562 562
-------------------------------------------------------------------------------------
5 Years 941 1,002 1,002 1,002 1,002
-------------------------------------------------------------------------------------
10 Years 1,768 2,056 2,056 2,225 2,225
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- --------------
<S> <C> <C>
1 Year (1) $ 56
-------------------------------------
3 Years 261
-------------------------------------------
5 Years 482
-------------------------------------------------
10 Years 1,119
-------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $427
Class B (no redemption) $197
Class B (with redemption) $497
Class C (no redemption) $197
Class C (with redemption) $297
Class I $96
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 227
6
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Intermediate Tax-Free
Bond Fund
WHAT IS THE GOAL OF THE
INTERMEDIATE TAX-FREE
BOND FUND? The Fund seeks current income exempt from Federal income
taxes consistent with prudent investment management and
the preservation of capital.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF THE INTERMEDIATE
TAX-FREE BOND FUND? The Fund invests primarily in a portfolio of municipal
securities with an average weighted maturity of between
three and 10 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual
securities and different market sectors. Taking a
long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform
well over market cycles. The Intermediate Tax-Free Bond
Fund spreads its holdings across various security types
within the municipal securities market. Banc One
Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Fund's investment strategies, please read "More
About The Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 20% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INTERMEDIATE TAX-FREE
BOND FUND? The main risks of investing in the Intermediate Tax-Free
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Intermediate Tax-Free Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Intermediate Tax-Free Bond
Fund.
<PAGE> 228
7
- ------------------------------------
Intermediate Tax-Free Bond Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 229
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Intermediate Tax-Free Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE INTERMEDIATE
TAX-FREE BOND FUND
PERFORMED? By showing the variability of the Intermediate Tax-Free
Bond Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INTERMEDIATE TAX-FREE BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1991 10.02
1992 7.53
1993 9.68
1994 -3.43
1995 13.06
1996 4.39
1997 8.20
1998 6.00
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-2.07%.
- -----------------------------------------------------------------------------
Best Quarter: 5.14% 1Q1995 Worst Quarter: -4.73% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Intermediate Tax-Free Bond Fund 1.03% 4.18% 5.42%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (1) 6.22% 5.79% 6.89%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Fund
Index (2) 5.62% 5.13% 6.26%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Intermediate Tax-Free Bond Fund 0.08% 4.13%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (1) 6.22% 5.66%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Fund
Index (2) 5.62% 5.00%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 9/4/90)
<S> <C> <C> <C>
One Group Intermediate Tax-Free Bond Fund 6.00% 5.39% 6.95%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (1) 6.22% 5.79% 7.62%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Fund
Index (2) 5.62% 5.13% 6.96%
</TABLE>
(1) The Lehman Brothers 7 Year Municipal Bond Index
is an unmanaged index comprised of investment
grade municipal bonds with maturities close to
seven years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By
contrast, the performance of the One Group
Intermediate Tax-Free Bond Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B
shares.
(2) The Lipper Intermediate Municipal Bond Fund Index
consists of the equally weighted average monthly
return of the largest funds within the universe
of all funds in this category.
<PAGE> 230
9
- ------------------------------------
Intermediate Tax-Free Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .19% .19% .19% .19%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.14% 1.79% 1.79% .79%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.29%) (.29%) (.29%) (.19%)
-------------------------------------------------------------------------------------------------
Net Expenses .85% 1.50% 1.50% .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, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.85% for Class A shares, 1.50% for Class B
shares, 1.50% for Class C shares, and .60% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 533 $ 653 $ 153 $ 253 $ 153
-------------------------------------------------------------------------------------
3 Years 768 835 535 535 535
-------------------------------------------------------------------------------------
5 Years 1,023 1,143 943 943 943
-------------------------------------------------------------------------------------
10 Years 1,749 1,910 1,910 2,081 2,081
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 61
-----------------------------------
3 Years 233
-----------------------------------------
5 Years 420
-----------------------------------------------
10 Years 960
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $561
Class B (no redemption) $182
Class B (with redemption) $682
Class C (no redemption) $182
Class C (with redemption) $282
Class I $81
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 231
10
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Tax-Free Bond Fund
WHAT IS THE GOAL OF THE
TAX-FREE BOND FUND? The Fund seeks as high a level of current income exempt
from Federal income tax as is consistent with relative
stability of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF THE TAX-FREE BOND
FUND? The Fund invests primarily in a portfolio of municipal
securities. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual
securities and different market sectors. Taking a
long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform
well over market cycles. The Tax-Free Bond Fund spreads
its holdings across various security types within the
municipal securities market. Banc One Investment
Advisors selects individual securities after performing
a risk/reward evaluation of interest rate risk, credit
risk, and the complex legal and technical structure of
the transaction. For more information about the Fund's
investment strategies, please read "More About The
Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 20% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
TAX-FREE BOND FUND? The main risks of investing in the Tax-Free Bond Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Tax-Free Bond Fund will change every day in response to
market conditions. You may lose money if you invest in
the Tax-Free Bond Fund.
<PAGE> 232
11
- ------------------------------------
Tax-Free Bond Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 233
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Tax-Free Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE TAX-FREE BOND
FUND PERFORMED? By showing the variability of the Tax-Free Bond Fund's
performance from year to year, the charts below help
show the risk of investing in the Fund. PLEASE REMEMBER
THAT THE PAST PERFORMANCE OF THE TAX-FREE BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES
--------------
<S> <C>
1989 10.05
1990 7.76
1991 11.85
1992 9.45
1993 10.74
1994 -1.98
1995 16.89
1996 3.36
1997 9.15
1998 5.71
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-2.63%.
(2) Performance data includes performance of the
Pegasus Municipal Bond Fund for the period before
it was consolidated with the One Group Tax-Free
Bond Fund on March 22, 1999.
- --------------------------------------------------------------------------------
Best Quarter: 6.71% 1Q1995 Worst Quarter: -3.74% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998 (4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 3/1/88)
<S> <C> <C> <C> <C>
One Group Tax-Free Bond Fund 0.92% 5.47% 7.69% 7.68%
--------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond
Index (1) 6.48% 6.22% 8.22% 8.25%
--------------------------------------------------------------------------------------------
Lipper General Municipal Bond
Index (3) 5.64% 5.70% 7.75% 7.99%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 2/8/94)
<S> <C> <C> <C> <C>
One Group Tax-Free Bond Fund -0.03% 5.83%
--------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond
Index (1) 6.48% 8.10%
--------------------------------------------------------------------------------------------
Lipper General Municipal Bond
Index (3) 5.64% 7.66%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (2) (since 3/1/88)
<S> <C> <C> <C> <C>
One Group Tax-Free Bond Fund 5.98% 6.73% 8.47% 8.41%
--------------------------------------------------------------------------------------------
Lehman Brothers Municipal Bond
Index (1) 6.48% 6.22% 8.22% 8.25%
--------------------------------------------------------------------------------------------
Lipper General Municipal Bond
Index (3) 5.64% 5.70% 7.75% 7.99%
</TABLE>
(1) The Lehman Brothers Municipal Bond Index is an
unmanaged index generally representative of the
municipal bond market as a whole. The performance
of the index does not reflect the deduction of
expenses associated with a mutual fund, such as
management fees. By contrast, the performance of
the One Group Tax-Free Bond Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B
shares.
(2) For periods prior to February 1, 1995, the
performance of Class I Shares is based on Class A
Share performance adjusted to reflect the absence
of sales charges.
(3) The Lipper General Municipal Bond Index consists
of funds that invest at least 65% of their assets
in municipal debt issues in the top four credit
ratings.
(4) Performance data includes the performance of the
Pegasus Municipal Bond Fund for the period before
it was consolidated with the One Group Tax-Free
Bond Fund on March 22, 1999.
<PAGE> 234
13
- ------------------------------------
Tax-Free Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
redeemed all of your shares or
if you hold them. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.04% 1.69% 1.69% .69%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.17%) (.17%) (.17%) (.07%)
-------------------------------------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.87% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, and .62% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 535 $ 655 $ 155 $ 255 $ 155
-------------------------------------------------------------------------------------
3 Years 750 816 516 516 516
-------------------------------------------------------------------------------------
5 Years 982 1,102 902 902 902
-------------------------------------------------------------------------------------
10 Years 1,649 1,811 1,811 1,984 1,984
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 63
-----------------------------------
3 Years 214
-----------------------------------------
5 Years 377
-----------------------------------------------
10 Years 852
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $551
Class B (no redemption) $172
Class B (with redemption) $672
Class C (no redemption) $172
Class C (with redemption) $272
Class I $70
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 235
14
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Income Fund
WHAT IS THE GOAL OF THE
MUNICIPAL INCOME FUND? The Fund seeks current income exempt from Federal income
taxes.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES OF
THE MUNICIPAL INCOME
FUND? The Fund invests in a portfolio of municipal securities,
including mortgage-backed securities. While current
income is the Fund's primary focus, it seeks to produce
income in a manner consistent with the preservation of
principal. The Fund's average weighted maturity will
normally range between five and 15 years. From time to
time, a significant portion of the Funds total assets
may be invested in municipal housing authority
obligations. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual
securities and different market sectors. Taking a
long-term approach to time the market, Banc One
Investment Advisors looks for individual securities that
it believes will perform well over market cycles. The
Municipal Income Fund spreads its holdings across
various security types within the municipal securities
market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of
interest rate risk, credit risk, and the complex legal
and technical structure of the transaction. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MUNICIPAL INCOME FUND? The main risks of investing in the Municipal Income Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Municipal Income Fund will change every day in response
to market conditions. You may lose money if you invest
in the Municipal Income Fund.
<PAGE> 236
15
- ------------------------------------
Municipal Income Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. The securities decrease in value
based on changes in interest rates. If rates increase,
the value of a Fund's investments generally declines. On
the other hand, if rates fall, the value of the
investments generally increases. Your investment will
decline in value if the value of a Fund's investments
decrease. Securities with greater interest rate
sensitivity and longer maturities tend to produce higher
yields, but are subject to greater fluctuations in
value. Usually, changes in the value of fixed income
securities will not affect cash income generated, but
may affect the value of your investment.
Prepayment and Call Risk. As part of its main investment
strategy, the Municipal Income Fund may invest in
mortgage-backed securities. The issuers of these and
other callable securities may be able to repay principal
in advance, especially when interest rates fall. Changes
in pre-payment rates can make the price and yield of
mortgage-backed securities volatile. When mortgages are
prepaid or when securities are called, the Fund may have
to reinvest in securities with a lower yield. The Fund
also may fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Portfolio Quality. The Fund may invest in Municipal
Securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE MUNICIPAL
INCOME FUND PERFORMED? By showing the variability of the Municipal Income
Fund's performance from year to year, the charts below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MUNICIPAL
INCOME FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
<PAGE> 237
16
FUND SUMMARY
Municipal Income Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes in
the Fund's performance from
year to year. Total returns
assume reinvestment of
dividends and distributions.
The returns shown DO NOT
reflect applicable sales
charges. If these charges were
included, the returns would be
lower than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1994 -1.6
1995 12.01
1996 4.58
1997 8.58
1998 6.14
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.68%.
- --------------------------------------------------------------------------------
Best Quarter: 4.74% 1Q1995 Worst Quarter: -1.91% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/9/93)
<S> <C> <C> <C>
One Group Municipal
Income Fund 1.09% 4.63% 4.89%
-------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond
Index (1) 6.22% 5.79% 5.93%
-------------------------------------------------------------------
Lipper Intermediate
Municipal Bond Funds
Index (2) 5.62% 5.13% 5.34%
-------------------------------------------------------------------
Lehman Brothers Housing
Bond Index (3) 5.57% 6.21% 6.52%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Municipal
Income Fund 5.22% 4.94%
-------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond
Index (1) 6.22% 5.66%
-------------------------------------------------------------------
Lipper Intermediate
Municipal Bond Funds
Index (2) 5.62% 5.00%
-------------------------------------------------------------------
Lehman Brothers Housing
Bond Index (3) 5.57% 6.32%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 11/4/97)
<S> <C> <C> <C>
One Group Municipal
Income Fund 4.26% 9.78%
-------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond
Index (1) 6.22% 6.93%
-------------------------------------------------------------------
Lipper Intermediate
Municipal Bond Funds
Index (2) 5.62% 6.44%
-------------------------------------------------------------------
Lehman Brothers Housing
Bond Index (3) 5.57% 6.02%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 2/9/93)
<S> <C> <C> <C>
One Group Municipal
Income Fund 6.14% 5.84% 5.97%
-------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond
Index (1) 6.22% 5.79% 5.93%
-------------------------------------------------------------------
Lipper Intermediate
Municipal Bond Funds
Index (2) 5.62% 5.13% 5.34%
-------------------------------------------------------------------
Lehman Brothers Housing
Bond Index (3) 5.57% 6.21% 6.52%
</TABLE>
(1) The Lehman Brothers 7 Year Municipal Bond Index
an unmanaged index comprised of investment grade
municipal bonds with maturities close to seven
years. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as management fees. By
contrast, the performance of the One Group
Municipal Income Fund reflects the deduction of
these value-added services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and
Class C shares. The benchmark index for the One
Group Municipal Income Fund has changed from the
Lehman Brothers Housing Bond Index to the Lehman
Brothers 7 Year Municipal Bond Index in order to
better represent the investment policies for
comparison purposes.
(2) The Lipper Intermediate Municipal Bond Funds
Index consists of the equally weighted average
monthly return of the largest funds within the
universe of all funds in the category.
(3) The Lehman Brothers Housing Bond Index is
comprised of municipal housing bonds.
<PAGE> 238
17
- ------------------------------------
Municipal Income Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.02% 1.67% 1.67% .67%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.15%) (.15%) (.15%) (.05%)
-------------------------------------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.87% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, and .62% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 535 $ 655 $ 155 $ 255 $ 155
-------------------------------------------------------------------------------------
3 Years 746 812 512 512 512
-------------------------------------------------------------------------------------
5 Years 974 1,093 893 893 893
-------------------------------------------------------------------------------------
10 Years 1,629 1,791 1,791 1,964 1,964
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- --------------
<S> <C> <C>
1 Year (1) $ 63
-------------------------------------
3 Years 209
-------------------------------------------
5 Years 368
-------------------------------------------------
10 Years 830
-------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $549
Class B (no redemption) $170
Class B (with redemption) $670
Class C (no redemption) $170
Class C (with redemption) $270
Class I $68
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 239
18
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Arizona Municipal
Bond Fund
WHAT IS THE GOAL OF THE
ARIZONA MUNICIPAL BOND
FUND? The Fund seeks current income exempt from Federal income
tax and Arizona personal income tax, consistent with the
preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES OF
THE ARIZONA MUNICIPAL
BOND FUND? The Fund invests in municipal securities issued by or on
behalf of the state of Arizona and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Arizona
municipal securities is exempt from Federal income tax
and Arizona personal income tax. A portion of the Fund's
total assets also may be invested in municipal
securities issued by other states and territories. The
Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors.
Taking a long-term approach, Banc One Investment
Advisors looks for individual securities that it
believes will perform well over market cycles. The
Arizona Municipal Bond Fund spreads its holdings across
various security types within the municipal securities
market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of
interest rate risk, credit risk, and the complex legal
and technical structure of the transaction. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
ARIZONA
MUNICIPAL BOND FUND? The main risks of investing in the Arizona Municipal
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Arizona Municipal Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Arizona Municipal Bond Fund.
MAIN RISKS
- --------------------------------
Non-Diversification. The Arizona Municipal Bond Fund is
"non-diversified". This means that the Fund may invest a
more significant portion of its assets in the securities
of a single issuer than can a "diversified" fund.
Non-diversification increases the risk of loss to the
Fund if an issuer fails to make interest or principal
payments or if the market value of a security declines.
Geographic Concentration. Because the Arizona Municipal
Bond Fund is not diversified and because it concentrates
its investments in the securities of issuers in Arizona,
certain factors including economic conditions,
constitutional amendments, legislative and executive
measures, and voter initiatives may have a
disproportionately negative effect on the Fund's
investments. For example, Arizona's population growth
continues to outpace the national average. However, this
growth is expensive and Arizona's economic outlook
depends on its ability to match long-term revenues with
expenditures. In addition, Arizona's continued growth
depends to some extent on its ability to manage its
water resources.
<PAGE> 240
19
- ------------------------------------
Arizona Municipal Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE ARIZONA
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the Arizona Municipal Bond
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE ARIZONA
MUNICIPAL BOND FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 9.50
1990 6.47
1991 10.37
1992 7.65
1993 9.97
1994 -2.38
1995 11.96
1996 4.05
1997 7.33
1998 5.55
</TABLE>
(1.) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.99%. The Arizona Municipal Bond Fund
commenced operations on January 20, 1997
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for period prior to the Fund's
commencement of operations as adjusted to
reflect the expenses associated with the Fund.
The common trust fund was not registered with
the SEC and was not subject to the investment
restrictions, limitations and diversification
requirements imposed by law on registered mutual
funds. If the common trust fund had been
registered, its return may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 4.65% 4Q1990 Worst Quarter: -3.51% 1Q1994
- --------------------------------------------------------------------------------
<PAGE> 241
20
- ------------------------------------
FUND SUMMARY
Arizona Municipal Bond Fund
ONE GROUP(R)
- ------------------------------------
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 11/30/79)
<S> <C> <C> <C> <C>
One Group Arizona Municipal
Bond Fund 0.63% 3.68% 6.07% 6.74%
--------------------------------------------------------------------------------------------
Lehman Brother 7 Year
Municipal Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
(since 11/30/79)
<S> <C> <C> <C> <C>
One Group Arizona Municipal
Bond Fund -1.02% 2.98% 5.56% 6.14%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 11/30/79)
<S> <C> <C> <C> <C>
One Group Arizona Municipal
Bond Fund 5.55% 5.20% 6.98% 7.34%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
(1) The Lehman Brothers Municipal Bond Index is an
unmanaged index generally representative of the
municipal bond market as a whole. The performance
of the index does not reflect the deduction of
expenses associated with a mutual fund, such as
management fees. By contrast, the performance of
the One Group Arizona Municipal Bond Fund
reflects the deduction of these services as well
as the deduction of sales charges on Class A
shares and contingent deferred sales charges on
Class B shares.
(2) The Arizona Municipal Bond Fund commenced
operations on January 20, 1997 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
period prior to the Fund's commencement of
operations as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations and diversification restrictions
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
(3) The Lipper Intermediate Municipal Bond Funds
Index consists of the equally weighted average
monthly return of the largest funds within the
universe of all funds in the category.
* Index did not exist.
<PAGE> 242
21
- ------------------------------------
Arizona Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them to the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(fees paid directly from your investment) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price) (1)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(expenses that are deducted from fund assets) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.07% 1.72% 1.72% .72%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.17%) (.17%) (.17%) (.07%)
------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares, and .65% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
--------------------------------------------------------------------------------------------------------
3 Years 759 825 525 525 525 223
--------------------------------------------------------------------------------------------------------
5 Years 998 1,117 917 917 917 394
--------------------------------------------------------------------------------------------------------
10 Years 1,682 1,844 1,844 2,016 2,016 888
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 243
22
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Kentucky Municipal
Bond Fund
WHAT IS THE GOAL OF THE
KENTUCKY MUNICIPAL BOND
FUND? The Fund seeks current income exempt from Federal income
tax and Kentucky personal income tax, consistent with
the preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES OF
THE KENTUCKY MUNICIPAL
BOND FUND? The Fund invests in municipal securities issued by or on
behalf of the state of Kentucky and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Kentucky
municipal securities is exempt from Federal income tax
and Kentucky personal income tax. The Fund also invests
in municipal securities issued by other states and
territories. The Fund's average weighted maturity
normally will range between five and 20 years. Banc One
Investment Advisors selects securities for the Fund by
analyzing both individual securities and different
market sectors. Taking a long-term approach, Banc One
Investment Advisors looks for individual securities that
it believes will perform well over market cycles. The
Kentucky Municipal Bond Fund spreads its holdings across
various security types within the municipal securities
market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of
interest rate risk, credit risk, and the complex legal
and technical structure of the transaction. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
KENTUCKY MUNICIPAL BOND
FUND? The main risks of investing in the Kentucky Municipal
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Kentucky Municipal Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Kentucky Municipal Bond Fund.
<PAGE> 244
23
- ------------------------------------
Kentucky Municipal Bond Fund
MAIN RISKS
- --------------------------
Non-Diversification. The Kentucky Municipal Bond Fund is
"non-diversified". This means that the Fund may invest a
more significant portion of its assets in the securities
of a single issuer than can a "diversified" fund.
Non-diversification increases the risk of loss to the
Fund if an issuer fails to make interest or principal
payments or if the market value of a security declines.
Geographic Concentration. Because the Kentucky Municipal
Bond Fund is not diversified and because it concentrates
its investments in the securities of issuers in
Kentucky, certain factors including economic conditions,
constitutional amendments, legislative and executive
measures, and voter initiatives may have a
disproportionately negative effect on the Fund's
investments. For example, as of June 30, 1999, Kentucky
had an unemployment rate of 4.6%, slightly higher than
the national average. In addition, 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.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 245
24
- ------------------------------------
FUND SUMMARY
Kentucky Municipal Bond Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total
Return Table shows how the
Fund's average annual returns
for the periods indicated
compare to those of a broad
measure of market performance.
Average annual total returns
for more than one year tend to
smooth out variations in a
Fund's total return and are
not the same as actual
year-by-year results. The
average annual returns shown
on the Average Annual Total
Return Table DO include
applicable sales charges.
HOW HAS THE KENTUCKY
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the Kentucky Municipal
Bond Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
KENTUCKY MUNICIPAL BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1994 -5.66
1995 15.32
1996 4.18
1997 7.5
1998 5.52
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.38%.
(2) Performance data includes the performance of the
Trademark Kentucky Municipal Bond Fund for the
period before it was consolidated with the One
Group Kentucky Municipal Bond Fund on January 20,
1995.
- -----------------------------------------------------------------------------
Best Quarter: 6.16% 1Q1995 Worst Quarter: -4.62 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A(1) (since 3/12/93)
<S> <C> <C> <C>
One Group Kentucky
Municipal Bond Fund 0.55% 3.93% 4.55%
-----------------------------------------------------------------------
Lehman Brother 7 Year
Municipal Bond
Index (2) 6.22% 5.79% 6.26%
-----------------------------------------------------------------------
Lipper Intermediate
Municipal Bond Funds
Index (3) 5.62% 5.13% 5.64%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 3/16/95)
<S> <C> <C> <C>
One Group Kentucky Municipal Bond Fund -0.37% 5.29%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (2) 6.22% 7.13%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (3) 5.62% 6.54%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 3/12/93)
<S> <C> <C> <C>
One Group Kentucky Municipal Bond Fund 5.52% 5.15% 5.60%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (2) 6.22% 5.79% 6.26%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (3) 5.62% 5.13% 5.64%
</TABLE>
(1) For periods prior to January 20, 1995, the
performance for Class A shares is based on Class
I performance adjusted to reflect applicable
sales loads.
(2) The Lehman Brothers 7 Year Municipal Bond Index
is an unmanaged index comprised of investment
grade municipal bonds with maturities close to
seven years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By
contrast, the performance of the One Group
Kentucky Municipal Bond Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B
shares.
(3) The Lipper Intermediate Municipal Bond Fund Index
consists of the equally weighted average monthly
return of the largest funds within the universe
of all funds in the category.
(4) Performance data includes the performance of the
Trademark Kentucky Municipal Bond Fund for the
period before it was consolidated with the One
Group Kentucky Municipal Bond Fund on January 20,
1995.
<PAGE> 246
25
- ------------------------------------
Kentucky Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them to the end of the
period shown. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.07% 1.72% 1.72% .72%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.17%) (.17%) (.17%) (.07%)
------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C, and .65% for Class I
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158
-------------------------------------------------------------------------------------
3 Years 759 825 525 525 525
-------------------------------------------------------------------------------------
5 Years 998 1,117 917 917 917
-------------------------------------------------------------------------------------
10 Years 1,682 1,844 1,844 2,016 2,016
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 66
-----------------------------------
3 Years 223
-----------------------------------------
5 Years 394
-----------------------------------------------
10 Years 888
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 247
26
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Louisiana Municipal
Bond Fund
WHAT IS THE GOAL OF THE
LOUISIANA MUNICIPAL
BOND FUND? The Fund seeks current income exempt from Federal income
tax and Louisiana personal income tax, consistent with
the preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF THE LOUISIANA
MUNICIPAL BOND FUND? The Fund invests in municipal securities issued by or on
behalf of the state of Louisiana and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Louisiana
municipal securities is exempt from Federal income tax
and Louisiana personal income tax. A portion of the
Fund's total assets also may be invested in municipal
securities issued by other states and territories. The
Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors.
Taking a long-term approach, Banc One Investment
Advisors looks for individual securities that it
believes will perform well over market cycles. The
Louisiana Municipal Bond Fund spreads its holdings
across various security types within the municipal
securities market. Banc One Investment Advisors selects
individual securities after performing a risk/reward
evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the
transaction. For more information about the Fund's
investment strategies, please read "More About The
Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
LOUISIANA MUNICIPAL
BOND FUND? The main risks of investing in the Louisiana Municipal
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Louisiana Municipal Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Louisiana Municipal Bond
Fund.
<PAGE> 248
27
- ------------------------------------
Louisiana Municipal Bond Fund
MAIN RISKS
- --------------------------
Non-Diversification. The Louisiana Municipal Bond Fund
is "non-diversified". This means that the Fund may
invest a more significant portion of its assets in the
securities of a single issuer than can a "diversified"
fund. Non-diversification increases the risk of loss to
the Fund if an issuer fails to make interest or
principal payments or if the market value of a security
declines.
Geographic Concentration. Because the Louisiana
Municipal Bond Fund is not diversified and because it
concentrates its investments in the securities of
issuers in Louisiana, certain factors including economic
conditions, constitutional amendments, legislative and
executive measures, and voter initiatives may have a
disproportionately negative effect on the Fund's
investments. For example, the Louisiana economy is
heavily dependent on a single industry, in this case
energy (oil and gas). Louisiana continues to recover
from the oil price declines of the mid-1980's, although
its debt burden is well above that of other states,
while wealth and income indicators are below the
national average. Louisiana's average employment growth
for the past five years is the highest since 1982.
Economic growth is expected to follow the national trend
and slow over the next five years.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 249
28
FUND SUMMARY
Louisiana Municipal Bond Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE LOUISIANA
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the Louisiana Municipal
Bond Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
LOUISIANA MUNICIPAL BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1990 7.41
1991 9.93
1992 7.97
1993 10.35
1994 -3.25
1995 12.02
1996 4.54
1997 7.04
1998 5.43
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.81%.
(2) Performance data includes the performance of the
Paragon Louisiana Tax-Free Bond Fund for the
period before it was consolidated with the One
Group Louisiana Municipal Bond Fund on March 26,
1996.
- -----------------------------------------------------------------------------
Best Quarter: 4.81% 1Q1995 Worst Quarter: -4.19% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 12/29/89)
<S> <C> <C> <C>
One Group Louisiana Municipal Bond Fund 0.73% 4.09% 6.24%
--------------------------------------------------------------------------------------------
Lehman Brother 7 Year Municipal Bond Index (2) 6.22% 5.79% 7.37%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (3) 5.62% 5.13% 6.74%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 9/16/94)
<S> <C> <C> <C>
One Group Louisiana Municipal Bond Fund -0.33% 5.24%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (2) 6.22% 7.30%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (3) 5.62% 6.68%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (1) (since 12/29/89)
<S> <C> <C> <C>
One Group Louisiana Municipal Bond Fund 5.59% 5.11% 6.82%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (2) 6.22% 5.79% 7.37%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (3) 5.62% 5.13% 6.74%
</TABLE>
(1) For periods prior to March 26, 1996, the
performance for Class I shares is based on Class
A performance adjusted to reflect the absence of
sales charges.
(2) The Lehman Brothers 7 Year Municipal Bond Index
is an unmanaged index comprised of investment
grade municipal bonds with maturities close to
seven years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By
contrast, the performance of the One Group
Louisiana Municipal Bond Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B
shares.
(3) The Lipper Intermediate Municipal Bonds Fund
Index consists of the equally weighted average
monthly return of the largest funds within the
universe of all funds in the category.
(4) Performance data includes the performance of the
Paragon Louisiana Tax-Free Bond Fund for the
period before it was consolidated with the One
Group Louisiana Municipal Bond Fund on March 26,
1996.
<PAGE> 250
29
- ------------------------------------
Louisiana Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .24% .24% .24% .24%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.19% 1.84% 1.84% .84%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.29%) (.29%) (.29%) (.19%)
-------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares and .65% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158
-------------------------------------------------------------------------------------
3 Years 783 850 550 550 550
-------------------------------------------------------------------------------------
5 Years 1,048 1,169 969 969 969
-------------------------------------------------------------------------------------
10 Years 1,804 1,964 1,964 2,135 2,135
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 66
-----------------------------------
3 Years 249
-----------------------------------------
5 Years 447
-----------------------------------------------
10 Years 1,020
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $566
Class B (no redemption) $187
Class B (with redemption) $687
Class C (no redemption) $187
Class C (with redemption) $287
Class I $86
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 251
30
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Michigan Municipal
Bond Fund
WHAT IS THE GOAL OF THE
MICHIGAN MUNICIPAL BOND
FUND? The Fund seeks current income exempt from Federal income
tax and Michigan personal income tax, consistent with
the preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF THE MICHIGAN
MUNICIPAL BOND FUND? The Fund invests in municipal securities issued by or on
behalf of the state of Michigan and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Michigan
municipal securities is exempt from Federal income tax
and Michigan personal income tax. A portion of the
Fund's total assets also may be invested in municipal
securities issued by other states and territories. The
Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors.
Taking a long-term approach, Banc One Investment
Advisors looks for individual securities that it
believes will perform well over market cycles. The
Michigan Municipal Bond Fund spreads its holdings across
various security types within the municipal securities
market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of
interest rate risk, credit risk, and the complex legal
and technical structure of the transaction. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
31
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MICHIGAN MUNICIPAL BOND
FUND? The main risks of investing in the Michigan Municipal
Bond Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Michigan Municipal Bond Fund will change
every day in response to market conditions. You may lose
money if you invest in the Michigan Municipal Bond Fund.
<PAGE> 252
31
- ------------------------------------
Michigan Municipal Bond Fund
MAIN RISKS
- --------------------------
Non-Diversification. The Michigan Municipal Bond Fund is
"non-diversified". This means that the Fund may invest a
more significant portion of its assets in the securities
of a single issuer than can a "diversified" fund.
Non-diversification increases the risk of loss to the
Fund if an issuer fails to make interest or principal
payments or if the market value of a security declines.
Geographic Concentration. Because the Michigan Municipal
Bond Fund is not diversified and because it concentrates
its investments in the securities of issuers in
Michigan, certain factors including economic conditions,
constitutional amendments, legislative and executive
measures, and voter initiatives may have a
disproportionately negative effect on the Fund's
investments. For example, the Michigan economy is
heavily dependent on the automobile industry, a highly
cyclical industry. This affects the revenue streams of
the State and local governments because of its impact on
tax sources, particularly sales taxes, income taxes, and
Michigan single business taxes. State and local revenues
also are affected by statutory and constitutional
changes adopted in 1993 and 1994, which limit annual
assessment increases and transfer a substantial part of
the financing of education costs from local property
taxes to sales taxes and other taxes imposed at the
State level.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 253
32
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Michigan Municipal Bond Fund
The Bar Chart shows changes in
the Fund's performance from
year to year. Total returns
assume reinvestment of
dividends and distributions.
The returns shown DO NOT
reflect applicable sales
charges. If these were
included, the return would be
lower than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE MICHIGAN
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the Michigan Municipal
Bond Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
MICHIGAN MUNICIPAL BOND FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1994 -5.37
1995 16.43
1996 3.46
1997 9.42
1998 5.91
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-2.91%.
(2) The performance data includes the performance of
the Pegasus Michigan Municipal Bond Fund for the
period before it was consolidated with the One
Group Michigan Municipal Bond Fund on March 22,
1999.
- --------------------------------------------------------------------------------
Best Quarter: 6.71% 1Q1995 Worst Quarter: -5.52% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/1/93)
<S> <C> <C> <C>
One Group Michigan
Municipal Bond Fund 0.81% 4.62% 5.67%
---------------------------------------------------------------------
Lehman Brother Michigan
Municipal Bond
Index (1) 5.60% 6.48% *
---------------------------------------------------------------------
Lipper Michigan
Municipal Bond Funds
Index (3) 5.34% 5.28% 5.71%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS B(4) (since 2/1/93)
<S> <C> <C> <C>
One Group Michigan
Municipal Bond Fund -0.09% 4.88% 6.04%
---------------------------------------------------------------------
Lehman Brothers Michigan
Municipal Bond
Index (1) 6.50% 6.48% *
---------------------------------------------------------------------
Lipper Michigan
Municipal Bond Funds
Index (3) 5.34% 5.28% 5.71%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 2/1/93)
<S> <C> <C> <C>
One Group Michigan
Municipal Bond Fund 5.91% 5.72% 6.61%
---------------------------------------------------------------------
Lehman Brothers Michigan
Municipal Bond
Index (1) 6.50% 6.48% *
---------------------------------------------------------------------
Lipper Michigan
Municipal Bond Funds
Index (3) 5.34% 5.28% 5.71%
</TABLE>
(1) The Lehman Brothers Michigan Municipal Bond Index
is an unmanaged index generally representative of
the Michigan Municipal Bond Market. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the
performance of the One Group Michigan Municipal
Bond Fund reflects the deduction of these
services as well as the deduction of sales
charges on Class A shares and contingent deferred
sales charges on Class B shares.
(2) The performance data includes the performance of
the Pegasus Michigan Municipal Bond Fund for the
period before it was consolidated with the One
Group Michigan Municipal Bond Fund on March 22,
1999.
(3) The Lipper Michigan Municipal Bond Fund Index is
comprised of funds that limit their assets to
those securities that are exempt from taxation in
a specific state (double tax-exempt) or city
(triple tax-exempt).
(4) For periods prior to September 23, 1999, the
performance for Class B shares is based on Class
A share performance adjusted to reflect Class B
expenses and sales charges.
* Index did not exist.
<PAGE> 254
33
- ------------------------------------
Michigan Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them to the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.07% 1.72% 1.72% .72%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.17%) (.17%) (.17%) (.07%)
-------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares, and .65% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158
-------------------------------------------------------------------------------------
3 Years 759 825 525 525 525
-------------------------------------------------------------------------------------
5 Years 998 1,117 917 917 917
-------------------------------------------------------------------------------------
10 Years 1,682 1,844 1,844 2,016 2,016
-------------------------------------------------------------------------------------
<CAPTION>
CLASS I
---------------- ------------
<S> <C> <C>
1 Year (1) $ 66
-----------------------------------
3 Years 223
-----------------------------------------
5 Years 394
-----------------------------------------------
10 Years 888
-----------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 255
34
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ohio Municipal
Bond Fund
WHAT IS THE GOAL OF THE
OHIO MUNICIPAL BOND FUND?
The Fund seeks current income exempt from Federal income
tax and Ohio personal income tax, consistent with the
preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES OF
THE OHIO MUNICIPAL BOND
FUND? The Fund invests in municipal securities issued by or on
behalf of the state of Ohio and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on Ohio municipal
securities is exempt from Federal income tax and Ohio
personal income tax. A portion of the Fund's total
assets also may be invested in municipal securities
issued by other states and territories. The Fund's
average weighted maturity normally will range between
five and 20 years. Banc One Investment Advisors selects
securities for the Fund by analyzing both individual
securities and different market sectors. Taking a
long-term approach, Banc One Investment Advisors looks
for individual securities that it believes will perform
well over market cycles. The Ohio Municipal Bond Fund
spreads its holdings across various security types
within the municipal securities market. Banc One
Investment Advisors selects individual securities after
performing a risk/reward evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Fund's investment strategies, please read "More
About The Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE OHIO
MUNICIPAL BOND FUND? The main risks of investing in the Ohio Municipal Bond
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Ohio Municipal Bond Fund will change every day in
response to market conditions. You may lose money if you
invest in the Ohio Municipal Bond Fund.
<PAGE> 256
35
- ------------------------------------
MAIN RISKS
- --------------------------------
Non-Diversification. The Ohio Municipal Bond Fund is
"non-diversified". This means that the Fund may invest a
more significant portion of its assets in the securities
of a single issuer than can a "diversified" fund.
Non-diversification increases the risk of loss to the
Fund if an issuer fails to make interest or principal
payments or if the market value of a security declines.
Geographic Concentration. Because the Ohio Municipal
Bond Fund is not diversified and because it concentrates
its investments in the securities of issuers in Ohio,
certain factors including economic conditions,
constitutional amendments, legislative and executive
measures, and voter initiatives may have a
disproportionately negative effect on the Fund's
investments. For example, the Ohio economy relies to a
significant degree on manufacturing. As a result,
economic activity in Ohio tends to be cyclical, which
may affect the market value of Ohio Municipal Securities
or the ability of issuers to make timely payments of
interest and principal.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of a
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 257
36
- ------------------------------------
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Ohio Municipal Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth out
variations in a Fund's total
return and are not the same as
actual year-by- year results.
The average annual returns shown
on the Average Annual Total
Return Table DO include
applicable sales charges.
HOW HAS THE OHIO
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the Ohio Municipal Bond
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE OHIO
MUNICIPAL BOND FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year)(1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1992 8.54%
1993 11.52
1994 -4.71
1995 13.28
1996 4.15
1997 7.46
1998 5.64
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.77%.
- --------------------------------------------------------------------------------
Best Quarter: 3.93% 1Q1993 Worst
Quarter: -4.71 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C>
One Group Ohio Municipal Bond Fund 0.76% 3.84% 5.59%
--------------------------------------------------------------------------------------------
Lehman Brother 7 Year Municipal Bond
Index (1) 6.22% 5.79% 6.89%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (2) 5.62% 5.13% 6.26%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 1/14/94)
<S> <C> <C> <C>
One Group Ohio Municipal Bond Fund -0.21% 3.87%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (1) 6.22% 5.66%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (2) 5.62% 5.00%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 7/2/91)
<S> <C> <C> <C>
One Group Ohio Municipal Bond Fund 5.64% 5.00% 6.81%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index (1) 6.22% 5.79% 7.23%
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal Bond Funds
Index (2) 5.62% 5.13% 6.57%
</TABLE>
(1) The Lehman Brothers 7 Year Municipal Bond Index
is an unmanaged index comprised of investment
group municipal bonds with maturities close to
seven years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By
contrast, the performance of the One Group Ohio
Municipal Bond Fund reflects the deduction of
these services as well as the deduction of sales
charges on Class A shares and contingent deferred
sales charges on Class B shares.
(2) The Lipper Intermediate Municipal Bond Funds
Index consists of the equally weighted average
monthly return of the largest funds within the
universe of all funds in the category.
<PAGE> 258
37
- ------------------------------------
Ohio Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them to the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .60% .60% .60% .60%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.18% 1.83% 1.83% .83%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.31%) (.31%) (.31%) (.21%)
------------------------------------------------------------------------------------------------
Net Expenses .87% 1.52% 1.52% .62%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.87% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, and .62% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 535 $ 655 $ 155 $ 255 $ 155 $ 63
--------------------------------------------------------------------------------------------------------
3 Years 779 845 545 545 545 244
--------------------------------------------------------------------------------------------------------
5 Years 1,041 1,161 961 961 961 440
--------------------------------------------------------------------------------------------------------
10 Years 1,791 1,952 1,952 2,123 2,123 1,006
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $565
Class B (no redemption) $186
Class B (with redemption) $686
Class C (no redemption) $186
Class C (with redemption) $286
Class I $85
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 259
38
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY, INVESTMENTS, RISK & PERFORMANCE
West Virginia Municipal
Bond Fund
WHAT IS THE GOAL OF THE
WEST VIRGINIA MUNICIPAL
BOND FUND? The Fund seeks current income exempt from Federal income
tax and West Virginia personal income tax, consistent
with the preservation of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES OF
THE WEST VIRGINIA
MUNICIPAL BOND FUND? The Fund invests in municipal securities issued by or on
behalf of the state of West Virginia and its respective
authorities, political subdivisions, agencies and
instrumentalities. The interest paid on West Virginia
municipal securities is exempt from Federal income tax
and West Virginia personal income tax. A portion of the
Fund's total assets also may be invested in municipal
securities issued by other states and territories. The
Fund's average weighted maturity normally will range
between five and 20 years. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors.
Taking a long-term approach, Banc One Investment
Advisors looks for individual securities that it
believes will perform well over market cycles. The West
Virginia Municipal Bond Fund spreads its holdings across
various security types within the municipal securities
market. Banc One Investment Advisors selects individual
securities after performing a risk/reward evaluation of
interest rate risk, credit risk, and the complex legal
and technical structure of the transaction. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income. Any capital gains distributed by the
Fund may be taxable.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE WEST
VIRGINIA MUNICIPAL BOND
FUND? The main risks of investing in the West Virginia
Municipal Bond Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of the West Virginia Municipal Bond Fund
will change every day in response to market conditions.
You may lose money if you invest in the West Virginia
Municipal Bond Fund.
MAIN RISKS
- --------------------------
Non-Diversification. The West Virginia Municipal Bond
Fund is "non-diversified". This means that the Fund may
invest a more significant portion of its assets in the
securities of a single issuer than can a "diversified"
fund. Non-diversification increases the risk of loss to
the Fund if an issuer fails to make interest or
principal payments or if the market value of a security
declines.
Geographic Concentration. Because the West Virginia
Municipal Bond Fund is not diversified and because it
concentrates its investments in the securities of
issuers in West Virginia, certain factors including
economic conditions, constitutional amendments,
legislative and executive measures, and voter
initiatives may have a disproportionately negative
effect on the Fund's investments. For example, coal
mining and related industries are an important part of
the West Virginia economy. Increased government
regulation and a reduced demand for coal has adversely
affected that industry. West Virginia's unemployment
rate is above the national average.
Interest Rate Risk. The Fund invests mainly in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment
<PAGE> 260
39
- ------------------------------------
West Virginia Municipal Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
will decline in value if the value of the Fund's
investments decrease. Securities with greater interest
rate sensitivity and longer maturities tend to produce
higher yields, but are subject to greater fluctuations
in value. Usually, changes in the value of fixed income
securities will not affect cash income generated, but
may affect the value of your investment.
Derivatives. The Fund may invest in securities that are
considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of the Fund. Lower
credit quality also may affect liquidity and make it
difficult for the Fund to sell the security.
Portfolio Quality. The Fund may invest in municipal
securities that are rated in the lowest investment
grade. Even though such securities are generally
considered investment grade securities, they are
considered to have speculative characteristics. Issuers
of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade
securities.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE WEST VIRGINIA
MUNICIPAL BOND FUND
PERFORMED? By showing the variability of the West Virginia
Municipal Bond Fund's performance from year to year, the
chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF
THE WEST VIRGINIA MUNICIPAL BOND FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE
FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 7.54
1990 7.16
1991 9.01
1992 6.93
1993 7.73
1994 -0.12
1995 10.66
1996 4.71
1997 7.87
1998 5.87
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-1.94%. The West Virginia Municipal Bond Fund
commenced operations on January 20, 1997
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines, and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for period prior to the Fund's
commencement of operations as adjusted to reflect
the expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- -----------------------------------------------------------------------------
Best Quarter: 4.06% 1Q1995 Worst Quarter: -1.26% 4Q1994
- -------------------------------------------------------------------------------
<PAGE> 261
40
FUND SUMMARY
West Virginia Municipal Bond Fund
ONE GROUP(R)
- ------------------------------------
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS A (since 12/31/83)
<S> <C> <C> <C> <C>
One Group West Virginia
Municipal Bond Fund 0.76% 4.57% 5.97% 6.81%
--------------------------------------------------------------------------------------------
Lehman Brother 7 Year Municipal
Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS B 1 YEAR 5 YEARS 10 YEARS LIFE
(since 12/31/83)
<S> <C> <C> <C> <C>
One Group West Virginia
Municipal Bond Fund 0.06% 4.53% 5.78% 6.45%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
(since 12/31/83)
<S> <C> <C> <C> <C>
One Group West Virginia
Municipal Bond Fund 5.87% 5.74% 6.70% 7.37%
--------------------------------------------------------------------------------------------
Lehman Brothers 7 Year
Municipal Bond Index (1) 6.22% 5.79% * *
--------------------------------------------------------------------------------------------
Lipper Intermediate Municipal
Bond Funds Index (3) 5.62% 5.13% 6.91% *
</TABLE>
(1) The Lehman Brothers 7 Year Municipal Bond Index
is an unmanaged index comprised of investment
grade municipal bonds with maturities close to
seven years. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as management fees. By
contrast, the performance of the One Group West
Virginia Municipal Bond Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B
shares.
(2) The West Virginia Municipal Bond Fund commenced
operations on January 20, 1997 subsequent to the
transfer of assets from a common trust fund with
materially equivalent investment objectives,
policies, guidelines and restrictions as the
Fund. The quoted performance of the Fund includes
the performance of the common trust fund for
period prior to the Fund's commencement of
operations as adjusted to reflect the expenses
associated with the Fund. The common trust fund
was not registered with the SEC and was not
subject to the investment restrictions,
limitations and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
(3) The Lipper Intermediate Municipal Bond Funds
Index consists of the equally weighted average
monthly return of the largest funds within the
universe of all funds in the category.
* Index did not exist.
<PAGE> 262
41
- ------------------------------------
West Virginia Municipal Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 4.50% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .45% .45% .45% .45%
-------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
-------------------------------------------------------------------------------------------------
Other Expenses .27% .27% .27% .27%
-------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.07% 1.72% 1.72% .72%
-------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (4) (.17%) (.17%) (.17%) (.07%)
-------------------------------------------------------------------------------------------------
Net Expenses .90% 1.55% 1.55% .65%
-------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense Information has been restated to reflect
current fees.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.90% for Class A shares, 1.55% for Class B
shares, 1.55% for Class C shares, and .65% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 538 $ 658 $ 158 $ 258 $ 158 $ 66
--------------------------------------------------------------------------------------------------------
3 Years 759 825 525 525 525 223
--------------------------------------------------------------------------------------------------------
5 Years 998 1,117 917 917 917 394
--------------------------------------------------------------------------------------------------------
10 Years 1,682 1,844 1,844 2,016 2,016 888
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $554
Class B (no redemption) $175
Class B (with redemption) $675
Class C (no redemption) $175
Class C (with redemption) $275
Class I $74
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 263
42
ONE GROUP(R)
- ------------------------------------
[PHOTO]
More About The Funds
Each of the ten funds described in this Prospectus is a
series of One Group Mutual Funds and is managed by Banc
One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of the Funds" and the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES The mutual funds described in this Prospectus are
designed to produce income exempt from Federal and/or
state income tax. The principal investment strategies
that are used to meet each Fund's investment objective
are described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are
also described below.
FUNDAMENTAL POLICIES
Each Fund's investment strategy may
involve "fundamental policies." A policy
is fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
also may use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND. The Fund
invests at least 80% of its net assets in investment
grade municipal securities, as well as mortgage-backed
securities and restricted securities. The securities in
which the Fund invests may have fixed rates of return or
floating or variable rates.
- As a matter of fundamental policy, the Fund invests as
least 65% of its total assets in bonds.
- The Fund will, from time to time, invest more than 25%
of its net assets in municipal housing authority
obligations.
- Up to 20% of the Fund's total assets may be held in
cash and cash equivalents.
- The Fund's average weighted maturity normally will be
three years or less.
- -----
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND. The Fund
invests at least 80% of its net assets in investment
grade municipal securities, including restricted
securities. The securities in which the Fund invests may
have fixed rates of return or floating or variable
rates.
- As a matter of fundamental policy, the Fund invests at
least 65% of its total assets in bonds.
- The Fund's average weighted maturity normally will
range between three and 10 years.
<PAGE> 264
43
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual bonds in a fund calculated so
as to count most heavily those securities
with the highest dollar value. Average
maturity is important to bond investors as
an indication of a fund's sensitivity to
changes in interest rates. The longer the
average maturity, the more fluctuation in
share price you can expect. The terms
"Intermediate" and "Short-Term" in a
fund's name refer to the average maturity
the fund maintains.
- -----
ONE GROUP TAX-FREE BOND FUND. The Fund invests at least
80% of its net assets in investment grade municipal
securities. The securities in which the Fund invests may
have fixed rates of return or floating or variable
rates.
- As a matter of fundamental policy, the Fund invests as
least 65% of its total assets in bonds.
- Up to 20% of the Fund's total assets may be held in
cash and cash equivalents.
- The Fund may invest in securities without regard to
maturity.
- -----
ONE GROUP MUNICIPAL INCOME FUND. The Fund invests at
least 80% of its net assets in investment grade
municipal securities, as well as mortgage-backed
securities and restricted securities. The securities in
which the Fund invests may have fixed rates of return or
floating or variable rates.
- As a matter of fundamental policy, the Fund invests as
least 65% of its total assets in bonds.
- As a matter of fundamental policy, the Fund will not
invest more than 25% of its net assets:
(i) in securities within a single industry; or
(ii) in securities of governmental units or issuers in
the same state, territory, or possession.
However, from time to time, the Fund will invest
more than 25% of its net assets in municipal
housing authority obligations.
- The Fund's average weighted maturity will range from
five to 15 years, although the Fund may shorten its
average weighted maturity to as little as two years if
appropriate for temporary defensive purposes.
- -----
ONE GROUP ARIZONA MUNICIPAL BOND FUND. The Fund invests
at least 80% of its total assets in municipal securities
issued by or on behalf of the State of Arizona and its
respective authorities, political subdivisions, agencies
and instrumentalities. This is a fundamental policy.
- The Fund also may invest up to 20% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase Arizona municipal securities
only if it receives assurances from attorneys for the
issuer of the securities that the interest payable on
the securities is exempt from Federal income tax and
Arizona personal income tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- The Fund's average weighted maturity normally will be
between five and 20 years, although the Fund may
invest in securities with any maturity.
<PAGE> 265
44
- -----
ONE GROUP KENTUCKY MUNICIPAL BOND FUND. The Fund invests
at least 80% of its total assets in municipal securities
that are exempt from Federal income tax. Alternatively,
the Fund invests its assets so that 80% of its annual
interest income is exempt from Federal income tax. The
Fund invests at least 65% of its total assets in
securities issued by or on behalf of the State of
Kentucky and its respective authorities, political
subdivisions, agencies and instrumentalities. These are
fundamental policies.
- The Fund also may invest up to 35% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase Kentucky municipal securities
only if it receives assurances from attorneys for the
issuer of the securities that the interest payable on
the securities is exempt from Federal income tax and
Kentucky personal income tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- The Fund's average weighted maturity normally will be
between five and 20 years, although the Fund may
invest in securities with any maturity.
- -----
ONE GROUP LOUISIANA MUNICIPAL BOND FUND. The Fund
invests at least 80% of its total assets in municipal
securities issued by or on behalf of the State of
Louisiana and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a
fundamental policy.
- The Fund also may invest up to 20% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase Louisiana municipal securities
only if it receives assurances from attorneys for the
issuer of the securities that the interest payable on
the securities is exempt from Federal income tax and
Louisiana personal income tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- The Fund's average weighted maturity normally will be
between five and 20 years, although the Fund may
invest in securities with any maturity.
- -----
ONE GROUP MICHIGAN MUNICIPAL BOND FUND. The Fund invests
at least 80% of its total assets in municipal securities
issued by or on behalf of the State of Michigan and its
respective authorities, political subdivisions, agencies
and instrumentalities. This is a fundamental policy.
- The Fund also may invest up to 20% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase Michigan municipal securities
only if it receives assurances from attorneys for the
issuer of the securities that the interest payable on
the securities is exempt from Federal income tax and
Michigan personal income tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- The Fund may invest in securities without regard to
any maturity.
<PAGE> 266
45
- The Fund's average weighted maturity normally will be
between five and 20 years, although the Fund may
invest in securities with any maturity.
- -----
ONE GROUP OHIO MUNICIPAL BOND FUND. The Fund invests at
least 80% of its total assets in municipal securities
issued by or on behalf of the State of Ohio and its
respective authorities, political subdivisions, agencies
and instrumentalities. This is a fundamental policy.
- The Fund also may invest up to 20% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase Ohio municipal securities only
if it receives assurances from attorneys for the
issuer of the securities that the interest payable on
the securities is exempt from Federal income tax and
Ohio personal income tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- -----
ONE GROUP WEST VIRGINIA MUNICIPAL BOND FUND. The Fund
invests at least 80% of its total assets in municipal
securities issued by or on behalf of the State of West
Virginia and its respective authorities, political
subdivisions, agencies and instrumentalities. This is a
fundamental policy.
- The Fund also may invest up to 20% of its total assets
in municipal securities of other states and
territories.
- The Fund will purchase West Virginia municipal
securities only if it receives assurances from
attorneys for the issuer of the securities that the
interest payable on the securities is exempt from
Federal income tax and West Virginia personal income
tax.
- The securities in which the Fund invests may have
fixed rates of return or floating or variable rates.
- The Fund's average weighted maturity normally will be
between five and 20 years, although the Fund may
invest in securities with any maturity.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The main risks of investing in the Funds are described
in the Fund Summaries. Additional risk information is
described below.
- -----
DERIVATIVES. The Funds may invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of
derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use
such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
<PAGE> 267
46
PREPAYMENT AND CALL RISK: The Funds may invest a portion
of their assets in mortgage-backed securities. These
securities are subject to prepayment and call risk. The
issuers of mortgage-backed and other callable securities
may be able to repay principal in advance, especially
when interest rates fall. Changes in prepayment rates
can affect the return on investment and yield of
mortgage-backed securities. When mortgages are prepaid,
a Fund may have to reinvest in securities with a lower
yield. A Fund also may fail to recover premiums paid for
the securities, resulting in unexpected capital loss.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES Each Fund's investment objective and the following
investment policies summarized below are fundamental. In
addition to the fundamental policies mentioned in
PRINCIPAL INVESTMENT STRATEGIES, the following
fundamental policies apply to each Fund as specified.
The full text of the fundamental policies can be found
in the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES FOR
SPECIFIC FUNDS The Intermediate Tax-Free Bond Fund and the Municipal
Income Fund may not:
1. Purchase the securities of an issuer if as a result
more than 5% of its total assets would be invested in
the securities of that issuer, or the Fund would own
more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued
or guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements
involving these securities. This restriction applies
to 75% of a Fund's total assets.
2. Concentrate in a particular industry or group of
industries. This does not include municipal
securities or governmental guarantees of municipal
securities, and with respect to the Municipal Income
Fund, housing authority obligations. Private activity
bonds that are backed only by the assets and revenues
of a non-governmental issuer are not municipal
securities for purposes of this restriction.
The Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Louisiana Municipal Bond Fund,
the Ohio Municipal Bond Fund, the Kentucky Municipal
Bond Fund, and the Michigan Municipal Bond Fund may not:
1. Purchase the securities of an issuer if as a result
more than 25% of its total assets would be invested
in the securities of that issuer. This restriction
applies with respect to 50% of a Fund's total assets.
With respect to the remaining 50% of its total
assets, a Fund may not purchase the securities of an
issuer if as a result more than 5% of its total
assets would be invested in the securities of that
issuer. This restriction does not apply to securities
issued or guaranteed by the United States, its
agencies, or instrumentalities, securities of
regulated investment companies, and repurchase
agreements involving such securities.
<PAGE> 268
47
2. Concentrate their investment in the securities of one
or more issuers conducting their principal business
in a particular industry or group of industries. This
does not include:
- Obligations issued or guaranteed by the United
States government or its agencies and
instrumentalities and repurchase agreements
involving such securities; and
- Municipal securities. With respect to the Arizona
Municipal Bond Fund and the West Virginia Municipal
Bond Fund, private activity bonds that are backed
only by the assets and revenues of a
non-governmental issuer are not municipal securities
for purposes of this restriction.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES FOR
ALL FUNDS None of the Funds may make loans, except that a Fund may
(i) purchase or hold debt instruments in accordance with
its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities
lending.
Additional investment policies are set forth in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to debt securities (i.e., bonds). Generally, ratings are
divided into two main categories: "Investment Grade
Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating
agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include
securities that, in the opinion of the rating agencies,
are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet
the rating criteria described below.
- Municipal Securities that are bonds must be rated as
investment grade.
- Other securities such as taxable and tax-exempt
commercial paper, notes, and variable demand
obligations must be rated in one of the two highest
investment grade categories.
- The Louisiana Municipal Bond Fund also may invest in
short-term tax-exempt municipal securities rated at
least MIG3 (VMIG3) by Moody's or SP-2 by S&P. These
securities may have speculative characteristics.
If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable
quality to rated securities. Banc One Investment
Advisors will look at a security's rating at the time of
investment.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
<PAGE> 269
48
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE
POSITION For liquidity and to respond to unusual market
conditions, the Funds may invest all or most of their
assets in cash and CASH EQUIVALENTS (see below) for
temporary defensive purposes. These investments may
result in a lower yield than lower-quality or longer
term investments and may prevent the Funds from meeting
their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
While the Funds are engaged in a temporary defensive
position, they will not be pursuing their investment
objectives. Therefore, the Funds will pursue a temporary
defensive position only when market conditions warrant.
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER The Funds may engage in active and frequent trading of
portfolio securities to achieve their principal
investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds and may result in
additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights. To
the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at
ordinary income tax rates.
<PAGE> 270
49
ONE GROUP(R)
- ------------------------------------
[PHOTO]
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES?- Purchases may be made on any business day. This
includes any day that the Fund is open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close
before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the
following business day.
- Purchase orders may be cancelled if the Fund's
Custodian, State Street Bank and Trust Company, does
not receive "federal funds" by 4:00 p.m. ET (i) on the
business day after the order is placed if you are
buying Class I shares, and (ii) on the third business
day if you are purchasing Class A, Class B or Class C
shares.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
WHAT KIND OF SHARES CAN I
BUY? One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to
the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
<PAGE> 271
50
- When deciding what class of shares to buy, you should
consider the amount of your investment, the length of
time you intend to hold the shares, and the sales
charges and expenses applicable to each class of
shares. If you intend to hold your shares for seven or
more years, Class A shares may be more appropriate for
you. If you intend to hold your shares for less than
seven years, you may want to consider Class B or Class
C shares. Sales charges are discussed in the section
of this prospectus entitled SALES CHARGES.
HOW MUCH DO SHARES COST?- Shares are sold at net asset value ("NAV") plus a
sales charge, if any.
- Each class of shares in each Fund has a different NAV.
This is primarily because each class has different
distribution expenses.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4
p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund
($100 for employees of Bank One Corporation and its
affiliates).
- Subsequent investments must be at least $25 per
Fund.
- You may purchase no more than $249,999 of Class B
shares. This is because Class A shares offer a
reduced sales charge on purchases of $250,000 or
more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY?
provides information that can help you choose the
appropriate share class.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
4. Send the completed application and a personal check
(unless you choose to pay by wire) payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does
not accept "third party checks." Checks made payable
to any individual and endorsed to One Group are
considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
<PAGE> 272
51
- - State Street Bank and Trust Company; or
- - The specific Fund in which you are investing.
Checks made payable to any party other than those
listed above will be returned to the address provided
on the account application.
6. If you redeem shares purchased under the Systematic
Investment Plan (see below) or that were purchased by
check, One Group will delay forwarding you redemption
proceeds until payment has been collected from your
bank. One Group generally receives payment within ten
(10) calendar days of purchase.
7. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-800-480-4111.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-800-480-4111 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP 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
<PAGE> 273
52
CAN I AUTOMATICALLY
INVEST ON A SYSTEMATIC
BASIS? Yes. After your Account is established, you may purchase
additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account.
The minimum initial investment is still $1,000 per Fund,
but minimum automatic additions are only $25 per Fund.
The One Group Services Company may waive these minimums.
To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the
Account Application Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future. However, your
bank may impose a charge for debiting your bank
account.
- You may revoke your right to make systematic
investments by calling The One Group Services Company
at 1-800-480-4111 or by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CONVERSION FEATURE Your Class B shares automatically convert to Class A
shares after eight years (measured from the end of the
month in which they were purchased).
- After conversion, your shares will be subject to the
lower distribution and shareholder servicing fees
charged on Class A shares.
- You will not be assessed any sales charges or fees for
conversion of shares, nor will you be subject to any
Federal income tax.
- Because the share price of the Class A shares may be
higher than that of the Class B shares at the time of
conversion, you may receive fewer Class A shares;
however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for
Class B shares of another, the time you held the
shares in each Fund will be added together.
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group.
Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own
resources. The tables below show the sales charges for
each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder
Servicing Agent.
<PAGE> 274
53
CLASS A SHARES
- -------------------------
This table shows the amount of sales charge you pay and
the commissions paid to Shareholder Servicing Agents.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 4.50% 4.71% 4.05%
-------------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
-------------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
-------------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
-------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
If you buy Class A shares of the Short-Term Municipal
Bond Fund, the following table shows the amount of sales
charge and the commissions paid to Shareholder Servicing
Agents.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT SALES CHARGE SALES CHARGE COMMISSION
OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $100,000 3.00% 3.09% 2.07%
-------------------------------------------------------------------------------
$100,000-$249,999 2.50% 2.56% 2.18%
-------------------------------------------------------------------------------
$250,000-$499,999 2.00% 2.04% 1.64%
-------------------------------------------------------------------------------
$500,000-$999,999 1.50% 1.52% 1.20%
-------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares
and are not assessed a sales charge at the time of
purchase, you will be charged the equivalent of 1% of
the purchase price if you redeem any or all of the
Class A shares within one year of purchase and 0.50%
of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company
receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
- -------------------------
Class B shares are offered at NAV, without any up-front
sales charges. However, if you redeem these shares
within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC")
according to the following schedule:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE 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> 275
54
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>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 3.00%
-----------------------------------
1-2 3.00%
-----------------------------------
2-3 2.00%
-----------------------------------
3-4 1.00%
-----------------------------------
MORE THAN 4 0.00%
-----------------------------------
</TABLE>
The One Group Services Company pays a commission of
4.00% of the original purchase price to Shareholder
Servicing Agents who sell Class B shares of all the
Funds except for the Short-Term Municipal Bond Fund.
Shareholder Servicing Agents receive a commission of
2.75% of the purchase price of Class B shares of the
Short-Term Municipal Bond Fund.
CLASS C SHARES
- -------------------------
Class C shares are offered at NAV, without any up-front
sales charge. However, if you redeem your shares within
one year of the purchase date, you will be assessed a
CDSC as follows:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
-----------------------------------
AFTER FIRST
YEAR NONE
-----------------------------------
</TABLE>
Shareholder Servicing Agents selling Class C shares
receive a commission of 1.00% of the original purchase
price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given
month were made on the first day of the month.
- The CDSC is based on the current market value or the
original cost of the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a
CDSC assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- To keep your CDSC as low as possible, the Fund first
will redeem any shares in your account that carry no
CDSC, starting with Class A Shares. After that, the
Fund will redeem the shares acquired through dividend
reinvestment followed by shares you have held for the
longest time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an
unrelated mutual fund for Class B or Class C shares of
One Group in connection with a fund reorganization,
the CDSC applicable to your original shares (including
the period of time you have held those shares) will be
applied to One Group shares you receive in the
reorganization.
<PAGE> 276
55
12b-1 FEES
- -------------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees. These fees are called "12b-1 fees."
12b-1 fees are paid by One Group to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average
daily net assets of the Fund, which is currently
being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00%
of the average daily net assets of the Fund, which is
currently being waived to .90%. This will cause
expenses for Class B and Class C shares to be higher
and dividends to be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help The One Group
Services Company sell Class B and Class C shares without
an "up-front" sales charge by financing the costs of
advancing brokerage commissions and other expenses paid
to Shareholder Servicing Agents.
The One Group Services Company may use up to .25% of the
fees for shareholder servicing and up to .75% for
distribution. During the last fiscal year, The One Group
Services Company received 12b-1 fees totaling .25% and
.90% of the average daily net assets of Class A and
Class B shares, respectively.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor).
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS
AND WAIVERS
REDUCING YOUR CLASS A
SALES CHARGES There are several ways you can reduce
the sales charges you pay on Class A shares:
- -------------------------
1. Right of Accumulation: You may add the market value
of any Class A, Class B or Class C shares of a Fund
(except a money market fund) that you (and your
spouse and minor children) already own to the amount
of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also
may take advantage of this option.
2. Letter of Intent: With an initial investment of
$2,000, you may purchase Class A shares of one or
more funds over the next 13 months and pay the same
sales charge that you would have paid if all shares
were purchased at once. A percentage of your
investment will be held in escrow until the full
amount covered by the Letter of Intent has been
invested.
<PAGE> 277
56
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,
or custodial capacity 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.
<PAGE> 278
57
6. Bought with proceeds from the sale of shares of a
mutual fund, including Class A shares of a One Group
Fund, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or
distribution.
7. Bought with assets of One Group.
8. Bought in connection with plans of reorganizations of
a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B
SALES CHARGE No sales charge is imposed on redemptions of Class B
shares of the Fund:
- -------------------------
1. If you withdraw, no more than 10% of the value of
your account in a 12 month period. Shares received
from dividend and capital gains reinvestment are
included in calculating amounts eligible for this
waiver. You need to participate 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
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I Pay a Sales Charge on an Exchange?
WAIVER OF THE CLASS C
SALES CHARGE No sales charge is imposed on redemptions of Class C
shares of the Fund:
- -------------------------
1. If you withdraw no more than 10% of the value of your
account. Shares received from dividend and capital
gains reinvestment are included in calculating
amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
<PAGE> 279
58
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I Pay a Sales Charge on an Exchange?
7. If The One Group Services Company receives notice
before you invest indicating that your Shareholder
Servicing Agent, due to the type of account that you
have, is waiving its commission.
To take advantage of any of these sales charge waivers,
you must qualify for such waiver in advance. To see if
you qualify, contact The One Group Services Company at
1-800-480-4111 or your Shareholder Servicing Agent.
These waivers will not continue indefinitely and may be
discontinued at any time without notice.
- --------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I
shares of that Fund or for Class A or Class I shares
of another One Group Fund, but only if you are
eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B
shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C
shares of another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by 4:00 p.m., ET.
- You have provided One Group with all of the
information necessary to process the exchange.
<PAGE> 280
59
- 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 that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
<PAGE> 281
60
- --------------------------------------------------------------------------------
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day
that the Fund is open for business.
- Redemption requests received by The One Group Services
Company before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
HOW DO I REDEEM
SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
ONE GROUP
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
- You may request redemption forms by calling The One
Group Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or
less;
2. the redemption is payable to the shareholder of
record;
3. the redemption check is mailed to the shareholder
at the record address; or
4. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- Your redemption proceeds will ordinarily be paid
within seven days after receipt of the redemption
request. If you have wire instructions on file, the
Funds will attempt to honor requests for same day
payment if the request is received before 4:00 p.m.
ET. If redemption requests are received after 4:00
p.m. ET, the Funds will attempt to wire payment the
next business day.
WHAT WILL MY SHARES BE
WORTH? - If you own Class A and Class I shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV.
- If you own Class B or Class C shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
<PAGE> 282
61
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-800-480-4111 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the
Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy
additional Class A shares while participating in a
Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than
10% of your account value annually. Shares received
from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable
Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually.
Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales
charge.
3. If you are age 70 1/2, you may elect to receive
payments to the extent that the payment represents
a minimum required distribution from a One Group
IRA or other One Group 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.
<PAGE> 283
62
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $800 that are not participating in
a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account
fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. The Funds generally declare dividends each
business day. Dividends are distributed on the first
business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
<PAGE> 284
63
The Funds pay dividends and distributions on a per-share
basis. This means that the value of your shares will be
reduced by the amount of the payment. If you purchase
shares shortly before the record date for a dividend or
the distribution of capital gains, you will pay the full
price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than
those payable on other classes of shares. This is
because Class A, Class B and Class C shares have higher
distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call The One Group Services Company at
1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B
shares received as dividends and capital gains
distributions will be accounted for separately. Each
time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of
the Class B shares in the sub-account will also convert
to Class A shares. (See "Conversion Feature.")
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in
cash.
FEDERAL TAXATION
OF DISTRIBUTIONS
- -------------------------
EXEMPT-INTEREST DIVIDENDS. If, at the close of each
quarter of its taxable year, at least 50% of the value
of a Fund's assets consists of obligations the interest
on which is excludable from gross income, the Fund may
pay "exempt-interest dividends" to you. Generally,
exempt-interest dividends are excludable from gross
income. However:
1. If you receive Social Security or Railroad
Retirement benefits, you may be taxed on a portion
of such benefits if you receive exempt-interest
dividends from the Funds.
2. Receipt of exempt-interest dividends may result in
liability for Federal alternative minimum tax and
for state and local taxes, both for individual and
corporate shareholders.
<PAGE> 285
64
Interest on Private Activity Bonds. The Municipal Income
Fund, the Short-Term Municipal Bond Fund, the Arizona
Municipal Bond Fund, the West Virginia Municipal Bond
Fund, the Kentucky Municipal Bond Fund, the Louisiana
Municipal Bond Fund, the Ohio Municipal Bond Fund and
the Michigan Municipal Bond Fund may invest as much as
100% of their assets in municipal securities issued to
finance private activities, the interest on which is a
tax preference item for purposes of the Federal
alternative minimum tax ("Private Activity Bonds"). The
Intermediate Tax-Free Bond Fund and the Tax-Free Bond
Fund may invest as much as 20% of their assets in such
Private Activity Bonds. As a result, Fund shareholders
who are subject to the Federal alternative minimum tax
may have all or a portion of their income from those
Funds subject to Federal income tax. Additionally,
corporate shareholders will be required to take the
interest on municipal securities (including municipal
securities of each Fund's respective state) into account
in determining their alternative minimum taxable income.
Persons who are substantial users of facilities financed
by Private Activity Bonds or who are "related persons"
of such substantial users should consult their tax
advisors before investing in the Funds.
Investment Income and Capital Gains Dividends. Each Fund
will distribute substantially all of its net investment
income (including, for this purpose, the excess of net
short-term capital gains over net long-term capital
losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital
losses) on at least an annual basis. Dividends you
receive from a Fund, other than "exempt-interest
dividends," will be taxable to you, whether reinvested
or received in cash. Dividends from a Fund's net
investment income, if any, will be taxable as ordinary
income and distributions from a Fund's long-term capital
gains will be taxable to you as such, regardless of how
long you have held the shares. Distributions are taxable
to you even if they are paid from income or gains earned
by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid the previous December.
State and Local Taxation of Distributions. Dividends
that are derived from the Funds' investments in U.S.
government obligations may not be entitled to the
exemptions from state and local taxes that would be
available if you purchased U.S. government obligations
directly.
The funds will notify you annually of the percentage of
income and distributions derived from U.S. government
obligations. Unless otherwise discussed below,
investment income and capital gains dividends may be
subject to state and local taxes.
Louisiana Taxes. Distributions from the Louisiana
Municipal Bond Fund, which are derived from interest on
tax-exempt obligations of the State of Louisiana or its
political subdivisions and certain obligations of the
United States or its territories, are exempt from
Louisiana income tax.
<PAGE> 286
65
Arizona Taxes. Exempt-interest dividends from the
Arizona Municipal Bond Fund, which are derived from
interest on tax-exempt obligations of the State of
Arizona and its political subdivisions and certain
obligations of the United States or its territories are
exempt from Arizona income tax. Other distributions from
the Fund, including those related to long-term and
short-term capital gains, will be subject to Arizona
income tax. Arizona law does not permit a deduction for
interest paid or accrued on indebtedness incurred or
continued to purchase or carry obligations, the interest
on which is exempt from Arizona income tax.
West Virginia Taxes. Distributions from the West
Virginia Municipal Bond Fund which are derived from
interest or dividends on obligations or securities of a
West Virginia state or local municipal governmental body
generally are exempt from West Virginia income tax. In
addition, you will not pay that tax on the portion of
your income from the Fund which represents interest or
dividends received on obligations or securities of the
United States and some of its authorities, commissions
or instrumentalities.
Kentucky Taxes. Dividends received from the Kentucky
Municipal Bond Fund which are derived from interest on
Kentucky Municipal Securities are exempt from the
Kentucky individual income tax. Dividends paid from
interest earned on securities that are merely guaranteed
by the Federal government, repurchase agreements
collateralized by U.S. government obligations, or from
interest earned on obligations of other states are not
exempt from Kentucky individual income tax. Any
distributions of net short-term and net long-term
capital gain earned by the Fund are includable in each
Shareholder's Kentucky adjusted gross income as dividend
income and long-term capital gain, respectively, and are
both taxed at ordinary income tax rates.
Ohio Taxes. Dividends received from the Ohio Municipal
Bond Fund which are derived from interest on Ohio
Municipal Securities are exempt from the Ohio personal
income tax. In addition, gain from the sale or transfer
of certain Ohio Municipal Securities is also exempt from
Ohio income tax. Certain Ohio municipalities may have
retained the right to tax dividends from the Fund.
Corporate investors must include the Fund shares in the
corporation's tax base for purposes of the Ohio
franchise tax net worth computation, but not for the net
income computation.
Michigan Taxes. Distributions received from the Michigan
Municipal Bond Fund are exempt from Michigan personal
income tax to the extent they are derived from interest
on tax-exempt securities, under the current position of
the Michigan Department of Treasury. Such distributions,
if received in connection with a shareholder's business
activity, may, however, be subject to Michigan single
business tax. For Michigan personal income tax, and
single business tax purposes, Fund distributions
attributable to any source other than interest on
tax-exempt securities will be fully taxable. Fund
distributions may be subject to the uniform city income
tax imposed by certain Michigan cities.
Information in the preceding paragraphs in based on the
current law as well as current policies of the various
state Departments of Taxation, all of which may change.
<PAGE> 287
66
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111, or visit www.onegroup.com.
REPORTING
- -------------------------
In September and March you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 288
67
(Intentionally Left Blank)
<PAGE> 289
68
[PHOTO]
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to One Group Mutual Funds
since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual
funds and individual corporate, charitable, and
retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary
of Bank One Corporation, managed over $126 billion in
assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each Fund. For the most recent fiscal year, the Funds
paid advisory fees at the following rates.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Short-Term Municipal Income Fund .31%
----------------------------------------------------------------------------------
One Group(R) Intermediate Tax-Free Bond Fund .39%
----------------------------------------------------------------------------------
One Group(R) Tax-Free Bond Fund* .40%
----------------------------------------------------------------------------------
One Group(R) Municipal Income Fund .35%
----------------------------------------------------------------------------------
One Group(R) Arizona Municipal Bond Fund .41%
----------------------------------------------------------------------------------
One Group(R) Kentucky Municipal Bond Fund .36%
----------------------------------------------------------------------------------
One Group(R) Louisiana Municipal Bond Fund .38%
----------------------------------------------------------------------------------
One Group(R) Michigan Municipal Bond Fund* .39%
----------------------------------------------------------------------------------
One Group(R) Ohio Municipal Bond Fund .33%
----------------------------------------------------------------------------------
One Group(R) West Virginia Municipal Bond Fund .37%
----------------------------------------------------------------------------------
</TABLE>
(*) In March 1999, the Pegasus Funds and One Group
Mutual Funds merged. The investment advisory fee
includes fees paid to First Chicago NBD
Investment Management Company, an affiliate of
Banc One Investment Advisors, as advisor to the
Pegasus Funds.
<PAGE> 290
69
- -----------------------------------------------------------------------------
THE FUND
MANAGERS The Fund is managed by a team of portfolio managers,
research analysts and fixed income traders. The team
works together to establish general duration and sector
strategies for the Fund. Each team member makes
recommendations about securities in the Fund. The
research analysts and trading personnel provide
individual security and sector recommendations, while
the portfolio managers select and allocate individual
securities in a manner designed to meet the investment
objectives of the Fund.
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 291
70
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Short-Term Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
FOR THE
SIX MONTHS MAY 4,
ENDED 1998 TO
JUNE 30, DECEMBER 31,
CLASS A 1999(E) 1998(A)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.19 0.22
Net realized and unrealized gains (losses) from
investments and futures (0.15) 0.16
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 0.04 0.38
- ------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.18) (0.23)
Total Distributions (0.18) (0.23)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.01 $ 10.15
- ------------------------------------------------------------------------------------------------
Total Return 0.37%(B) 3.89%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 1,843 $ 559
Ratio of expenses to average net assets 0.86%(C) 0.86%(C)
Ratio of net investment income to average net assets 3.48%(C) 3.53%(C)
Ratio of expenses to average net assets* 1.16%(C) 0.99%(C)
Ratio of net investment income to average net assets* 3.18%(C) 3.40%(C)
Portfolio Turnover(D) 74.84% 32.23%
</TABLE>
* 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 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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Short Municipal Bond Fund
became One Group Short-Term Municipal Bond Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Short Municipal Bond
Fund.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS MAY 4,
ENDED 1998 TO
JUNE 30, DECEMBER 31,
CLASS B 1999(E) 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 10.00
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.15 0.13
Net realized and unrealized gains (losses) from
investments and futures (0.14) 0.21
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 0.01 0.34
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.15) (0.15)
Total Distributions (0.15) (0.15)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.19
- -------------------------------------------------------------------------------------------------
Total Return 0.11%(B) 3.48%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 226 $ 112
Ratio of expenses to average net assets 1.55%(C) 1.61%(C)
Ratio of net investment income to average net assets 2.80%(C) 2.43%(C)
Ratio of expenses to average net assets* 1.80%(C) 1.68%(C)
Ratio of net investment income to average net assets* 2.55%(C) 2.36%(C)
Portfolio Turnover(D) 74.84% 32.23%
</TABLE>
* 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 the 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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Short Municipal Bond Fund
became One Group Short-Term Municipal Bond Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Short Municipal Bond
Fund.
<PAGE> 292
71
- -------------------------------------
Short-Term Municipal Bond Fund
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS MAY 4,
ENDED 1998 TO
JUNE 30, DECEMBER 31,
CLASS I 1999(E) 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.16 $ 10.00
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.19 0.25
Net realized and unrealized gains (losses) from
investments and futures (0.14) 0.16
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 0.05 0.41
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.19) (0.25)
Total Distributions (0.19) (0.25)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.02 $ 10.16
- -------------------------------------------------------------------------------------------------
Total Return 0.50%(B) 4.15%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $132,902 $118,296
Ratio of expenses to average net assets 0.62%(C) 0.61%(C)
Ratio of net investment income to average net assets 3.79%(C) 3.75%(C)
Ratio of expenses to average net assets* 0.80%(C) 0.70%(C)
Ratio of net investment income to average net assets* 3.61%(C) 3.66%(C)
Portfolio Turnover(D) 74.84% 32.23%
</TABLE>
* 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 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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Short Municipal Bond Fund
became One Group Short-Term Municipal Bond Fund. Financial highlights for the
periods prior to March 22, 1999 represent the Pegasus Short Municipal Bond
Fund.
<PAGE> 293
72
- -------------------------------------
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Intermediate Tax-Free Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.14 $ 10.91 $ 10.67 $ 10.63 $ 10.48
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.50 0.51 0.50 0.51
Net realized and unrealized gains (losses) from
investments (0.30) 0.31 0.26 0.05 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.17 0.81 0.77 0.55 0.66
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.47) (0.50) (0.51) (0.49) (0.49)
In excess of net investment income - - - - (0.02)
Net realized gains (0.17) (0.08) (0.02) (0.02) -
In excess of net realized gains - - - - -
Total Distributions (0.64) (0.58) (0.53) (0.51) (0.51)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.67 $ 11.14 $ 10.91 $ 10.67 $ 10.63
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.45% 7.50% 7.39% 5.28% 6.49%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 34,725 $ 14,515 $ 8,457 $ 6,622 $ 5,614
Ratio of expenses to average net assets 0.84% 0.85% 0.83% 0.79% 0.78%
Ratio of net investment income to average net assets 4.28% 4.45% 4.75% 4.62% 4.91%
Ratio of expenses to average net assets* 1.16% 1.16% 1.15% 1.22% 1.23%
Ratio of net investment income to average net assets* 3.96% 4.14% 4.43% 4.19% 4.46%
Portfolio turnover(A) 108.41% 109.03% 86.89% 111.58% 199.76%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.16 $ 10.93 $ 10.68 $ 10.65 $ 10.50
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.43 0.45 0.43 0.46
Net realized and unrealized gains (losses) from
investments (0.30) 0.31 0.27 0.04 0.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.10 0.74 0.72 0.47 0.60
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.40) (0.43) (0.45) (0.42) (0.45)
Net realized gains (0.17) (0.08) (0.02) (0.02) -
Total Distributions (0.57) (0.51) (0.47) (0.44) (0.45)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 11.16 $ 10.93 $ 10.68 $ 10.65
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 0.80% 6.81% 6.82% 4.48% 5.89%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 9,087 $ 5,659 $ 3,307 $ 2,439 $ 1,116
Ratio of expenses to average net assets 1.49% 1.50% 1.47% 1.44% 1.43%
Ratio of net investment income to average net assets 3.58% 3.80% 4.09% 3.97% 4.29%
Ratio of expenses to average net assets* 1.81% 1.81% 1.78% 1.87% 1.88%
Ratio of net investment income to average net assets* 3.26% 3.49% 3.78% 3.54% 3.84%
Portfolio turnover(A) 108.41% 109.03% 86.89% 111.58% 199.76%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 294
73
- -------------------------------------
Intermediate Tax-Free Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.15 $ 10.92 $ 10.67 $ 10.64 $ 10.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.52 0.54 0.52 0.54
Net realized and unrealized gains (losses) from
investments (0.30) 0.31 0.27 0.04 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.20 0.83 0.81 0.56 0.69
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.52) (0.54) (0.51) (0.54)
Net realized gains (0.17) (0.08) (0.02) (0.02) -
Total Distributions (0.67) (0.60) (0.56) (0.53) (0.54)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.68 $ 11.15 $ 10.92 $ 10.67 $ 10.64
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.71% 7.74% 7.76% 5.39% 6.75%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,013,839 $493,686 $451,089 $217,201 $211,229
Ratio of expenses to average net assets 0.59% 0.60% 0.58% 0.54% 0.53%
Ratio of net investment income to average net assets 4.49% 4.70% 5.05% 4.87% 5.17%
Ratio of expenses to average net assets* 0.81% 0.81% 0.81% 0.87% 0.88%
Ratio of net investment income to average net assets* 4.27% 4.49% 4.82% 4.54% 4.82%
Portfolio turnover(A) 108.41% 109.03% 86.89% 111.58% 199.76%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 295
74
[PHOTO]
ONE GROUP(R)
- ------------------------------------
- -------------------------------------
FINANCIAL HIGHLIGHTS
Tax-Free Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
FOR THE SIX MARCH 1, YEAR
MONTHS ENDED YEAR ENDED DECEMBER 31, 1995 TO ENDED
JUNE 30, --------------------------- DECEMBER 31, FEBRUARY 28,
CLASS A 1999(E) 1998 1997 1996 1995(A) 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.99 $ 12.87 $ 12.36 $ 12.64 $ 12.06 $ 12.13
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.28 0.55 0.56 0.59 0.48 0.60
Net realized and unrealized gains (losses)
from investments (0.53) 0.17 0.54 (0.18) 0.82 (0.07)
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.25) 0.72 1.10 0.41 1.30 0.53
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.29) (0.57) (0.59) (0.58) (0.48) (0.60)
Net realized gains (0.01) (0.03) - (0.01) (0.24) -
In excess of net realized gains - - - (0.10) - -
Total Distributions (0.30) (0.60) (0.59) (0.69) (0.72) (0.60)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.44 $ 12.99 $ 12.87 $ 12.36 $ 12.64 $ 12.06
- -------------------------------------------------------------------------------------------------------------------------
Total Return (1.97%)(C) 5.74% 9.13% 3.36% 10.95%(C) 4.45%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $38,253 $47,176 $34,729 $29,352 $ 7,426 $ 6,840
Ratio of expenses to average net assets 0.87%(B) 0.88% 0.85% 0.83% 0.89%(B) 1.98%
Ratio of net investment income to average net
assets 4.34%(B) 4.36% 4.65% 4.54% 4.57%(B) 5.09%
Ratio of expenses to average net assets* 0.95%(B) 0.88% 0.85% 0.89% 1.04%(B) 3.89%
Ratio of net investment income to average net
assets* 4.26%(B) 4.36% 4.65% 4.48% 4.42%(B) 3.18%
Portfolio turnover(D) 37.90% 22.05% 32.08% 64.51% 69.31%(C) 60.78%
</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)
Effective March 1, 1995, the fund changed its fiscal year end from February 28
to December 31. (B) Annualized. (C) Not Annualized. (D) Portfolio turnover is
calculated on the basis of the fund as a whole without distinguishing among
the classes of shares issued. (E) Upon reorganizing as a fund of One Group,
the Pegasus Municipal Bond Fund became One Group Tax-Free Bond Fund. Financial
highlights for the periods prior to March 22, 1999 represent the Pegasus
Municipal Bond Fund.
<TABLE>
<CAPTION>
FOR THE SIX APRIL 4, MARCH 1, FEBRUARY 8,
MONTHS ENDED YEAR ENDED DECEMBER 31, 1995 TO 1994 TO 1994 TO
JUNE 30, --------------------------- DECEMBER 31, DECEMBER 2, FEBRUARY 28,
CLASS B 1999(H) 1998 1997 1996 1995(C)(D) 1994(B) 1994(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 12.99 $ 12.86 $ 12.36 $ 12.65 $ 12.17 $ 12.14 $ 12.37
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.23 0.45 0.46 0.52 0.34 0.41 0.03
Net realized and unrealized
gains (losses) from
investments (0.53) 0.18 0.54 (0.21) 0.72 (0.70) (0.23)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.30) 0.63 1.00 0.31 1.06 (0.29) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.24) (0.47) (0.50) (0.49) (0.34) (0.41) (0.03)
Net realized gains (0.01) (0.03) - (0.01) (0.24) - -
In excess of net realized gains - - - (0.10) - - -
Total Distributions (0.25) (0.50) (0.50) (0.60) (0.58) (0.41) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Conversion to Class A Shares(B) - - - - - (11.44) -
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.44 $ 12.99 $ 12.86 $ 12.36 $ 12.65 $ - $ 12.14
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (2.31%)(F) 4.98% 8.26% 2.56% 8.81%(F) (4.30%)(F) (1.64%)(F)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 2,443 $ 2,142 $ 1,312 $ 672 $ 238 $ - $ 2
Ratio of expenses to average
net assets 1.57%(E) 1.63% 1.60% 1.58% 1.66%(E) 3.18%(E) 0.50%(E)
Ratio of net investment income
to average net assets 3.64%(E) 3.61% 3.90% 3.79% 3.61%(E) 4.51%(E) 4.10%(E)
Ratio of expenses to average
net assets* 1.61%(E) 1.63% 1.60% 1.70% 2.04%(E) 5.85%(E) 2.91%(E)
Ratio of net investment income
to average net assets* 3.60%(E) 3.61% 3.90% 3.67% 3.23%(E) 1.84%(E) 1.69%(E)
Portfolio turnover(G) 37.90% 22.05% 32.08% 64.51% 69.31%(F) 60.78%(F) 175.06%(F)
</TABLE>
* 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) On December 2, 1994, the fund
terminated its offering of Class B Shares and such shares converted to Class A
Shares. (C) Re-offering date of Class B Shares. (D) Effective March 1, 1995,
the fund changed its fiscal year end from February 28 to December 31. (E)
Annualized. (F) Not Annualized. (G) Portfolio turnover is calculated on the
basis of the fund as a whole without distinguishing among the classes of
shares issued. (H) Upon reorganizing as a fund of One Group, the Pegasus
Municipal Bond Fund became One Group Tax-Free Bond Fund. Financial highlights
for the periods prior to March 22, 1999 represent the Pegasus Municipal Bond
Fund.
<PAGE> 296
75
- -------------------------------------
Tax-Free Bond Fund
<TABLE>
<CAPTION>
FOR THE SIX MARCH 1, FEBRUARY 1,
MONTHS ENDED YEAR ENDED DECEMBER 31, 1995 TO 1995 TO
JUNE 30, ----------------------------- DECEMBER 31, FEBRUARY 28,
CLASS I 1999(F) 1998 1997 1996 1995(B) 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.98 $ 12.86 $ 12.36 $ 12.63 $ 12.06 $ 12.06
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.29 0.60 0.61 0.65 0.52 0.05
Net realized and unrealized gains (losses)
from investments (0.52) 0.16 0.51 (0.20) 0.81 -
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.23) 0.76 1.12 0.45 1.33 0.05
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.61) (0.62) (0.61) (0.52) (0.05)
Net realized gains (0.01) (0.03) - (0.01) (0.24) -
In excess of net realized gains - - - (0.10) - -
Total Distributions (0.31) (0.64) (0.62) (0.72) (0.76) (0.05)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.44 $ 12.98 $ 12.86 $ 12.36 $ 12.63 $ 12.06
- -------------------------------------------------------------------------------------------------------------------------
Total Return (1.78%)(D) 6.01% 9.32% 3.76% 11.20%(D) 0.39%(D)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $795,839 $841,715 $355,814 $338,104 $240,160 $220,143
Ratio of expenses to average net assets 0.63%(C) 0.63% 0.60% 0.58% 0.54%(C) 0.65%(C)
Ratio of net investment income to average
net assets 4.60%(C) 4.61% 4.90% 4.79% 4.95%(C) 5.45%(C)
Ratio of expenses to average net assets* 0.66%(C) 0.63% 0.60% 0.68% 0.67%(C) 0.79%(C)
Ratio of net investment income to average
net assets* 4.57%(C) 4.61% 4.90% 4.69% 4.82%(C) 5.31%(C)
Portfolio turnover(E) 37.90% 22.05% 32.08% 64.51% 69.31%(D) 60.78%(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) Effective March 1, 1995, the fund
changed its fiscal year end from February 28 to December 31. (C) Annualized.
(D) Not Annualized. (E) Portfolio turnover is calculated on the basis of the
fund as a whole without distinguishing among the classes of shares issued. See
notes to financial statements. (F) Upon reorganizing as a fund of One Group,
the Pegasus Municipal Bond Fund became One Group Tax-Free Bond Fund. Financial
highlights for the periods prior to March 22, 1999 represent the Pegasus
Municipal Bond Fund.
<PAGE> 297
76
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Municipal Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.14 $ 9.87 $ 9.69 $ 9.72 $ 9.67
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.49 0.51 0.55 0.55
Net realized and unrealized gains (losses) from
investments (0.19) 0.27 0.18 (0.04) 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.28 0.76 0.69 0.51 0.60
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.49) (0.51) (0.54) (0.55)
Total Distributions (0.47) (0.49) (0.51) (0.54) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.95 $ 10.14 $ 9.87 $ 9.69 $ 9.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.80% 7.84% 7.24% 5.35% 6.21%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $188,143 $101,805 $ 41,829 $25,787 $ 11,462
Ratio of expenses to average net assets 0.82% 0.82% 0.82% 0.81% 0.81%
Ratio of net investment income to average net assets 4.62% 4.83% 5.13% 5.45% 5.76%
Ratio of expenses to average net assets* 1.01% 1.02% 1.03% 1.11% 1.09%
Ratio of net investment income to average net assets* 4.43% 4.63% 4.92% 5.15% 5.48%
Portfolio turnover(A) 55.03% 69.76% 62.83% 83.17% 66.02%
</TABLE>
* 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 B 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.84 $ 9.66 $ 9.69 $ 9.62
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.42 0.44 0.47 0.49
Net realized and unrealized gains (losses) from
investments (0.19) 0.26 0.18 (0.03) 0.07
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.22 0.68 0.62 0.44 0.56
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.42) (0.44) (0.47) (0.49)
Total Distributions (0.41) (0.42) (0.44) (0.47) (0.49)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.91 $ 10.10 $ 9.84 $ 9.66 $ 9.69
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 2.14% 7.04% 6.55% 4.65% 5.58%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $97,899 $ 56,911 $ 36,258 $23,204 $ 8,326
Ratio of expenses to average net assets 1.47% 1.47% 1.47% 1.46% 1.46%
Ratio of net investment income to average net assets 3.99% 4.18% 4.48% 4.80% 5.14%
Ratio of expenses to average net assets* 1.67% 1.67% 1.67% 1.76% 1.74%
Ratio of net investment income to average net assets* 3.79% 3.98% 4.28% 4.50% 4.86%
Portfolio turnover(A) 55.03% 69.76% 62.83% 83.17% 66.02%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 298
77
- -------------------------------------
Municipal Income Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NOVEMBER 4, 1997
CLASS C 1999 TO JUNE 30, 1998(A)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.09 $ 9.96
- -----------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.68
Net realized and unrealized gains (losses) from
investments (0.18) 0.13
- -----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.23 0.81
- -----------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.68)
Total Distributions (0.41) (0.68)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.91 $ 10.09
- -----------------------------------------------------------------------------------------------------------------
Total Return 2.24% 8.28%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 13,737 $ 2,216
Ratio of expenses to average net assets 1.47% 1.47%(C)
Ratio of net investment income to average net assets 3.93% 4.18%(C)
Ratio of expenses to average net assets* 1.66% 1.67%(C)
Ratio of net investment income to average net assets* 3.74% 3.98%(C)
Portfolio turnover(D) 55.03% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.11 $ 9.84 $ 9.66 $ 9.69 $ 9.66
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.51 0.53 0.56 0.57
Net realized and unrealized gains (losses) from
investments (0.19) 0.27 0.18 (0.03) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.31 0.78 0.71 0.53 0.60
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.51) (0.53) (0.56) (0.57)
Total Distributions (0.50) (0.51) (0.53) (0.56) (0.57)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.92 $ 10.11 $ 9.84 $ 9.66 $ 9.69
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.06% 8.09% 7.49% 5.54% 6.46%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $744,647 $617,885 $408,577 $241,115 $185,916
Ratio of expenses to average net assets 0.57% 0.57% 0.57% 0.56% 0.56%
Ratio of net investment income to average net assets 4.92% 5.08% 5.38% 5.70% 6.02%
Ratio of expenses to average net assets* 0.67% 0.67% 0.68% 0.76% 0.74%
Ratio of net investment income to average net assets* 4.82% 4.98% 5.27% 5.50% 5.84%
Portfolio turnover(A) 55.03% 69.76% 62.83% 83.17% 66.02%
</TABLE>
* 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.
<PAGE> 299
78
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Arizona Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 JUNE 30, THROUGH
------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 9.99 $10.00
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.44 0.46 0.15
Net realized and unrealized gains (losses) from
investments (0.26) 0.16 (0.01)
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.18 0.62 0.14
- --------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.44) (0.46) (0.15)
Net realized gain (0.15) (0.07) -
Total Distributions (0.59) (0.53) (0.15)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.67 $ 10.08 $ 9.99
- --------------------------------------------------------------------------------------------------------------
Total Return 1.69% 6.30% 1.40%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 1,799 $ 1,321 $1,500
Ratio of expenses to average net assets 0.86% 0.84% 0.85%(C)
Ratio of net investment income to average net assets 4.37% 4.53% 4.90%(C)
Ratio of expenses to average net assets* 1.02% 1.01% 0.96%(C)
Ratio of net investment income to average net assets* 4.21% 4.36% 4.79%(C)
Portfolio turnover(D) 16.29% 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>
JANUARY 20, 1997
YEAR ENDED JUNE 30, THROUGH
------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.16 $ 10.09 $10.00
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.13 0.00
Net realized and unrealized gains (losses) from
investments (0.26) 0.14 0.09
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.11 0.27 0.09
- --------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.37) (0.13) -
Net realized gains (0.15) (0.07) -
Total Distributions (0.52) (0.20) -
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 10.16 $10.09
- --------------------------------------------------------------------------------------------------------------
Total Return 1.04% 2.67% 0.90%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 640 $ 290 -(C)
Ratio of expenses to average net assets 1.50% 1.50% -(D)
Ratio of net investment income to average net assets 3.67% 3.88% -(D)
Ratio of expenses to average net assets* 1.66% 1.64% -(D)
Ratio of net investment income to average net assets* 3.51% 3.74% -(D)
Portfolio turnover(E) 16.29% 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.
<PAGE> 300
79
- -------------------------------------
Arizona Municipal Bond Fund
<TABLE>
<CAPTION>
JANUARY 20, 1997
YEAR ENDED JUNE 30, THROUGH
--------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.06 $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.49 0.23
Net realized and unrealized gains from investments (0.26) 0.16 0.06
- ----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.20 0.65 0.29
- ----------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.49) (0.23)
Net realized gain (0.15) (0.07) -
Total Distributions (0.61) (0.56) (0.23)
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.74 $ 10.15 $ 10.06
- ----------------------------------------------------------------------------------------------------------------
Total Return 1.94% 6.58% 2.90%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $233,360 $248,590 $255,755
Ratio of expenses to average net assets 0.61% 0.59% 0.59%(C)
Ratio of net investment income to average net assets 4.59% 4.79% 5.09%(C)
Ratio of expenses to average net assets* 0.67% 0.65% 0.66%(C)
Ratio of net investment income to average net assets* 4.53% 4.73% 5.02%(C)
Portfolio turnover(D) 16.29% 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.
<PAGE> 301
80
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Kentucky Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED JUNE 30, 1995 TO
------------------------------------------ JUNE 30,
CLASS A 1999 1998 1997 1996 1995(A)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $10.21 $ 10.05 $ 9.93 $ 9.49
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.49 0.48 0.44 0.19
Net realized and unrealized gains from investments (0.28) 0.20 0.16 0.12 0.44
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.19 0.69 0.64 0.56 0.63
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.49) (0.48) (0.44) (0.19)
Total Distributions (0.47) (0.49) (0.48) (0.44) (0.19)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.13 $10.41 $ 10.21 $ 10.05 $ 9.93
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 1.79% 6.86% 6.46% 5.70% 5.66%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $10,075 $7,899 $ 5,554 $ 8,178 $ 8,818
Ratio of expenses to average net assets 0.86% 0.85% 0.84% 0.93% 0.90%(C)
Ratio of net investment income to average net assets 4.50% 4.69% 4.66% 4.35% 4.44%(C)
Ratio of expenses to average net assets* 1.06% 1.04% 1.04% 1.37% 1.33%(C)
Ratio of net investment income to average net assets* 4.30% 4.50% 4.46% 3.91% 4.01%(C)
Portfolio turnover(D) 6.30% 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.
<TABLE>
<CAPTION>
MARCH 16,
YEAR ENDED JUNE 30, 1995 TO
----------------------------------------- JUNE 30,
CLASS B 1999 1998 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.35 $10.15 $ 9.99 $ 9.87 $ 9.75
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.42 0.41 0.38 0.14
Net realized and unrealized gains from investments (0.29) 0.20 0.16 0.13 0.12
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.11 0.62 0.57 0.51 0.26
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.42) (0.41) (0.39) (0.14)
Total Distributions (0.40) (0.42) (0.41) (0.39) (0.14)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.06 $10.35 $ 10.15 $ 9.99 $ 9.87
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 1.05% 6.20% 5.81% 5.16% 2.63%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $15,135 $5,581 $ 2,399 $ 1,457 $ 79
Ratio of expenses to average net assets 1.51% 1.51% 1.47% 1.58% 1.58%(C)
Ratio of net investment income to average net assets 3.85% 4.04% 4.05% 3.70% 3.89%(C)
Ratio of expenses to average net assets* 1.71% 1.70% 1.70% 2.02% 2.21%(C)
Ratio of net investment income to average net assets* 3.65% 3.85% 3.82% 3.26% 3.25%(C)
Portfolio turnover(D) 6.30% 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 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> 302
81
- -------------------------------------
Kentucky Municipal Bond Fund
<TABLE>
<CAPTION>
JANUARY 20, FEBRUARY 1,
YEAR ENDED JUNE 30, 1995 TO 1994 TO
------------------------------------------- JUNE 30, JANUARY 19,
CLASS I 1999 1998 1997 1996 1995(A) 1995(B)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.40 $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.51 0.50 0.50 0.20 0.41
Net realized and unrealized gains (losses)
from investments (0.28) 0.20 0.16 0.12 0.43 (0.95)
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.22 0.71 0.66 0.62 0.63 (0.54)
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.51) (0.50) (0.50) (0.20) (0.42)
Total Distributions (0.50) (0.51) (0.50) (0.50) (0.20) (0.42)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.12 $ 10.40 $ 10.20 $ 10.04 $ 9.92 $ 9.49
- -------------------------------------------------------------------------------------------------------------------------
Total Return 2.05% 7.11% 6.74% 6.35% 6.56%(D) (5.17%)(D)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $122,917 $122,220 $116,830 $30,300 $32,520 $41,953
Ratio of expenses to average net assets 0.61% 0.60% 0.59% 0.68% 0.65%(C) 1.03%(C)
Ratio of net investment income to average net
assets 4.77% 4.94% 5.12% 4.60% 4.70%(C) 4.27%(C)
Ratio of expenses to average net assets* 0.71% 0.69% 0.72% 1.02% 0.97%(C) 1.05%(C)
Ratio of net investment income to average net
assets* 4.67% 4.85% 4.99% 4.26% 4.38%(C) 4.25%(C)
Portfolio turnover(E) 6.30% 5.81% 13.30% 16.78% 19.75% 10.00%
</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)
Annualized. (D) Not Annualized. (E) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
<PAGE> 303
82
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Louisiana Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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>
SEVEN
MONTHS
YEAR ENDED JUNE 30, ENDED YEAR ENDED JUNE 30,
---------------------------------- JUNE 30, ---------------------
CLASS A 1999 1998 1997 1996(A) 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.38 $ 10.27
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.45 0.47 0.47 0.24 0.50 0.49
Net realized and unrealized gains (losses)
from investments (0.28) 0.16 0.17 (0.16) 0.71 (0.79)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.17 0.63 0.64 0.08 1.21 (0.30)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.45) (0.47) (0.47) (0.24) (0.50) (0.49)
Net realized gains (0.02) - - - - (0.10)
Total Distributions (0.47) (0.47) (0.47) (0.24) (0.50) (0.59)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.96 $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.38
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.67% 6.35% 6.55% 0.84%(B) 13.11% (2.97%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $75,958 $47,078 $48,498 $53,479 $206,119 $196,820
Ratio of expenses to average net assets 0.86% 0.85% 0.87% 0.69%(C) 0.62% 0.65%
Ratio of net investment income to average
net assets 4.40% 4.60% 4.66% 4.71%(C) 5.07% 4.97%
Ratio of expenses to average net assets* 1.20% 1.18% 1.19% 0.86%(C) 0.77% 0.80%
Ratio of net investment income to average
net assets* 4.06% 4.27% 4.34% 4.54%(C) 4.92% 4.82%
Portfolio turnover(D) 19.67% 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 $10.67 to $10.00
effective March 26, 1996. (B) Not annualized. (C) Annualized. (D) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
SEVEN
MONTHS SEPTEMBER 16,
YEAR ENDED JUNE 30, ENDED YEAR ENDED THROUGH
---------------------------------- JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1999 1998 1997 1996(A) 1995 1994(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.36 $ 9.73
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.39 0.41 0.40 0.21 0.42 0.08
Net realized and unrealized gains
(losses) from investments (0.27) 0.16 0.17 (0.16) 0.73 (0.37)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.12 0.57 0.57 0.05 1.15 (0.29)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.41) (0.40) (0.21) (0.42) (0.08)
Net realized gains (0.02) - - - - -
Total Distributions (0.41) (0.41) (0.40) (0.21) (0.42) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.97 $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.36
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.11% 5.69% 5.87% 0.48%(C) 12.52% (2.94%)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $10,866 $ 5,474 $ 3,835 $ 3,223 $ 2,115 $ 204
Ratio of expenses to average net
assets 1.51% 1.50% 1.51% 1.50%(D) 1.37% 1.41%(D)
Ratio of net investment income to
average net assets 3.74% 3.95% 4.02% 3.98%(D) 4.27% 4.45%(D)
Ratio of expenses to average net
assets* 1.85% 1.83% 1.85% 1.70%(D) 1.52% 1.56%(D)
Ratio of net investment income to
average net assets* 3.40% 3.62% 3.68% 3.78%(D) 4.12% 4.30%(D)
Portfolio turnover(E) 19.67% 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) Period from commencement of operations. (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.
<PAGE> 304
83
- -------------------------------------
Louisiana Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED JUNE 30, MARCH 26, 1996
--------------------------------- THROUGH JUNE 30,
CLASS I 1999 1998 1997 1996(A)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.50 0.49 0.13
Net realized and unrealized gains (losses) from
investments (0.28) 0.16 0.17 (0.07)
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.20 0.66 0.66 0.06
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.50) (0.49) (0.13)
Net realized gains (0.02) - - -
Total Distributions (0.50) (0.50) (0.49) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.96 $ 10.26 $ 10.10 $ 9.93
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 1.92% 6.62% 6.81% 0.90%(B)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $106,294 $92,690 $113,338 $136,041
Ratio of expenses to average net assets 0.61% 0.60% 0.62% 0.71%(D)
Ratio of net investment income to average net assets 4.66% 4.85% 4.91% 4.76%(D)
Ratio of expenses to average net assets* 0.85% 0.83% 0.84% 0.86%(D)
Ratio of net investment income to average net assets* 4.42% 4.62% 4.69% 4.61%(D)
Portfolio turnover(E) 19.67% 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.
<PAGE> 305
84
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Michigan Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
CLASS A 1999(D) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.24 0.47 0.49 0.48 0.48 0.50
Net realized and unrealized gains (losses)
from investments and futures (0.40) 0.13 0.44 (0.14) 1.06 (1.06)
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.16) 0.60 0.93 0.34 1.54 (0.56)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.24) (0.48) (0.48) (0.46) (0.48) (0.50)
From net realized gain - (0.02) - - - -
Total Distributions (0.24) (0.50) (0.48) (0.46) (0.48) (0.50)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (1.47%)(A) 5.61% 9.15% 3.32% 16.49% (5.42%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $22,217 $22,876 $18,687 $18,575 $21,034 $21,106
Ratio of expenses to average net assets 0.88%(B) 0.91% 0.92% 0.88% 0.79% 0.53%
Ratio of net investment income to average
net assets 4.35%(B) 4.27% 4.59% 4.57% 4.71% 5.01%
Ratio of expenses to average net assets* 0.96%(B) 0.92% 0.98% 0.96% 1.04% 1.05%
Ratio of net investment income to average
net assets* 4.27%(B) 4.26% 4.53% 4.49% 4.46% 4.49%
Portfolio turnover(C) 10.60% 23.33% 37.84% 24.49% 26.97% 25.93%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A) Not
Annualized. (B) Annualized. (C) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among classes of shares issued.
(D) Upon reorganizing as a fund of One Group, the Pegasus Michigan Municipal
Bond Fund became One Group Michigan Municipal Bond Fund. Financial highlights
for periods prior to March 22, 1999 represent the Pegasus Michigan Municipal
Bond Fund.
<TABLE>
<CAPTION>
PERIOD YEAR ENDED SEPTEMBER 23,
ENDED DECEMBER 31, 1996 TO
JUNE 30, ------------------- DECEMBER 31,
CLASS B 1999(E) 1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.68 $ 10.59 $ 10.18 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.20 0.39 0.38 0.07
Net realized and unrealized gains (losses) from
investments and futures (0.40) 0.12 0.44 0.17
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.20) 0.51 0.82 0.24
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.20) (0.40) (0.41) (0.06)
From net realized gain - (0.02) - -
Total Distributions (0.20) (0.42) (0.41) (0.06)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.68 $ 10.59 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------
Total Return (1.86%)(B) 4.92% 8.26% 2.45%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 6,771 $ 1,940 $ 707 $ 110
Ratio of expenses to average net assets 1.59%(C) 1.66% 1.67% 1.69%(C)
Ratio of net investment income to average net assets 3.64%(C) 3.52% 3.84% 2.01%(C)
Ratio of expenses to average net assets* 1.70%(C) 1.67% 1.73% 1.77%(C)
Ratio of net investment income to average net assets* 3.53%(C) 3.51% 3.78% 1.93%(C)
Portfolio turnover(D) 10.60% 23.33% 37.84% 24.49%
</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 the 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 classes of shares issued. (E) Upon
reorganizing as a fund of One Group, the Pegasus Michigan Municipal Bond Fund
became One Group Michigan Municipal Bond Fund. Financial highlights for
periods prior to March 22, 1999 represent the Pegasus Michigan Municipal Bond
Fund.
<PAGE> 306
85
- -------------------------------------
Michigan Municipal Bond Fund
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------
CLASS I 1999(D) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54 $ 10.60
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.25 0.50 0.51 0.49 0.48 0.50
Net realized and unrealized gains from
investments (0.41) 0.13 0.45 (0.14) 1.06 (1.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.16) 0.63 0.96 0.35 1.54 (0.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.25) (0.51) (0.51) (0.47) (0.48) (0.50)
From net realized gain - (0.02) - - - -
Total Distributions (0.25) (0.53) (0.51) (0.47) (0.48) (0.50)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.62 $ 11.03 $ 10.93 $ 10.48 $ 10.60 $ 9.54
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (1.46%)(A) 5.94% 9.42% 3.44% 16.49 (5.42%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $309,445 $298,842 $ 61,768 $41,909 $32,419 $24,157
Ratio of expenses to average net assets 0.66%(B) 0.66% 0.67% 0.77% 0.79% 0.53%
Ratio of net investment income to average
net assets 4.60%(B) 4.52% 4.84% 4.68% 4.71% 5.01%
Ratio of expenses to average net assets* 0.69%(B) 0.67% 0.73% 0.85% 1.04% 1.05%
Ratio of net investment income to average
net assets* 4.57%(B) 4.51% 4.78% 4.60% 4.46% 4.49%
Portfolio turnover(C) 10.60% 23.33% 37.84% 24.49% 26.97% 25.93%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A) Not
annualized. (B) Annualized. (C) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among classes of shares issued.
(D) Upon reorganizing as a fund of One Group, the Pegasus Michigan Municipal
Bond Fund became One Group Michigan Municipal Bond Fund. Financial highlights
for periods prior to March 22, 1999 represent the Pegasus Michigan Municipal
Bond Fund.
<PAGE> 307
86
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Ohio Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.11 $ 10.91 $10.72 $ 10.68 $ 10.61
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.54 0.54 0.55 0.53
Net realized and unrealized gains (losses) from
investments (0.33) 0.20 0.19 0.03 0.07
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.18 0.74 0.73 0.58 0.60
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.54) (0.54) (0.54) (0.51)
In excess of net investment income - - - - (0.02)
Total Distributions (0.51) (0.54) (0.54) (0.54) (0.53)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.78 $ 11.11 $10.91 $ 10.72 $ 10.68
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 1.59% 6.87% 6.95% 5.44% 5.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $26,876 $17,297 $16,114 $16,507 $12,006
Ratio of expenses to average net assets 0.81% 0.79% 0.79% 0.82% 0.82%
Ratio of net investment income to average net assets 4.57% 4.83% 4.96% 4.92% 5.01%
Ratio of expenses to average net assets* 1.18% 1.18% 1.19% 1.30% 1.25%
Ratio of net investment income to average net assets* 4.20% 4.44% 4.56% 4.44% 4.58%
Portfolio turnover(A) 13.69% 10.49% 7.45% 24.61% 77.69%
</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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
CLASS B 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.18 $ 10.98 $ 10.79 $ 10.75 $ 10.68
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.44 0.47 0.47 0.48 0.43
Net realized and unrealized gains (losses) from
investments (0.32) 0.20 0.19 0.03 0.07
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.12 0.67 0.66 0.51 0.50
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.44) (0.47) (0.47) (0.47) (0.43)
Total Distributions (0.44) (0.47) (0.47) (0.47) (0.43)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.86 $ 11.18 $ 10.98 $ 10.79 $ 10.75
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 1.01% 6.20% 6.26% 4.79% 5.17%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $49,703 $26,138 $14,316 $ 8,854 $ 3,209
Ratio of expenses to average net assets 1.46% 1.44% 1.44% 1.47% 1.48%
Ratio of net investment income to average net assets 3.89% 4.19% 4.33% 4.27% 4.40%
Ratio of expenses to average net assets* 1.83% 1.83% 1.84% 1.95% 1.91%
Ratio of net investment income to average net assets* 3.52% 3.80% 3.93% 3.79% 3.97%
Portfolio turnover(A) 13.69% 10.49% 7.45% 24.61% 77.69%
</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.
<PAGE> 308
87
- -------------------------------------
Ohio Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.08 $ 10.88 $ 10.69 $ 10.65 $ 10.58
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.54 0.56 0.56 0.56 0.55
Net realized and unrealized gains from investments (0.33) 0.20 0.19 0.04 0.07
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.21 0.76 0.75 0.60 0.62
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.54) (0.56) (0.56) (0.56) (0.55)
Total Distributions (0.54) (0.56) (0.56) (0.56) (0.55)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.75 $ 11.08 $ 10.88 $ 10.69 $ 10.65
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 1.84% 7.13% 7.22% 5.69% 6.07%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $160,493 $149,890 $133,172 $80,611 $79,993
Ratio of expenses to average net assets 0.56% 0.54% 0.54% 0.57% 0.58%
Ratio of net investment income to average net assets 4.86% 5.09% 5.24% 5.17% 5.29%
Ratio of expenses to average net assets* 0.83% 0.83% 0.84% 0.95% 0.91%
Ratio of net investment income to average net assets* 4.59% 4.80% 4.94% 4.79% 4.96%
Portfolio turnover(A) 13.69% 10.49% 7.45% 24.61% 77.69%
</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.
<PAGE> 309
88
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
West Virginia Municipal Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED 1997
JUNE 30, THROUGH
------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.36 $ 10.15 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.48 0.16
Net realized and unrealized gains from investments (0.32) 0.21 0.15
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.15 0.69 0.31
- ----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.48) (0.16)
Net realized gains (0.01) - -
Total Distributions (0.48) (0.48) (0.16)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.03 $ 10.36 $ 10.15
- ----------------------------------------------------------------------------------------------------------
Total Return 1.37% 6.98% 3.08%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 3,570 $ 2,024 $ 808
Ratio of expenses to average net assets 0.85% 0.85% 0.84%(C)
Ratio of net investment income to average net assets 4.42% 4.68% 4.94%(C)
Ratio of expenses to average net assets* 1.05% 1.07% 0.97%(C)
Ratio of net investment income to average net assets* 4.22% 4.46% 4.81%(C)
Portfolio turnover(D) 15.24% 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>
JANUARY 20,
YEAR ENDED 1997
JUNE 30, THROUGH
------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.35 $ 10.12 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.42 0.14
Net realized and unrealized gains from investments (0.31) 0.23 0.12
- -------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.09 0.65 0.26
- -------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.40) (0.42) (0.14)
Net realized gains (0.01) - -
Total Distributions (0.41) (0.42) (0.14)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.03 $ 10.35 $ 10.12
- -------------------------------------------------------------------------------------------------------------
Total Return 0.80% 6.57% 2.64%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 7,505 $ 3,352 $ 614
Ratio of expenses to average net assets 1.50% 1.50% 1.49%(C)
Ratio of net investment income to average net assets 3.79% 4.05% 4.08%(C)
Ratio of expenses to average net assets* 1.71% 1.72% 1.62%(C)
Ratio of net investment income to average net assets* 3.58% 3.83% 3.95%(C)
Portfolio turnover(D) 15.24% 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 310
89
- -------------------------------------
West Virginia Municipal Bond Fund
<TABLE>
<CAPTION>
JANUARY 20,
1997
THROUGH
YEAR ENDED JUNE 30, JUNE 30,
------------------- 1997(A)
CLASS I 1999 1998 -----------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.28 $ 10.06 $ 10.00
Investment Activities:
Net investment income 0.49 0.50 0.22
Net realized and unrealized gains from investments (0.31) 0.22 0.06
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.18 0.72 0.28
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.50) (0.22)
Net realized gains (0.01) -- --
Total Distributions (0.50) (0.50) (0.22)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.96 $ 10.28 $ 10.06
- -----------------------------------------------------------------------------------------------------------
Total Return 1.71% 7.36% 2.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $98,391 $102,413 $96,270
Ratio of expenses to average net assets 0.61% 0.60% 0.59%(C)
Ratio of net investment income to average net assets 4.74% 4.93% 5.04%(C)
Ratio of expenses to average net assets* 0.71% 0.72% 0.67%(C)
Ratio of net investment income to average net assets* 4.64% 4.81% 4.96%(C)
Portfolio turnover(D) 15.24% 16.69% 6.21%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Period from commencement of operations. (B) Not annualized. (C) Annualized.
(D) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<PAGE> 311
90
ONE GROUP(R)
- ------------------------------------
[PHOTO]
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
-------------------------------------------------------------
<S> <C> <C>
One Group(R) Short-Term Municipal Bond Fund 1
------------------------------------------------------
One Group(R) Intermediate Tax-Free Bond Fund 2
------------------------------------------------------
One Group(R) Tax-Free Bond Fund 3
------------------------------------------------------
One Group(R) Municipal Income Fund 4
------------------------------------------------------
One Group(R) Arizona Municipal Bond Fund 5
------------------------------------------------------
One Group(R) Kentucky Municipal Bond Fund 6
------------------------------------------------------
One Group(R) Louisiana Municipal Bond Fund 7
------------------------------------------------------
One Group(R) Michigan Municipal Bond Fund 8
------------------------------------------------------
One Group(R) Ohio Municipal Bond Fund 9
------------------------------------------------------
One Group(R) West Virginia Municipal Bond Fund 10
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-10 Market
STRIPS, and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. 1-10 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1-10 Market
issued by agencies and instrumentalities of the
U.S. Government. These include Credit Ginnie Mae,
Fannie Mae and Freddie Mac.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-10 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 312
91
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Company Securities: Shares of other 1-10 Market
mutual funds, including money market funds of The
One Group and shares of other money market mutual
funds for which Banc One Investment Advisors
serves as investment advisor or administrator.
Banc One Investment Advisors will waive certain
fees when investing in funds for which it serves
as investment advisor.
-------------------------------------------------------------------------------
Call and Put Options: A call option gives the 1-10 Management
buyer the right to buy, and obligates the seller Liquidity
of the option to sell, a security at a specified Credit
price. A put option gives the buyer the right to Market
sell, and obligates the seller of the option to Leverage
buy, a security at a specified price. The Funds
will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing 1-10 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of Credit
securities, or an index at a specified time in the Liquidity
future and at a specified price. Leverage
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-10 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-10 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A Credit
securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-10 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1-10 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1-10 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 313
92
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps, Caps and Floors: A Fund may enter into 1-10 Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two parties. Market
Caps and floors entitle a purchaser to a principal
amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls
below a predetermined interest.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 1-10 Management
contracts and other financial products continue to Credit
be developed and the Fund may invest in such Market
options, contracts and products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 1-10 Market
agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign currency Foreign
exchange rates, interest rates, or one or more Investment
other references indices.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 1-10 Credit
or political subdivision to obtain funds for Political
various public purposes. Municipal securities Tax
include private activity bonds and industrial Market
development bonds, as well as General Obligation Regulatory
Notes, Anticipation Notes, Bond Tax Anticipation
Notes, Revenue Anticipation Notes, Project Notes,
other short-term tax-exempt obligations, municipal
leases, participations in pools of municipal
securities, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative 1-10 Pre-payment
multi-class mortgage securities which are usually Market
structured with two classes of shares that receive Credit
different proportions of the interest and Regulatory
principal from a pool of mortgage assets. These
include IO's and PO's.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1-10 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 314
93
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Zero-Coupon Debt Securities: Bonds and other debt 1-10 Credit
that pay no interest, but are issued at a discount Market
from their value 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 1-10 Credit
floating rate debt instruments with interest rates Market
that reset in the opposite direction from the Leverage
market rate of interest to which the inverse
floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: 1-10 Market
Participations in, or assignments of municipal Credit
securities, including municipal leases. Political
Liquidity
Tax
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise be unable to honor a financial obligation.
Credit risk is generally higher for non-investment
grade securities. The price of a security can be
adversely affected prior to actual default as its
credit status deteriorates and the probability of
default rises.
- Leverage Risk. The risk associated with securities or
practices that multiply small index or market
movements into large changes in value. Leverage is
often associated with investments in derivatives, but
also may be embedded directly in the characteristics
of other securities.
- Hedged. When a derivative (a security whose value is
based on another security or index) is used as a hedge
against an opposite position that the fund also holds,
any loss generated by the derivative should be
substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce
or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying
security, and there can be no assurance that a Fund's
hedging transactions will be effective.
- Speculative. To the extent that a derivative is not
used as a hedge, the fund is directly exposed to the
risks of that derivative. Gains or losses from
speculative positions in a derivative may be
substantially greater than the derivative's original
cost.
<PAGE> 315
94
- 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.
<PAGE> 316
95
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws which may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
<PAGE> 317
(Intentionally Left Blank)
<PAGE> 318
(Intentionally Left Blank)
<PAGE> 319
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling
1-800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-121 [ONE GROUP MUTUAL FUNDS LOGO]
<PAGE> 320
MONEY MARKET FUNDS
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
One Group(R) Prime Money Market Fund
One Group(R) U.S. Treasury Securities Money Market Fund
One Group(R) Municipal Money Market Fund
One Group(R) Michigan Municipal Money Market Fund
One Group(R) Ohio Municipal Money Market Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF ANY OF THE
FUNDS AS AN INVESTMENT OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS
YOU OTHERWISE IS COMMITTING A CRIME.
<PAGE> 321
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Prime Money Market Fund 2
---------
One Group U.S. Treasury Securities Money Market Fund 6
---------
One Group Municipal Money Market Fund 10
---------
One Group Michigan Municipal Money Market Fund 14
---------
One Group Ohio Municipal Money Market Fund 18
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 22
---------
Investment Risks 24
---------
Investment Policies 26
---------
Portfolio Quality and Maturity 27
---------
Temporary Defensive Positions 28
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 29
---------
Sales Charges 33
---------
Exchanging Fund Shares 36
---------
Redeeming Fund Shares 38
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 40
---------
Dividend Policies 41
---------
Tax Treatment of Shareholders 41
---------
Shareholder Inquiries 43
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 44
---------
Advisory Fees 44
---------
Year 2000 Readiness Disclosure 45
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 46
---------
APPENDIX A: INVESTMENT PRACTICES 53
---------
</TABLE>
<PAGE> 322
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 323
2
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money
Market Fund
WHAT IS THE GOAL OF THE
PRIME MONEY
MARKET FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE PRIME
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests exclusively in high quality, short-term
money market instruments. These instruments include
corporate notes, commercial paper, funding agreements,
certificates of deposit, bank obligations and deposit
notes. The Fund will concentrate in the financial
services industry, including asset-backed commercial
paper programs. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the Prime Money Market Fund's
investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
PRIME MONEY
MARKET FUND? The main risks of investing in the Prime Money Market
Fund and the circumstances likely to adversely affect
your investment are described below. Before you invest,
please read "More About the Funds" and "Investment
Risks."
<PAGE> 324
3
- ---------------------------
Prime Money Market Fund
MAIN RISKS
- ----------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Concentration. The Fund will invest a significant
portion of its assets in the securities of companies in
the financial services industry. Because of the Fund's
greater exposure to that industry, economic, political
and regulatory developments affecting the financial
services industry will have a disproportionate impact on
the Fund. These developments include changes in interest
rates, earlier than expected repayments by borrowers, an
inability to achieve the same yield on the reinvestment
of prepaid obligations, and Federal and state laws which
may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 325
4
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Prime Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
return for more than one year
tend to smooth out variations
in the Fund's total returns and
are not the same as actual
year- by-year results.
HOW HAS THE PRIME
MONEY MARKET FUND
PERFORMED? By showing the variability of the Prime Money Market
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE PRIME
MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 9.05
1990 7.90
1991 5.88
1992 3.58
1993 2.97
1994 4.09
1995 5.83
1996 5.20
1997 5.32
1998 5.30
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.56%.
- --------------------------------------------------------------------------------
Best Quarter: 2.34% 2Q1989 Worst
Quarter: .72% 2Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C> <C>
One Group Prime Money Market Fund 5.04% 4.89% 4.34%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
CLASS B 1 YEAR LIFE
(since 11/21/96)
<S> <C> <C> <C> <C>
One Group Prime Money Market Fund 4.25% 4.32%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
(since 8/1/85)
<S> <C> <C> <C> <C>
One Group Prime Money Market Fund 5.30% 5.15% 5.50% 5.73%
</TABLE>
(1) The Fund also offers Service Class Shares.
Service Class Shares commenced operations on
April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 326
5
- ---------------------------
Prime Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------------------
SERVICE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS CLASS I
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE 5.00% 1.00% NONE NONE
--------------------------------------------------------------------------------------------------------
as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------------------
SERVICE
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS B CLASS C CLASS CLASS I
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35% .35%
------------------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% 1.00% 1.00% .75% NONE
------------------------------------------------------------------------------------------------------------
Other Expenses .19% .19% .19% .19% .19%
------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .79% 1.54% 1.54% 1.29% .54%
------------------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (3) (.02%) (.02%) (.02%) (.22%) (.02%)
------------------------------------------------------------------------------------------------------------
Net Expenses .77% 1.52% 1.52% 1.07% .52%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.77% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, 1.07% for
Service Class shares and .52% for Class I shares
for the period beginning November 1, 1999 and
ending on October 31, 2000.
<TABLE>
<CAPTION>
SERVICE
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS (3) CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 79 $ 655 $ 155 $ 255 $ 155 $ 109 $ 53
--------------------------------------------------------------------------------------------------------------------
3 Years 250 784 484 484 484 387 171
--------------------------------------------------------------------------------------------------------------------
5 Years 437 1,038 838 838 838 686 300
--------------------------------------------------------------------------------------------------------------------
10 Years 976 1,631 1,631 1,833 1,833 1,537 675
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $81
Class B (no redemption) $157
Class B (with redemption) $657
Class C (no redemption) $157
Class C (with redemption) $257
Service Class $131
Class I $55
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 Years" example for Class B
shares represents a combination of Class A and
Class B operating expenses.
(3) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 327
6
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Treasury Securities
Money Market Fund
WHAT IS THE GOAL OF THE
U.S. TREASURY
SECURITIES
MONEY MARKET FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE U.S.
TREASURY SECURITIES
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests exclusively in short-term U. S.
Treasury obligations including repurchase agreements
collateralized by such Treasury obligations and
when-issued securities, U. S. Treasury bills, notes and
other securities issued or backed by the U. S.
Government. The Fund will comply with SEC rules
applicable to all money market funds including Rule 2a-7
under the Investment Company Act of 1940. For more
information about the U. S. Treasury Securities Money
Market Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
U.S. TREASURY
SECURITIES MONEY
MARKET FUND? The main risks of investing in the U. S. Treasury
Securities Money Market Fund and the circumstances
likely to adversely affect your investment are described
below. Before you invest, please read "More About the
Funds" and "Investment Risks."
<PAGE> 328
7
- ---------------------------
U.S. Treasury Securities Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 329
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
U.S. Treasury Securities Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE U.S. TREASURY
SECURITIES MONEY
MARKET FUND
PERFORMED? By showing the variability of the U. S. Treasury
Securities Money Market Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE U.S. TREASURY SECURITIES MONEY MARKET
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 8.80
1990 7.55
1991 5.51
1992 3.32
1993 2.81
1994 3.85
1995 5.62
1996 5.08
1997 5.13
1998 5.03
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.33%.
- --------------------------------------------------------------------------------
Best Quarter: 2.28% 2Q1989 Worst Quarter: .69% 2Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C> <C>
One Group U.S. Treasury Securities Money
Market Fund 4.77% 4.68% 4.14%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
CLASS B 1 YEAR LIFE
(since 11/21/96)
<S> <C> <C> <C> <C>
One Group U.S. Treasury Securities Money
Market Fund 3.99% 4.04%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 9/9/85)
<S> <C> <C> <C> <C>
One Group U.S. Treasury Securities Money
Market Fund 5.03% 4.94% 5.26% 5.46%
</TABLE>
(1) The Fund also offers Class C and Service Class
Shares. Class C Shares commenced operations on
February 18, 1998. Service Class Shares commenced
operations on April 16, 1999. Each Class does not
have a full calendar year of investment returns
as of the date of this Prospectus.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 330
9
- ---------------------------
U.S. Treasury Securities Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------------------
SERVICE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS CLASS I
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE 5.00% 1.00% NONE NONE
--------------------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE NONE
--------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------------------
SERVICE
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS B CLASS C CLASS CLASS I
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35% .35%
------------------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% 1.00% 1.00% .75% NONE
------------------------------------------------------------------------------------------------------------
Other Expenses .19% .19% .19% .19% .19%
------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .79% 1.54% 1.54% 1.29% .54%
------------------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.02%) (.02%) (.02%) (.02%) (.02%)
------------------------------------------------------------------------------------------------------------
Net Expenses .77% 1.52% 1.52% 1.07% .52%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.77% for Class A shares, 1.52% for Class B
shares, 1.52% for Class C shares, 1.07% for
Service Class shares and .52% for Class I shares
for the period beginning November 1, 1999 and
ending on October 31, 2000.
<TABLE>
<CAPTION>
SERVICE
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS (3) CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 79 $ 655 $ 155 $ 255 $ 155 $ 109 $ 53
--------------------------------------------------------------------------------------------------------------------
3 Years 250 784 484 484 484 387 171
--------------------------------------------------------------------------------------------------------------------
5 Years 437 1,038 838 838 838 686 300
--------------------------------------------------------------------------------------------------------------------
10 Years 976 1,631 1,631 1,833 1,833 1,537 675
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $81
Class B (no redemption) $157
Class B (with redemption) $657
Class C (no redemption) $157
Class C (with redemption) $257
Service Class $131
Class I $55
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 Years" example for Class B
shares represents a combination of Class A and
Class B operating expenses.
(3) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 331
10
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Money
Market Fund
WHAT IS THE GOAL OF THE
MUNICIPAL MONEY
MARKET FUND? The Fund seeks as high a level of current interest
income exempt from Federal income tax as is consistent
with liquidity and stability of principal.
WHAT ARE THE MUNICIPAL
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests in high quality, short-term money
market instruments. These instruments include short-term
municipal securities, which provide tax-exempt income.
The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the
Investment Company Act of 1940. For more information
about the Municipal Money Market Fund's investment
strategies, please read "More About the Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MUNICIPAL MONEY
MARKET FUND? The main risks of investing in the Municipal Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About the Funds" and
"Investment Risks."
<PAGE> 332
11
- ---------------------------
Municipal Money Market Fund
MAIN RISKS
- --------------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 333
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Municipal Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE MUNICIPAL
MONEY MARKET FUND
PERFORMED? By showing the variability of the Municipal Money Market
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
MUNICIPAL MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 6.11
1990 5.77
1991 4.37
1992 2.49
1993 2.10
1994 2.54
1995 3.60
1996 3.13
1997 3.31
1998 3.10
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.07%.
- --------------------------------------------------------------------------------
Best Quarter: 1.58% 2Q1989 Worst Quarter: .49% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 2/18/92)
<S> <C> <C> <C> <C>
One Group Municipal Money Market Fund 2.85% 2.89% 2.64%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS 10 YEARS LIFE
(since 6/4/87)
<S> <C> <C> <C> <C>
One Group Municipal Money Market Fund 3.10% 3.13% 3.64% 3.80%
</TABLE>
(1) The Fund also offers Service Class shares.
Service Class shares commenced operations on
April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT www.onegroup.com.
<PAGE> 334
13
- ---------------------------
Municipal Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
SERVICE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS C CLASS CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE 1.00% NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
SERVICE
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS C CLASS CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% 1.00% .75% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .80% 1.55% 1.30% .55%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.08%) (.08%) (.28%) (.08%)
--------------------------------------------------------------------------------------------------
Net Expenses .72% 1.47% 1.02% .47%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.72% for Class A shares, 1.47% for Class C
shares, 1.02% for Service Class shares and .47%
for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS (2) CLASS I
ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION
THE END OF
EACH PERIOD
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 74 $ 250 $ 150 $ 104 $ 48
----------------------------------------------------------------------------------------------
3 Years 247 482 482 384 168
----------------------------------------------------------------------------------------------
5 Years 436 837 837 686 299
----------------------------------------------------------------------------------------------
10 Years 982 1,839 1,839 1,543 682
----------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $56
</TABLE>
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 335
14
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Michigan Municipal Money Market Fund
WHAT IS THE GOAL OF THE
MICHIGAN MUNICIPAL
MONEY MARKET FUND? The Fund seeks as high a level of current interest
income exempt from Federal income tax and Michigan
personal income tax as is consistent with capital
preservation and stability of principal.
WHAT ARE THE MICHIGAN
MUNICIPAL MONEY
MARKET FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests in high quality, short-term money
market instruments. These include short-term municipal
securities issued in the State of Michigan. The Fund may
also invest in municipal securities issued by other
states. The Fund will comply with SEC rules applicable
to all money market funds, including Rule 2-a7 under the
Investment Company Act of 1940. For more information
about the Michigan Municipal Money Market Fund's
investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MICHIGAN MUNICIPAL
MONEY MARKET FUND? The main risks of investing in the Michigan Municipal
Money Market Fund and the circumstances likely to
adversely affect your investment are described below.
Before you invest, please read "More About the Funds"
and "Investment Risks."
<PAGE> 336
15
- ---------------------------
Michigan Municipal Money Market Fund
MAIN RISKS
- --------------------------
Large Positions/Geographic Concentration. As a single
state money market fund, this Fund is allowed by SEC
rules to invest a large portion of its assets in one
issuer. Because of these rules and the relatively small
number of issuers of Michigan municipal securities, the
Fund's performance is affected to a greater extent by
the success of one or a few issuers than is the
performance of a more diversified fund. Moreover,
because the Fund will concentrate in Michigan issuances,
certain factors particular to Michigan, including
economic conditions, constitutional amendments,
legislative and executive measures, and voter
initiatives in Michigan, may have a disproportionately
negative impact on the Fund's investments.
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 337
16
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Michigan Municipal Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated. Average
annual total return for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year- by-year
results.
HOW HAS THE MICHIGAN
MUNICIPAL MONEY
MARKET FUND
PERFORMED? By showing the variability of the Michigan Municipal
Money Market Fund's performance from year to year, the
chart and table below help show the risk of investing in
the Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF
THE MICHIGAN MUNICIPAL MONEY MARKET FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1992 2.40
1993 1.83
1994 2.30
1995 3.32
1996 2.99
1997 3.26
1998 3.02
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
1.86%.
(2) Performance data includes the performance of the
Pegasus Michigan Municipal Money Market Fund for
the period before it was consolidated with the
One Group Michigan Municipal Money Market Fund on
March 22, 1999.
- --------------------------------------------------------------------------------
Best Quarter: .97% 3Q1991 Worst Quarter: .43% 1Q1995
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 1/31/91)
<S> <C> <C> <C>
One Group Michigan Municipal Money
Market Fund 2.76% 2.86% 2.79%
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
1 YEAR 5 YEARS LIFE
CLASS I (since 1/31/91)
<S> <C> <C> <C>
One Group Michigan Municipal Money
Market Fund 3.02% 2.98% 2.86%
--------------------------------------------------------------------------------------
</TABLE>
(1) Performance data includes the performance of the
Pegasus Michigan Municipal Money Market Fund for
the period before it was consolidated with the
One Group Michigan Municipal Money Market Fund on
March 22, 1999.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 338
17
- ---------------------------
Michigan Municipal Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------------------------------------
SERVICE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS C CLASS CLASS I
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE 1.00% NONE NONE
----------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------------------------------------
SERVICE
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS C CLASS CLASS I
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .35% .35% .35% .35%
--------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% 1.00% .75% NONE
--------------------------------------------------------------------------------------------------
Other Expenses .29% .29% .29% .29%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .89% 1.64% 1.39% .64%
--------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement] (3) (.14%) (.14%) (.34%) (.14%)
--------------------------------------------------------------------------------------------------
Net Expenses .75% 1.50% 1.05% .50%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.75% for Class A shares, 1.50% for Class C
shares, 1.05% for Service Class Shares and .50%
for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS (2) CLASS I
ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION
THE END OF
EACH PERIOD
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 77 $ 253 $ 153 $ 107 $ 51
----------------------------------------------------------------------------------------------
3 Years 270 504 504 407 191
----------------------------------------------------------------------------------------------
5 Years 479 879 879 728 343
----------------------------------------------------------------------------------------------
10 Years 1,083 1,932 1,932 1,639 785
----------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $91
Class C (no redemption) $167
Class C (with redemption) $267
Service Class $142
Class I $65
</TABLE>
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 339
18
[PHOTO]
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Ohio Municipal
Money Market Fund
WHAT IS THE GOAL OF THE
OHIO MUNICIPAL MONEY
MARKET FUND? The Fund seeks as high a level of current interest
income exempt from Federal income tax and Ohio personal
income tax as is consistent with capital preservation
and stability of principal.
WHAT ARE THE OHIO
MUNICIPAL MONEY
MARKET FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests in high quality, short-term money
market instruments. These include short-term municipal
securities issued in the State of Ohio. The Fund may
also invest in municipal securities issued by other
states. The Fund will comply with SEC rules applicable
to all money market funds, including Rule 2a-7 under the
Investment Company Act of 1940. For more information
about the Ohio Municipal Money Market Fund's investment
strategies, please read "More About the Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
WILL ANY PORTION OF MY
INVESTMENT BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
OHIO
MUNICIPAL MONEY
MARKET FUND? The main risks of investing in the Ohio Municipal Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About the Funds" and
"Investment Risks."
<PAGE> 340
19
- ---------------------------
Ohio Municipal Money Market Fund
MAIN RISKS
- --------------------------
Large Positions/Geographically Concentrated. As a single
state money market fund, this Fund is allowed by SEC
rules to invest a large portion of its assets in one
issuer. Because of these rules and the relatively small
number of issuers of Ohio municipal securities, the
Fund's performance is affected to a greater extent by
the success of one or a few issuers than is the
performance of a more diversified fund. Moreover,
because the Fund will concentrate in Ohio issuances,
certain factors particular to Ohio, including economic
conditions, constitutional amendments, legislative and
executive measures and voter initiatives in Ohio, may
have a disproportionately negative impact on the Fund's
investments.
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 341
20
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Ohio Municipal Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE OHIO
MUNICIPAL MONEY
MARKET FUND
PERFORMED? By showing the variability of the Ohio Municipal Money
Market Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
OHIO MUNICIPAL MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1994 2.35
1995 3.30
1996 2.88
1997 3.08
1998 2.88
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.06%.
- -----------------------------------------------------------------------------
Best Quarter: .92% 2Q1995 Worst Quarter: .50% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS A (since 1/26/93)
<S> <C> <C> <C>
One Group Ohio Municipal Money Market Fund 2.88% 2.90% 2.77%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
(since 6/9/93)
<S> <C> <C> <C>
One Group Ohio Municipal Money Market Fund 3.14% 3.14% 3.05%
------------------------------------------------------------------------------------------------
</TABLE>
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 342
21
- ---------------------------
Ohio Municipal Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
period shown. The examples also
assume that your investment has
a 5% return each year and that
the Fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------------------------
SERVICE
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS C CLASS CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE 1.00% NONE NONE
--------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
SERVICE
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS C CLASS CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .30% .30% .30% .30%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% 1.00% .75% NONE
------------------------------------------------------------------------------------------------
Other Expenses .25% .25% .25% 25%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .80% 1.55% 1.30% .55%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (3) (.10%) (.10%) (.30%) (.10%)
------------------------------------------------------------------------------------------------
Net Expenses .70% 1.45% 1.00% .45%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.70% for Class A shares, 1.45% for Class C
shares, 1.00% for Service Class Shares and .45%
for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS C SERVICE CLASS (2) CLASS I
ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION
THE END OF
EACH PERIOD
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 72 $ 248 $ 148 $ 102 $ 46
----------------------------------------------------------------------------------------------
3 Years 245 480 480 382 166
----------------------------------------------------------------------------------------------
5 Years 434 835 835 684 297
----------------------------------------------------------------------------------------------
10 Years 980 1,837 1,837 1,541 680
----------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $56
</TABLE>
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 343
22
[PHOTO]
ONE GROUP(R)
- ---------------------------
More About The Funds
Each of the five funds described in this Prospectus is a
series of One Group Mutual Funds and is managed by Banc
One Investment Advisors Corporation ("Banc One
Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement
of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES The five mutual funds described in this Prospectus are
designed to produce high current income consistent with
liquidity or capital preservation and stability of
principal. The principal investment strategies that are
used to meet each Fund's investment objective are
described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are
also described below.
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve
"fundamental policies." A policy is
fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
may also use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only
in U.S. denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund invests exclusively in money market
instruments. These include:
1. corporate notes
2. commercial paper
3. funding agreements
4. certificates of deposit
5. bank obligations and deposit notes
- The Fund will invest at least 25% of its total assets
in securities issued by companies in the financial
services industry, although the Fund may invest less
than 25% of its total assets in that industry if
warranted due to adverse economic conditions and if
investing less than that amount would be in the best
interests of shareholders. The financial services
industry includes banks, broker-dealers, finance
companies and other issuers of asset-backed
securities.
<PAGE> 344
23
- The Fund may lend its portfolio's securities.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average weighted maturity,
the more fluctuation in share price you
can expect.
- -----
ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- -----
ONE GROUP MUNICIPAL MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- As a matter of fundamental policy, the Fund will
invest at least 80% of its total assets in municipal
securities.
- The Fund will purchase municipal securities only if
the issuer receives assurances from its legal counsel
that the interest payable on the securities is exempt
from Federal personal income tax.
- The Fund may invest as much as 100% of its assets in
municipal securities that produce income that is
subject to the Federal alternative minimum tax. If you
are subject to the Federal alternative minimum tax,
please read the section of this prospectus entitled
"Tax Treatment of Shareholders" before you invest.
- The Fund also may invest up to 20% of its total assets
in other types of securities, such as taxable money
market instruments, including repurchase agreements.
For a list of all the securities in which the Fund may
invest, please read "Investment Practices" in Appendix
A.
- -----
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund invests at least 80% of its total assets in
Michigan municipal securities.
- The Fund will purchase municipal securities only if
the issuer receives assurances from its legal counsel
that the interest payable on the securities is exempt
from Federal personal income tax and Michigan personal
income tax.
<PAGE> 345
24
- The Fund also may invest up to 20% of its total assets
in non-Michigan municipal securities, i.e., municipal
securities issued by states, territories and
possessions of the United States, including the
District of Columbia, other than Michigan as well as
their political subdivision, agencies,
instrumentalities and authorities that produce
interest exempt from Federal income tax.
- The Fund has the ability, for temporary defensive
purposes to invest as much as 100% of its assets in
non-Michigan municipal securities that produce income
that is subject to the Federal alternative minimum
tax, please read the section of this prospectus
entitled, "Tax Treatment of Shareholders" before you
invest.
- The Fund also may invest up to 20% of its total assets
in other types of securities, such as taxable money
market instruments, including repurchase agreements.
- -----
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund will invest at least 80% of its total assets
in Ohio municipal securities.
- The Fund will purchase municipal securities only if
the issuer receives assurances from its legal counsel
that the interest payable on the securities is exempt
from Federal personal income tax and Ohio personal
income tax.
- The Fund also may invest up to 20% of its total assets
in non-Ohio municipal securities, i.e., municipal
securities issued by states, territories and
possessions of the United States, including the
District of Columbia, other than Ohio, as well as
their political subdivisions, agencies,
instrumentalities and authorities that produce
interest exempt from Federal income tax.
- The Fund has the ability, for temporary defensive
purposes, to invest as much as 100% of its assets in
non-Ohio municipal securities that produce income that
is subject to the Federal alternative minimum tax. (If
you are subject to the Federal alternative minimum
tax, please read the section of this prospectus
entitled "Tax Treatment of Shareholders" before you
invest.)
- The Fund also may invest up to 20% of its total assets
in other types of securities, such as taxable money
market instruments, including repurchase agreements.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The main risks associated with investing in the Money
Market Funds are described in Fund Summaries:
Investments, Risk & Performance in the front of this
Prospectus. Additional risks are described below.
- -----
NET ASSET VALUE. There is no assurance that the Funds
will meet their investment objectives or be able to
maintain a net asset value of $1.00 per share on a
continuous basis.
<PAGE> 346
25
- -----
DIVERSIFICATION. The Ohio Municipal Money Market Fund
and the Michigan Municipal Money Market Fund may be less
diversified than money market funds that are not single
state funds. This is because a single state fund may
invest a significantly greater portion of its assets in
the securities of a single issuer than can a
"diversified" fund. In addition, each Fund's investments
are concentrated geographically. These concentrations
increase the risk of loss to each Fund if the issuer of
a security fails to make interest or principal payments
or if the market value of a security declines.
Investment in each Fund may entail more risks than an
investment in another type of money market fund.
- -----
THE OHIO ECONOMY. The Ohio Municipal Money Market Fund's
investments are concentrated in the State of Ohio. While
Ohio's economy has become increasingly diversified, it
continues to rely to a significant degree on durable
goods manufacturing, such as automobiles, tires, steel
and household appliances. These industries tend to be
cyclical. Agriculture also is an important part of the
Ohio economy, and the state has several programs that
provide financial assistance to farmers. Although
obligations issued by the state and its political
subdivisions are payable from specific sources or taxes,
future economic difficulties and the impact on state and
local government finances may negatively affect the
market value of the Ohio municipal securities held by
the Ohio Municipal Money Market Fund.
- -----
THE MICHIGAN ECONOMY. The Michigan Municipal Money
Market Fund's investments are concentrated in the State
of Michigan. The Michigan economy is heavily dependent
on the automobile industry, a highly cyclical industry.
This affects the revenue streams of the State and local
governments because of its impact on tax sources,
particularly sales taxes, income taxes, and Michigan
single business taxes. State and local revenues also are
affected by statutory and constitutional changes adopted
in 1993 and 1994, which limit annual assessment
increases and transfer, in part, the financing of
education costs from property taxes to sales taxes.
- -----
FIXED INCOME SECURITIES. Investments in fixed income
securities (for example, bonds) will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of the securities in the Fund, and the value of
your investment in a Fund, will increase and decrease as
the value of a Fund's investments increase and decrease.
- -----
DERIVATIVES. Funds other than the U.S. Treasury
Securities Money Market Fund invest in securities that
are considered to be DERIVATIVES. These securities may
be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
For more information about risks associated with the
types of investments that the Money Market Funds
purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of
Additional Information.
<PAGE> 347
26
- --------------------------------------------------------------------------------
INVESTMENT
POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net
asset value of $1.00 per share, although there is no
guarantee that the Funds will be able to do so.
2. Will not make loans, except that a Fund may (i)
purchase or hold debt instruments in accordance with
its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in
securities lending.
- -----
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Prime Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries (except that the Fund may concentrate
its investments in securities issued by companies in
the financial services industry). This does not
include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities,
domestic bank certificates of deposit or bankers'
acceptances, and repurchase agreements involving such
securities, municipal securities or governmental
guarantees of municipal securities. In addition,
private activity bonds backed only by the revenues
and assets of a non-governmental user will not be
deemed to be municipal securities.
The Prime Money Market Fund, the Municipal Money Market
Fund, and the U.S. Treasury Securities Money Market
Fund:
1. Will not purchase an issuer's securities if as a
result more than 5% of a Fund's total assets would be
invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting
securities of that issuer. This does not include
securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase
agreements involving these securities. This
restriction applies with respect to 75% of a Fund's
total assets. The Funds may invest the remaining 25%
of their total assets without regard to this
restriction as permitted by applicable law.
The U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and
repurchase agreements collateralized by such
obligations.
<PAGE> 348
27
The Ohio Municipal Money Market Fund and The Michigan
Municipal Money Market Fund:
1. Will not purchase an issuer's securities if as a
result more than 25% of its total assets would be
invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting
securities of that issuer. This does not include
securities issued or guaranteed by the United States,
its agencies or instrumentalities, securities of
registered investment companies, and repurchase
agreements involving these securities. This
restriction applies with respect to 50% of the Fund's
total assets. With respect to the remaining 50% of
its total assets, the Fund will not purchase an
issuer's securities if as a result more than 5% of
its total assets would be invested in the securities
of that issuer.
The Ohio Municipal Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries. This does not include municipal
securities or governmental guarantees of municipal
securities. In addition, private activity bonds
backed only by the assets and revenues of a
non-governmental user will not be deemed to be Ohio
municipal securities.
The Michigan Municipal Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries. This does not include municipal
securities or governmental guarantees of municipal
securities.
The Municipal Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries. This does not include municipal
securities or governmental guarantees of municipal
securities. In addition, private activity bonds
backed only by the revenues and assets of a
non-governmental user will not be deemed to be
municipal securities.
Additional investment policies can be found in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
AND MATURITY The quality and maturity of money market funds are
subject to SEC rules. Quality is generally restricted to
the two highest short-term ratings or their equivalent.
Maturity is limited both as to total portfolio average
and as to each individual security. With respect to
portfolio average, the rules limit the Fund's average
weighted maturity to 90 days. With respect to each
individual security, the remaining maturity is
restricted to 397 days at acquisition. Moreover, the SEC
rules limit exposure to a single issuer to 5% of a money
market fund's assets (although there is no limit on
government securities).
<PAGE> 349
28
- --------------------------------------------------------------------------------
TEMPORARY
DEFENSIVE
POSITIONS To respond to unusual market conditions, the Ohio
Municipal Money Market Fund, the Michigan Municipal
Money Market Fund, and the Municipal Money Market Fund
may take temporary defensive positions by:
- investing all or most of their assets in CASH
EQUIVALENTS (i.e., securities that are not municipal
securities).
- holding uninvested cash pending investment.
These investments may result in a lower yield than
lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
<PAGE> 350
29
[PHOTO]
ONE GROUP(R)
- ---------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES? - Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve and Christmas.
- Purchase requests will be effective on the day
received by The One Group Services Company and you
will be eligible to receive dividends declared the
same day, if such purchase orders are received by The
One Group Services Company:
(i) before 12:00 noon, Eastern Time ("ET"), for the
Municipal Money Market Fund, the Ohio Municipal
Money Market Fund and the Michigan Municipal Money
Market Fund; and
(ii) before 4:00 p.m., ET, for the Prime Money Market
Fund, and the U.S. Treasury Securities Money Market
Fund.
- In addition, the Funds' Custodian, State Street Bank
and Trust Company, must receive "federal funds" before
the times listed above on such day. If State Street
Bank and Trust Company does not receive federal funds
by the cut-off time, the purchase order will not be
effective until the next business day on which federal
funds are timely received by State Street Bank and
Trust Company.
- On occasion, the NYSE will close before 4 p.m. ET.
When the NYSE closes before the times listed above,
purchase requests received after the NYSE closes will
be effective the following business day.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
<PAGE> 351
30
- Shares are electronically recorded. Therefore,
certificates will not be issued.
WHAT KIND OF SHARES CAN
I BUY? One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to
the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
- Service Class shares are available to Intermediaries
purchasing shares on behalf of investors requiring
additional administrative or accounting services such
as sweep processing.
- When deciding what class of shares to buy, you should
consider the amount of your investment, the length of
time you intend to hold the shares, and the sales
charges and expenses applicable to each class of
shares.
One Group Fund Direct IRA and 403(b). One Group offers
retirement plans. This plan allows participants to defer
taxes while their retirement savings grow. Call The One
Group Services Company at 1-800-480-4111 for an Adoption
Agreement.
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV") plus a
sales charge, if any.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class. The Funds
use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able
to do so.
- NAV is calculated each business day as of:
(i) 12:00 noon ET for the Municipal Money Market Fund,
Ohio Municipal Money Market Fund and the Michigan
Municipal Money Market Fund; and
(ii) 4:00 p.m., ET for the Prime Money Market Fund, and
the U.S. Treasury Securities Money Market Fund.
On occasion, the NYSE will close before 4 p.m. ET. When
the NYSE closes before the times listed above, NAV will
be calculated as of the time the NYSE closes.
HOW DO I OPEN AN
ACCOUNT? 1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund
($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an
IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per
Fund.
- Class B shares may be purchased only in connection
with exchanges from Class B Shares of another fund.
This is because Class A shares are offered with no
sales charge and have lower expenses.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
<PAGE> 352
31
4. Send the completed application and a personal check
(unless you choose to pay by wire or bank transfer)
payable to "One Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
Contributions to Fund Direct IRAs should be made
payable to "State Street Bank and Trust Company for
the Benefit of (your name)."
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does
not accept "third party checks." Checks made payable
to any individual and endorsed to One Group are
considered third party checks. All checks must be
payable to one of the following:
- One Group Mutual Funds,
- State Street Bank and Trust Company, or
- the specific Fund in which you are investing.
Checks made payable to any party other than those
listed above will be returned to the address provided
on the account application.
6. If you redeem shares purchased under the systematic
investment plan (see below) or that were purchased by
check, One Group will delay forwarding your
redemption proceeds until payment has been collected
from your bank. One Group generally receives payment
within ten (10) calendar days of purchase.
7. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-800-480-4111.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-800-480-4111 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP 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.
<PAGE> 353
32
- You may revoke your right to make purchases over the
telephone by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CAN I AUTOMATICALLY
INVEST ON A
SYSTEMATIC BASIS? Yes. After your Account is established, you may purchase
additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account.
The minimum initial investment is still $1,000 per Fund,
but minimum automatic additions are only $25. The One
Group Services Company may waive these minimums. To
establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the
Account Application Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future. However, your
bank may impose a charge for debiting your bank
account.
- You may revoke your right to make systematic
investments by calling The One Group Services Company
at 1-800-480-4111 or by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
MAY I WRITE CHECKS ON
MY ACCOUNT? Class A shareholders may write checks for $250 or more.
- Checks may be payable to any person and your account
will continue to earn dividends until the check
clears.
- Checks are free, but your bank or the payee may charge
you for stop payment orders, insufficient funds, or
other valid reasons.
- You can not use this option to close your account
because of the difficulty of determining the exact
value of your account.
- You must wait ten (10) calendar days before you can
write a check against shares purchased by a check.
TO SELECT THIS OPTION: - Select the "Check Writing" option on the Account
Application Form
- Complete, sign and return a signature card and other
forms sent to you by State Street Bank and Trust
Company. You will receive a supply of checks that will
be drawn on State Street Bank and Trust Company.
CONVERSION FEATURE Your Class B shares automatically convert to Class A
shares after eight years (measured from the end of the
month in which they were purchased).
- After conversion, your shares will be subject to the
lower distribution and shareholder servicing fees
charged on Class A shares.
- You will not be assessed any sales charges or fees for
conversion of shares, nor will you be subject to any
Federal income tax.
<PAGE> 354
33
- If you have exchanged Class B shares of one Fund for
Class B shares of another, the time you held the
shares in each Fund will be added together.
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group Mutual
Funds. Compensation comes from sales charges, 12b-1 fees
and payments by The One Group Services Company from its
own resources. The tables below show the charges for
each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder
Servicing Agent. Class A shares do not assess a sales
charge.
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>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
-----------------------------------
1-2 4.00%
-----------------------------------
2-3 3.00%
-----------------------------------
3-4 3.00%
-----------------------------------
4-5 2.00%
-----------------------------------
5-6 1.00%
-----------------------------------
MORE THAN 6 0.00%
-----------------------------------
</TABLE>
The One Group Services Company pays a commission of
4.00% of the original purchase price to Shareholder
Servicing Agents who sell Class B shares.
CLASS C SHARES
- --------------------------------
Class C shares are offered at NAV, without any up-front
sales charge. However, if you redeem your shares within
one year of the purchase date, you will be assessed a
CDSC as follows:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE 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.
<PAGE> 355
34
- The CDSC is based on the net amount redeemed.
- A CDSC is not assessed on shares acquired through
reinvestment of dividends or capital gains
distributions.
- To keep your CDSC as low as possible, the Fund first
will redeem the shares you have held for the longest
time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an
unrelated mutual fund for Class B or Class C shares of
One Group in connection with a fund reorganization,
the CDSC applicable to your original shares (including
the period of time you have held those shares) will be
applied to One Group shares you receive in the
reorganization.
12B-1 FEES
- -----------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees for the sale and distribution of shares
of the Funds. These fees are called 12b-1 fees. 12b-1
fees are paid by One Group Mutual Funds to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of the average
daily net assets of the Fund.
2. Class B and Class C shares pay a 12b-1 fee of 1.00%
of the average daily net assets of the Fund. This
will cause expenses for Class B and Class C shares to
be higher and dividends to be lower than for Class A
shares.
3. Service Class shares pay a 12b-1 fee of .75% of the
average daily net assets of the Fund, which is
currently being waived to .55% for each Fund.
4. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help The One Group
Services Company sell Class B and Class C shares without
an "up-front" sales charge by defraying the costs of
advancing brokerage commissions and other expenses paid
to Shareholder Servicing Agents.
- The One Group Services Company may use up to .25% of
the fees for shareholder servicing and up to .75% for
distribution. During the last fiscal year, The One
Group Services Company received 12b-1 fees totaling
.25% and 1.00% of the average daily net assets of
Class A and Class B shares, respectively.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE> 356
35
- --------------------------------------------------------------------------------
SALES CHARGE
REDUCTIONS AND
WAIVERS
WAIVER OF THE CLASS B
SALES CHARGE
- -------------------------
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw, on an annual basis, no more than 10%
of the value of your account. Shares received from
dividend and capital gains reinvestment are included
in calculating amount eligible for this waiver. You
need to participate in the Systematic Withdrawal Plan
to take advantage of this waiver.
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
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I Pay A Sales Charge on an Exchange?
WAIVER OF THE CLASS C
SALES CHARGE
- -------------------------
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your
account. Shares received from dividend and capital
gains reinvestment are included in calculating
amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read Do I Pay A Sales Charge on an Exchange?
<PAGE> 357
36
7. If The One Group Services Company receives notice
before you invest indicating that your Shareholder
Servicing Agent, due to the type of account that you
have, is waiving its commission.
To take advantage of any of these sales charge waivers,
you must qualify for such waiver in advance. To see if
you qualify, contact The One Group Services Company at
1-800-480-4111 or your Shareholder Servicing Agent. The
waivers described above will not continue indefinitely
and may be discontinued at any time without notice.
- --------------------------------------------------------------------------------
EXCHANGING FUND
SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I
shares of that Fund or for Class A or Class I shares
of another One Group Fund, but only if you are
eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B
shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C
shares of another One Group Fund.
- Service Class shares do not have exchange privileges.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by:
(i) 12:00 noon ET, for the Municipal Money Market, the
Ohio Municipal Money Market and the Michigan
Municipal Money Market.
(ii) 4:00 p.m., ET for the Prime Money Market Fund and
the U.S. Treasury Securities Money Market Fund.
- You have provided One Group with all of the
information necessary to process the exchange.
- You have received a current prospectus of the Fund or
Funds in which you wish to invest.
- You have contacted your Shareholder Servicing Agent,
if necessary.
<PAGE> 358
37
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 that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
<PAGE> 359
38
- --------------------------------------------------------------------------------
REDEEMING FUND
SHARES
WHEN CAN I REDEEM
SHARES? You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before:
(i) 12:00 noon ET, for the Municipal Money Market, the
Ohio Municipal Money Market and the Michigan
Municipal Money Market
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and
the U.S. Treasury Securities Money Market Fund
will be effective that day. On occasion, the NYSE will
close before 4:00 p.m. ET. When the NYSE closes before
the times listed above, redemption requests received
after the NYSE closes will be effective the following
business day.
HOW DO I REDEEM SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
ONE GROUP
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
- All requests for redemptions from IRA accounts must
be in writing.
- You may request redemption forms by calling The One
Group Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or
less;
2. the redemption is payable to the shareholder of
record;
3. the redemption check is mailed to the shareholder
at the record address; or
4. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- Your redemption proceeds will ordinarily be paid
within seven days after receipt of the redemption
request. If you have wire instructions on file, the
Funds will attempt to honor requests for same day
payment if the request is received before the times
listed in When Can I Redeem Shares?. If redemption
requests are received after these times, the Funds
will attempt to wire payment the next business day.
<PAGE> 360
39
- The Funds also will attempt to honor requests for
payment in two business days, if the redemption
request is received after the time listed above.
WHAT WILL MY SHARES BE
WORTH? - If you own Class A and Class I shares and the Fund
receives your redemption request before the times
listed in When Can I Redeem Shares?, you will receive
that day's NAV.
- If you own Class B or Class C shares and the Fund
receives your redemption request before the times
listed in When Can I Redeem Shares?, you will receive
that day's NAV, minus the amount of any applicable
CDSC.
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-800-480-4111 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the
Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy
additional Class A shares while participating in a
Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than
10% of your account value annually. Shares received
from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable
Class B or Class C sales charge is waived provided
your withdrawals do not exceed 10% annually.
Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales
load.
<PAGE> 361
40
3.If you are age 70 1/2, you may elect to receive
payments to the extent that the payment represents a
minimum required distribution from an IRA or other
qualifying retirement plan.
4.If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $1,000 that are not participating
in a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account
fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
<PAGE> 362
41
DIVIDEND POLICIES
- ----------------------
DIVIDENDS. The Funds generally declare dividends on each
business day. Dividends are distributed on the first
business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share
basis. This means that the value of your shares will be
reduced by the amount of the payment. Dividends payable
on Class I shares will be more than those payable on
other classes of shares. This is because Class A, Class
B, Class C and Service Class shares have higher
distribution expenses.
DIVIDEND REINVESTMENT
- ----------------------
You automatically will receive all income dividends and
capital gain distributions in additional shares of the
same Fund and class, unless you have elected to take
such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record
date. Reinvested dividends and distributions receive the
same tax treatment as dividends and distributions paid
in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may change the way you receive dividends and
distributions by calling The One Group Services Company
at 1-800-480-4111.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B
shares received as dividends and capital gains
distributions will be accounted for separately. Each
time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of
the Class B shares in the sub-account will also convert
to Class A shares. (See "Conversion Feature.")
TAX TREATMENT
OF SHAREHOLDERS
- ----------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares may produce either a
taxable gain or a loss. You are responsible for any tax
liabilities generated by your transactions.
TAXATION OF DISTRIBUTIONS -- PRIME MONEY MARKET FUND
AND U.S. TREASURY SECURITIES MONEY MARKET FUND. Each
Fund will distribute substantially all of its net
investment income. Dividends you receive from a Fund,
whether reinvested or received in cash, will be taxable
to you. Dividends from a Fund's net investment income
(generally, all of the Fund's net investment income)
will be taxable as ordinary income. Dividends paid in
January, but declared in October, November or December
of the previous year, will be considered to have been
paid in the previous year.
TAXATION OF DIVIDENDS -- OHIO MUNICIPAL MONEY MARKET
FUND, MICHIGAN MUNICIPAL MONEY MARKET FUND AND
MUNICIPAL MONEY MARKET FUND. Each Fund will distribute
substantially all of its net investment income. These
Funds may pay "exempt-interest dividends" if at least
50% of the value of Fund assets at the end of each
quarter of the Fund's taxable year consists of
obligations the interest on which is excludable from
gross income. Exempt-interest dividends are generally
excludable from an investor's gross income for regular
Federal income tax purposes. However, the receipt of
exempt-interest dividends may cause recipients of Social
Security or Railroad Retirement benefits to be taxed on
a portion of such benefits. In addition, the receipt of
exempt-interest dividends may result in liability for
Federal alternative minimum tax 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.
<PAGE> 363
42
OHIO TAXATION OF DIVIDENDS -- OHIO MUNICIPAL MONEY
MARKET FUND. Dividends received from the Ohio Municipal
Money Market Fund that result from interest on Ohio
municipal securities are exempt from the Ohio personal
income tax. Some Ohio statutes provide that interest on
and gain from the sale of Ohio municipal securities is
exempt from all taxation in Ohio. Dividends that are
attributable to interest on or gain from the sale of
certain obligations issued under such statutes should be
exempt from Ohio personal income tax. Ohio
municipalities may not impose income taxes on dividends
on any intangible property (including such property of
the Fund) unless the intangible income was not exempt
from municipal income taxation before April 2, 1986 and
the tax was approved in an election held on November 8,
1988. Corporate shareholders will be required to include
the interest on Ohio municipal securities in their
alternative minimum-taxable income. In addition,
corporate shareholders must include the Fund shares in
the corporation's tax base for purposes of the Ohio
franchise tax net worth computation, but not for the net
income tax computation. Information in this paragraph is
based on current statutes and regulations as well as
current policies of the Ohio Department of Taxation, all
of which may change.
MICHIGAN TAXATION OF DIVIDENDS -- MICHIGAN MUNICIPAL
MONEY MARKET FUND. Dividends paid by the Michigan
Municipal Money Market Fund that are derived from
interest attributable to tax-exempt Michigan Municipal
Obligations will be exempt from Michigan income tax and
Michigan single business tax. Conversely, to the extent
that the Fund's dividends are derived from interest on
obligations other than Michigan Municipal Obligations or
certain U.S. Government Obligations (or are derived from
short term or long term gains), such dividends may be
subject to Michigan income tax and Michigan single
business tax, even though the dividends may be exempt
for Federal income tax purposes.
Except as noted above with respect to Michigan income
taxation, distributions of net income may be taxable to
investors as dividend income under other state or local
laws even though a substantial portion of such
distributions may be derived from interest on tax-exempt
obligations which, if realized directly, would be exempt
from such income taxes.
TAXATION OF RETIREMENT
- ----------------------
Distributions by the Funds to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual as described
in "Taxation of Distributions." If you are considering
purchasing shares of any money market funds,
particularly the Municipal, Michigan Municipal or Ohio
Municipal Money Market Funds, with qualified retirement
plan assets, you should consult your tax advisor for a
more complete explanation of the Federal, state, local
and (if applicable) foreign tax consequences of making
such an investment.
TAX INFORMATION
- ----------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
<PAGE> 364
43
SHAREHOLDER INQUIRIES
- ----------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111, or visit www.onegroup.com.
REPORTING
- ----------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 365
44
[PHOTO]
ONE GROUP(R)
- ---------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rate:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
AVERAGE DAILY NET ASSETS
FUND ----------------------------
<S> <C>
One Group(R) Prime Money Market Fund .32%
----------------------------------------------------------------------
One Group(R) U.S. Treasury Securities
Money Market Fund .32%
----------------------------------------------------------------------
One Group(R)Municipal Money Market Fund .26%
----------------------------------------------------------------------
One Group(R) Michigan Municipal Money
Market Fund* .22%
----------------------------------------------------------------------
One Group(R) Ohio Municipal Money Market
Fund .24%
----------------------------------------------------------------------
</TABLE>
()* In March 1999, the Pegasus Funds and One Group
Mutual Funds merged. The investment advisory fee
includes fees paid to First Chicago NBD
Investment Management Company, an affiliate of
Banc One Investment Advisors, as advisor to the
Pegasus Funds.
<PAGE> 366
45
- -----------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 367
46
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.046 0.050 0.048 0.051 0.050
Less Distributions:
Net investment income (0.046) (0.050) (0.048) (0.051) (0.050)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 4.72% 5.13% 4.94% 5.22% 5.08%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $3,171,028 $605,291 $332,646 $315,374 $201,968
Ratio of expenses to average net assets 0.75% 0.76% 0.73% 0.69% 0.67%
Ratio of net investment income to average net assets 4.47% 5.01% 4.83% 5.09% 5.02%
Ratio of expenses to average net assets* 0.79% 0.83% 0.91% 0.90% 0.92%
Ratio of net investment income to average net assets* 4.43% 4.94% 4.65% 4.88% 4.77%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED JUNE 30, 1996 TO
--------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.039 0.043 0.026
Less Distributions:
Net investment income (0.039) (0.043) (0.026)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Total Return 3.94% 4.35% 2.63%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 9,854 $ 1,912 $ 618
Ratio of expenses to average net assets 1.50% 1.51% 1.51%(C)
Ratio of net investment income to average net assets 3.80% 4.25% 4.16%(C)
Ratio of expenses to average net assets* 1.54% 1.57% 1.59%(C)
Ratio of net investment income to average net assets* 3.76% 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> 368
47
- -------------------------------------
Prime Money Market Fund
<TABLE>
<CAPTION>
APRIL 16,
1999 TO
JUNE 30,
SERVICE CLASS 1999(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.008
Less Distributions:
Net investment income (0.008)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------
Total Return 0.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 73
Ratio of expenses to average net assets 1.05%(C)
Ratio of net investment income to average net assets 4.02%(C)
Ratio of expenses to average net assets* 1.28%(C)
Ratio of net investment income to average net assets* 3.79%(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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.049 0.053 0.051 0.054 0.052
Less Distributions:
Net investment income (0.049) (0.053) (0.051) (0.054) (0.052)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 4.98% 5.39% 5.20% 5.49% 5.34%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $5,398,206 $2,616,698 $2,563,768 $2,186,562 $1,965,416
Ratio of expenses to average net assets 0.50% 0.51% 0.48% 0.44% 0.41%
Ratio of net investment income to average net
assets 4.79% 5.26% 5.08% 5.34% 5.27%
Ratio of expenses to average net assets* 0.54% 0.58% 0.56% 0.55% 0.57%
Ratio of net investment income average net assets* 4.75% 5.19% 5.00% 5.23% 5.12%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<PAGE> 369
48
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
U.S. Treasury Securities
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.043 0.048 0.047 0.050 0.047
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.043) (0.048) (0.047)(A) (0.050) (0.047)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 4.37% 4.92% 4.81% 5.08% 4.81%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,073,442 $861,350 $530,164 $110,864 $98,723
Ratio of expenses to average net assets 0.76% 0.77% 0.72% 0.67% 0.66%
Ratio of net investment income to average net assets 4.21% 4.82% 4.71% 4.92% 4.71%
Ratio of expenses to average net assets* 0.79% 0.86% 0.93% 0.91% 0.94%
Ratio of net investment income to average net assets* 4.18% 4.73% 4.50% 4.68% 4.43%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Includes $.000002 short term capital gain.
<TABLE>
<CAPTION>
NOVEMBER 21,
YEAR ENDED JUNE 30, 1996 TO
--------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.035 0.041 0.024
- ------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.035) (0.041) (0.024)(B)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------
Total Return 3.60% 4.14% 2.44%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 1,012 $ 181 $ 49
Ratio of expenses to average net assets 1.51% 1.52% 1.48%(D)
Ratio of net investment income to average net assets 3.43% 4.06% 3.97%(D)
Ratio of expenses to average net assets* 1.54% 1.60% 1.59%(D)
Ratio of net investment income to average net assets* 3.40% 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> 370
49
- -------------------------------------
U.S. Treasury Securities
Money Market Fund
<TABLE>
<CAPTION>
FEBRUARY 18,
YEAR ENDED 1998 TO
JUNE 30, JUNE 3,
CLASS C 1999 1999(A)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.0035 0.015
- -----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.0035) (0.015)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------
Total Return 3.59% 1.47%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 684 $ 1
Ratio of expenses to average net assets 1.51% 1.57%(C)
Ratio of net investment income to average net assets 3.35% 4.01%(C)
Ratio of expenses to average net assets* 1.54% 1.57%(C)
Ratio of net investment income to average net assets* 3.32% 4.01%(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.
<TABLE>
<CAPTION>
APRIL 16,
1999 TO
JUNE 30,
SERVICE CLASS 1999(A)
- ----------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.008
- ----------------------------------------------------------------------------------
Distributions:
Net investment income (0.008)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------
Total Return 0.77%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 5
Ratio of expenses to average net assets 1.06%(C)
Ratio of net investment income to average net assets 3.71%(C)
Ratio of expenses to average net assets* 1.27%(C)
Ratio of net investment income to average net assets* 3.50%(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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.045 0.051 0.050 0.052 0.050
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.045) (0.051) (0.050)(A) (0.052) (0.050)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 4.63% 5.19% 5.07% 5.34% 5.07%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $5,599,894 $3,025,608 $2,243,376 $1,844,590 $1,178,091
Ratio of expenses to average net assets 0.51% 0.52% 0.46% 0.42% 0.41%
Ratio of net investment income to average net
assets 4.52% 5.07% 4.95% 5.17% 4.96%
Ratio of expenses to average net assets* 0.54% 0.60% 0.57% 0.56% 0.59%
Ratio of net investment income to average net
assets* 4.49% 4.99% 4.84% 5.03% 4.78%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated. (A)
Includes $.000002 short term capital gain.
<PAGE> 371
50
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 A 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.026 0.030 0.029 0.030 0.030
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.026) (0.030) (0.029) (0.030) (0.030)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.63% 3.01% 2.97% 3.08% 3.02%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $428,448 $104,809 $48,185 $50,720 $56,518
Ratio of expenses to average net assets 0.70% 0.70% 0.68% 0.66% 0.66%
Ratio of net investment income to average net assets 2.59% 2.97% 2.91% 3.04% 3.01%
Ratio of expenses to average net assets* 0.80% 0.81% 0.90% 0.94% 0.94%
Ratio of net investment income to average net assets* 2.49% 2.86% 2.69% 2.76% 2.73%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
APRIL 16,
1999 TO
JUNE 30,
SERVICE CLASS 1999(A)
- --------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000
- --------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.005
- --------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.005)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000
- --------------------------------------------------------------------------------------
Total Return 0.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 36
Ratio of expenses to average net assets 1.00%(C)
Ratio of net investment income to average net assets 2.45%(C)
Ratio of expenses to average net assets* 1.29%(C)
Ratio of net investment income to average net assets* 2.16%(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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.028 0.032 0.031 0.033 0.032
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.028) (0.032) (0.031) (0.033) (0.032)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.88% 3.27% 3.19% 3.34% 3.28%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,077,205 $498,127 $467,420 $459,807 $437,743
Ratio of expenses to average net assets 0.46% 0.45% 0.43% 0.41% 0.41%
Ratio of net investment income to average net
assets 2.84% 3.22% 3.16% 3.29% 3.26%
Ratio of expenses to average net assets* 0.56% 0.56% 0.55% 0.59% 0.59%
Ratio of net investment income to average net
assets* 2.74% 3.11% 3.04% 3.11% 3.08%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<PAGE> 372
51
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Michigan Municipal
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
CLASS A 1999(C) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.012 0.027 0.030 0.029 0.033 0.024
Distributions:
Net investment income (0.012) (0.027) (0.030) (0.029) (0.033) (0.024)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 1.21%(A) 2.76% 3.00% 2.93% 3.32% 2.38%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $69,101 $64,283 $29,202 $72,089 $122,057 $78,640
Ratio of expenses to average net assets 0.75%(B) 0.75% 0.75% 0.74% 0.69% 0.67%
Ratio of net investment income to average net
assets 2.42%(B) 2.72% 2.95% 2.87% 3.30% 2.35%
Ratio of expenses to average net assets* 0.84%(B) 0.78% 0.79% 0.77% 0.76% 0.75%
Ratio of net investment income to average net
assets* 2.33%(B) 2.69% 2.91% 2.84% 3.23% 2.27%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Not annualized. (B) Annualized. (C) Upon reorganizing as a fund of One
Group, the Pegasus Michigan Municipal Money Market Fund became One Group
Michigan Municipal Money Market Fund. Financial highlights for periods
prior to March 22, 1999 represent the Pegasus Michigan Municipal Money
Market Fund.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED MARCH 30,
ENDED DECEMBER 31, 1996 TO
JUNE 30, -------------------- DECEMBER 31,
CLASS I 1999(D) 1998 1997 1996(A)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.013 0.030 0.032 0.023
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.013) (0.030) (0.032) (0.023)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000
- --------------------------------------------------------------------------------------------------------------------------
Total Return 1.34%(B) 3.02% 3.26% 3.03%(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 91,211 $110,833 $74,888 $ 49,521
Ratio of expenses to average net assets 0.49%(C) 0.50% 0.50% 0.59%(C)
Ratio of net investment income to average net assets 2.65%(C) 2.97% 3.20% 3.02%(C)
Ratio of expenses to average net assets* 0.57%(C) 0.53% 0.54% 0.62%(C)
Ratio of net investment income to average net assets* 2.57%(C) 2.94% 3.16% 2.99%(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. (D) Upon reorganizing as a fund of One Group, the Pegasus
Michigan Municipal Money Market Fund became One Group Michigan Municipal
Money Market Fund. Financial highlights for periods prior to March 22, 1999
represent the Pegasus Michigan Municipal Money Market Fund.
<PAGE> 373
52
[PHOTO]
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Ohio Municipal Money
Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Funds' financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
CLASS A 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.026 0.030 0.029 0.030 0.029
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.026) (0.030) (0.029) (0.029) (0.029)
In excess of net investment income - - (0.001) -
Total Distributions (0.026) (0.030) (0.029) (0.030) (0.029)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 2.62% 3.06% 2.96% 3.08% 2.98%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $37,180 $39,100 $30,479 $41,132 $35,790
Ratio of expenses to average net assets 0.67% 0.65% 0.65% 0.66% 0.63%
Ratio of net investment income to average net assets 2.60% 2.98% 2.90% 2.94% 2.91%
Ratio of expenses to average net assets* 0.80% 0.78% 0.88% 1.06% 0.95%
Ratio of net investment income to average net assets* 2.47% 2.85% 2.67% 2.54% 2.58%
</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 I 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.028 0.033 0.032 0.033 0.032
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.028) (0.033) (0.032) (0.032) (0.032)
In excess of net investment income - - (0.001) -
Total Distributions (0.028) (0.033) (0.032) (0.033) (0.032)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 2.88% 3.31% 3.22% 3.34% 3.20%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $55,745 $77,224 $56,442 $55,915 $51,806
Ratio of expenses to average net assets 0.42% 0.40% 0.40% 0.41% 0.41%
Ratio of net investment income to average net assets 2.85% 3.27% 3.17% 3.19% 3.13%
Ratio of expenses to average net assets* 0.55% 0.53% 0.53% 0.71% 0.60%
Ratio of net investment income to average net assets* 2.72% 3.14% 3.04% 2.89% 2.94%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<PAGE> 374
53
photo
ONE GROUP(R)
- ------------------------------------
Appendix A
--------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Prime Money Market Fund 1
------------------------------------------------------
One Group(R) U.S. Treasury Securities
Money Market Fund 2
------------------------------------------------------
One Group(R) Municipal Money Market Fund 3
------------------------------------------------------
One Group(R) Michigan Municipal Money
Market Fund 4
------------------------------------------------------
One Group(R) Ohio Municipal Money Market
Fund 5
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-5 Market
STRIPS, and CUBES. The U.S. Treasury Securities
Money Market Fund does not buy STRIPS and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS, and CATS. 1, 3-5 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1, 3-5 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments 1, 3-5 Market
with a stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1, 3-5 Liquidity
bank in exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 375
54
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreements: The purchase of a security 1-5 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1, 2 Market
security and the simultaneous commitment to buy Leverage
the security back at an agreed upon price on an
agreed upon date. This is treated as a borrowing
by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% 1 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities and/or letters Leverage
of credit as collateral.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1, 3-5 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1, 3-5 Market
money market mutual funds, including One Group
money market funds and shares of other money
market funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for
which it serves as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes 1, 3-5 Market
which normally mature within a short period of Credit
time (e.g., 1 month) but which may be extended by Liquidity
the issuer for a maximum maturity of thirteen
months.
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1, 3-5 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1, 3-5 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 376
55
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign Securities: Commercial paper of foreign 1, 3-5 Market
issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign
Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1, 3-5 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A
securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1, 3-5 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1, 3-5 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1, 3-5 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 1, 3-5 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, other
short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued 1 Market
by banks and highly rated insurance companies such Credit
as Guaranteed Investment Contracts ("GICs") and Liquidity
Bank Investment Contracts ("BICs").
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 377
56
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Participation Interests: Interests in municipal 1, 3-5 Credit
securities, including municipal leases, from Tax
financial institutions such as commercial and Market
investment banks, savings and loan associations
and insurance companies. These interests may take
the form of participations, beneficial interests
in a trust, partnership interests or any other
form of indirect ownership that allows the Funds
to treat the income from the investment as exempt
from Federal Income Tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1, 3-5 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price and
liquidity of a security can be adversely affected
prior to actual default as its credit status
deteriorates and the probability of default rises.
- Leverage Risk. The risk associated with securities or
practices (such as borrowing) that multiply small
index or market movements into large changes in value.
- Liquidity Risk. The risk that certain securities may
be difficult or impossible to sell at the time and the
price that normally prevails in the market. The seller
may have to lower the price, sell other securities
instead or forego an investment opportunity, any of
which could have a negative effect on fund management
or performance. This includes the risk of missing out
on an investment opportunity because the assets
necessary to take advantage of it are tied up in less
advantageous investments.
- Management Risk. The risk that a strategy used by a
fund's management may fail to produce the intended
result. This includes the risk that changes in the
value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result
in unanticipated risks.
<PAGE> 378
57
- 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.
<PAGE> 379
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling 1
800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-123 [ONE GROUP LOGO]
<PAGE> 380
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TREASURY PRIME MONEY MARKET FUND
ONE GROUP(R) U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 381
TABLE OF CONTENTS
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Treasury Prime Money Market Fund
One Group U. S. Government Securities Money Market Fund
MORE ABOUT THE FUNDS
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 382
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TREASURY PRIME MONEY MARKET FUND
WHAT IS THE GOAL OF THE TREASURY PRIME MONEY MARKET FUND?
The Fund seeks high current income with liquidity and stability of principal.
WHAT ARE THE TREASURY PRIME MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in U. S. Treasury bills, notes, and bonds. The Fund does not
engage in repurchase transactions. The Fund will comply with SEC rules
applicable to all money market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the Treasury Prime Money Market
Fund's investment strategies, please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TREASURY PRIME MONEY MARKET FUND?
The main risks of investing in the Treasury Prime Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About the Funds" and "Investment Risks."
Interest Rate Risk. The yield paid by the Fund will increase or decrease
with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
HOW HAS THE TREASURY PRIME MONEY MARKET FUND PERFORMED?
The Treasury Prime Money Market Fund had not begun operations as of June 30,
1999. Therefore, the performance that normally would be provided in this Section
is unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-800-480-4111 or visit www.onegroup.com.
3
<PAGE> 383
FEES AND EXPENSES OF THE TREASURY PRIME MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price) none none none none
Maximum Deferred Sales
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable) none 1.00% none none
Redemption Fee none none none none
Exchange Fee none none none none
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or Service]
(12b-1) Fees .25% 1.00% .75% none
Other Expenses .20% .20% .20% .20%
Total Annual Fund Operating
Expenses .80% 1.55% 1.30% .55%
Fee Waiver and/or Expense
Reimbursement(3) (.03%) (.03%) (.23%) (.03%)
Net Expenses .77% 1.52% 1.07% .52%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, 1.52% for Class C
shares, 1.07% for Service Class shares, and .52% for Class I shares, for the
period beginning November 1, 1999 and ending on October 31, 2000.
4
<PAGE> 384
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or continued to
hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 255 $ 109 $ 53
3 Years $252 $ 487 $ 487 $ 389 $ 173
5 Years $441 $ 842 $ 842 $ 691 $ 304
10 Years $987 $1,843 $1,843 $1,548 $ 686
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $ 56
(2) Because of the nature of the shares, investors are not expected to remain
in Service Class shares for more than a very limited period of time.
5
<PAGE> 385
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
WHAT IS THE GOAL OF THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND?
The Fund seeks high current income consistent with liquidity and stability of
principal.
WHAT ARE THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND'S MAIN INVESTMENT
STRATEGIES?
The Fund invests in short-term securities issued or guaranteed by the U. S.
Government, its agencies or instrumentalities; and repurchase agreements
relating to such securities. The Fund will comply with SEC rules applicable to
all money market funds, including Rule 2a-7 under the Investment Company Act of
1940. For more information about the U. S. Government Securities Fund's
investment strategies, please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE U. S. GOVERNMENT SECURITIES MONEY
MARKET FUND?
The main risks of investing in the U. S. Government Securities Money Market Fund
and the circumstances likely to adversely affect your investment are described
below. Before you invest, please read "More About the Funds" and "Investment
Risks."
Interest Rate Risk. The yield paid by the Fund will increase or decrease
with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on
a continuous basis.
Not FDIC Insured. An investment in the Fund is not a deposit of Bank One
Corporation or any of its subsidiaries and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other governmental agency.
Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
HOW HAS THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND PERFORMED?
The U. S. Government Securities Money Market Fund had not begun operations as of
June 30, 1999. Therefore, the performance that normally would be provided in
this Section is unavailable. However, to obtain the Fund's current yield
information, please call toll-free 1-800-480-4111 or visit www.onegroup.com.
6
<PAGE> 386
FEES AND EXPENSES OF THE U. S. GOVERNMENT SECURITIES MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS C SERVICE CLASS CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) none none none none
Imposed on Purchases (as a
percentage of offering
price)
Maximum Deferred Sales none 1.00% none none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(2)
Investment Advisory Fees .35% .35% .35% .35%
Distribution [and/or
Service] (12b-1) Fees .25% 1.00% .75% none
Other Expenses .20% .20% .20% .20%
Total Annual Fund Operating
Expenses .80% 1.55% 1.30% .55%
Fee Waiver and/or Expense
Reimbursement(3) (.03%) (.03%) (.23%) (.03%)
Net Expenses .77% 1.52% 1.07% .52%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a
$7.00 charge may be deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect current fees.
(3) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual
fund operating expenses to .77% for Class A shares, 1.52% for Class C
shares, 1.07% for Service Class shares, and .52% for Class I shares, for the
period beginning November 1, 1999 and ending on October 31, 2000.
7
<PAGE> 387
Example: The examples are intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in the Fund for the time periods indicated and reflect
what you would pay if you either redeemed all of your shares or continued to
hold them at the end of the periods shown. The examples also assume that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Your actual costs may be higher or lower than those shown
below. There is no sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS A CLASS C SERVICE CLASS(2) CLASS I
Assuming no Assuming
redemption redemption at the
end of each period
<S> <C> <C> <C> <C> <C>
1 Year(1) $ 79 $ 155 $ 255 $ 109 $ 53
3 Years $252 $ 487 $ 487 $ 389 $ 173
5 Years $441 $ 842 $ 842 $ 691 $ 304
10 Years $987 $1,843 $1,843 $1,548 $ 686
- ---------------------------------------------------------------------------------------------------
</TABLE>
1 Without contractual fee waivers, 1 year expenses would be as follows:
Class A $ 82
Class C (no redemption) $158
Class C (with redemption) $258
Service Class $132
Class I $ 56
2 Because of the nature of the shares, investors are not expected to remain
in Service Class shares for more than a very limited period of time.
8
<PAGE> 388
MORE ABOUT THE FUNDS
Each of the two funds described in this Prospectus is a series of One Group
Mutual Funds ("One Group") and is managed by Banc One Investment Advisors
Corporation ("Banc One Investment Advisors"). For more information about One
Group and Banc One Investment Advisors, please read "Management of the Funds"
and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The two mutual funds described in this Prospectus are designed to produce high
current income consistent with liquidity or capital preservation and stability
of principal. The principal investment strategies that are used to meet each
Fund's investment objective are described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are also described below.
-----------------------------------------------------------
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve "fundamental
policies". A policy is fundamental if it cannot be changed
without the consent of a majority of the outstanding shares
of the Fund.
-----------------------------------------------------------
There can be no assurance that the Funds will achieve their investment
objectives. Please note that each Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
-----------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current
maturities (that is, the term of the securities) of the
individual securities in a fund. Average weighted maturity
is important to investors as an indication of a fund's
sensitivity to changes in interest rates. The longer the
average weighted maturity, the more fluctuation in share
price you can expect.
-----------------------------------------------------------
ONE GROUP TREASURY PRIME MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the securities held
by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less
- The Fund will acquire only those securities that are issued or
guaranteed by the U. S. Treasury.
- The Fund does not invest in securities subject to repurchase
agreements.
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the securities held
by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less
- The Fund will acquire only those securities that are issued or
guaranteed by the U. S. Government or its agencies or
instrumentalities, some of which may be subject to repurchase
agreements.
INVESTMENT RISKS. The main risks associated with investing in the Money Market
Funds are described in Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described below.
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
PORTFOLIO TURNOVER: The Funds attempt to increase yield by taking advantage of
short-term market variations. This policy is expected to result in high
portfolio turnover. However, this should not adversely affect the Funds because
they usually do not pay brokerage commissions when purchasing U.S. government
securities.
9
<PAGE> 389
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
DERIVATIVES. The U. S. Government Securities Money Market Fund invest in
securities that are considered to be DERIVATIVES. These securities may be more
volatile than other investments. Derivatives present, to varying degrees,
market, credit, leverage, liquidity, and management risks.
-----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
-----------------------------------------------------------
For more information about risks associated with the types of investments that
the Money Market Funds purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of Additional Information.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of
$1.00 per share, although there is no guarantee that the Funds will be
able to do so.
2. Will not, with respect to 75% of a Fund's total assets, purchase the
securities of an issuer if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that
issuer, except as otherwise permitted by applicable law or regulation.
This does not include securities issued or guaranteed by the United
States, its agencies and instrumentalities, and repurchase agreements
involving these securities.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net assets.
4. Will not borrow money or issue senior securities, except that the
Funds may borrow from banks for temporary purposes in amounts not
exceeding 10% of their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in
connection with borrowing specified in 4 above and in amounts not in
excess of the lesser of the dollar amount borrowed or 10% of the value
of the respective Fund's total assets at the time of its borrowing.
PORTFOLIO MATURITY. The maturity of money market funds are subject to SEC rules.
Maturity is limited both as to total portfolio average and as to each individual
security. With respect to portfolio average, the rules limit the Fund's average
weighted maturity to 90 days. With respect to each individual security, the
remaining maturity is restricted to 397 days at acquisition. Moreover, the SEC
rules limit exposure to a single issuer to 5% of a money market fund's assets
(although there is no limit on government securities).
10
<PAGE> 390
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which
the New York Stock Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, Christmas Eve, and Christmas.
- Purchase requests will be effective on the day received by The One
Group Services Company and you will be eligible to receive dividends
declared the same day, if such purchase orders are received by The One
Group Services Company:
(i) before 2:00 p.m., ET, for the Treasury Prime Money Market Fund;
and
(ii) before 4:00 p.m., ET, for the U. S. Government Securities Money
Market Fund.
In addition, the Funds' Custodian, State Street Bank and Trust Company,
must receive "federal funds" before the times listed above on such day.
If State Street Bank and Trust Company does not receive federal funds
by the cut-off time, the purchase order will not be effective until the
next business day on which federal funds are timely received by State
Street Bank and Trust Company.
- On occasion, the NYSE will close before 4 p.m. ET. When the NYSE
closes before the times listed above, purchase requests received after
the NYSE closes will be effective the following business day.
- If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your
purchase or redemption order to the Fund. Your Shareholder Servicing
Agent may have an earlier cut-off time for purchase and redemption
requests.
- The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
- Shares are electronically recorded. Therefore, certificates will not
be issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- Class A and Class C shares are available to the general public.
- Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- Service Class shares are available to Intermediaries purchasing shares
on behalf of investors requiring additional administrative or
accounting services such as sweep processing.
- When deciding what class of shares to buy, you should consider the
amount of your investment, the length of time you intend to hold the
shares, and the sales charges and expenses applicable to each class of
shares.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
11
<PAGE> 391
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class. The Funds use their best
efforts to maintain their NAV at $1.00, although there is no guarantee that
they will be able to do so.
- - NAV is calculated each business day as of:
(i) 2:00 p.m., ET, for the Treasury Prime Money Market Fund; and
(ii) 4:00 p.m., ET, for the U. S. Government Securities Money Market
Fund.
On occasion, the NYSE will close before 4 p.m. ET. When the NYSE closes
before the times listed above, NAV will be calculated as of the time the
NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANK
ONE CORPORATION and its affiliates). The minimum initial investment
for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State Street
Bank and Trust Company for the Benefit of (your name)."
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual and endorsed to One Group
are considered third party checks. All checks must be payable to one of the
following:
- One Group Mutual Funds,
- State Street Bank and Trust Company, or
- The specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. Redemptions from a Fund will not be permitted for ten (10) calendar days if
purchases are made by check or under the Systematic Investment Plan (see
below).
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
12
<PAGE> 392
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- Send a personal check made payable to "One Group" to State Street Bank
and Trust Company (see address above), authorize a bank transfer, or
initiate a wire transfer to the following wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Treasury Prime Money
Market Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible for
any loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A and
Class C shares by making automatic monthly investments from your bank account.
The minimum initial investment is still $1,000, but minimum automatic additions
are only $25. The One Group Services Company may waive these minimums. To
establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the Account
Application Form.
- Provide the necessary information about the bank account from which
your investments will be made.
- Shares purchased under a Systematic Investment Plan may not be
redeemed for ten (10) calendar days.
- One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for
debiting your bank account.
- You may revoke your right to make systematic investments by calling
The One Group Services Company at 1-800-480-4111 or by sending a
letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
MAY I WRITE CHECKS ON MY ACCOUNT?
Class A shareholders may write checks for $250 or more.
- - Checks may be payable to any person and your account will continue to earn
dividends until the check clears.
- - Checks are free, but your bank or the payee may charge you for stop payment
orders, insufficient funds, or other valid reasons.
- - You can not use this option to close your account because of the difficulty
of determining the exact value of your account.
13
<PAGE> 393
- - You must wait ten (10) calendar days before you can write a check against
shares purchased by a check.
TO SELECT THIS OPTION:
- - Select the "Check Writing" option on the Account Application Form.
- - Complete, sign and return a signature card and other forms sent to you by
State Street Bank and Trust Company. You will receive a supply of checks
that will be drawn on State Street Bank and Trust Company.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a Contingent Deferred Sales Charge as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given month were made on
the first day of the month.
- The CDSC is based on the net amount redeemed.
- A sales charge is not assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
Shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
- If you exchange Class C shares of an unrelated mutual fund for Class C
shares of One Group in connection with a fund reorganization, the CDSC
applicable to your original shares (including the period of time you
have held those shares) will be applied to One Group shares you
receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12b-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds to The One Group Services Company as compensation for its
services and expenses. The One Group Services Company in turn pays all or part
of the 12b-1 fee to Shareholder Servicing Agents that sell shares of One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of the average daily net
assets of the Fund.
2. Class C shares pay a 12b-1 fee of 1.00% of the average daily net
assets of the Fund. This will cause expenses for Class C shares
to be higher and dividends to be lower than for Class A shares.
3. Service Class shares pay a 12b-1 fee of .75% of the average daily
net assets of the Fund, which is currently being waived to .55%
for each Fund.
4. There are no 12b-1 fees for Class I shares.
14
<PAGE> 394
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other expenses
paid to Shareholder Servicing Agents.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees totaling
.25% of the average daily net assets of Class A shares.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and to
Banc One Investment Advisors and its affiliates (or any sub-advisor) for
brokerage and other agency transactions.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need to participate in
the Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one
year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund Shares you received in the
exchange. Please read Do I Pay a Sales Charge on an Exchange?
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent. The waivers
described above will not continue indefinitely and may be discontinued at any
time without notice.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another One Group Fund, but
only if you are eligible to purchase those shares.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
- Service Class shares do not have exchange privileges.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your account application. To
learn more about it, please call The One Group Services Company at
1-800-480-4111.
15
<PAGE> 395
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by: (i) 4:00
p.m., ET.
- You have provided One Group with all of the information necessary to
process the exchange.
- You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- You will pay a sales charge if you own Class I shares of a Fund and
you want to exchange those shares for Class A shares, unless you
qualify for a sales charge waiver (see above).
- You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them
for shares of a Fund that does, in which case you would pay the
sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges you
have already paid.
- If you exchange Class B or Class C shares of a Fund, you will not pay
a sales charge at the time of the exchange, however:
1. Your new Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class C shares is
carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- An exchange between Funds is considered a sale and generally results
in a capital gain or loss for Federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group
limits excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
16
<PAGE> 396
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Funds are open for
business.
- Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
- Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank
and Trust Company at the following address:
One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- All requests for redemptions from IRA accounts must be in writing.
- You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in the
Securities Transfer Association Medallion Program or the Stock
Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Funds will attempt to honor requests for same day payment
if the request is received before 2:00 p.m., ET for the Treasury Prime
Money Market Fund and 4:00 p.m., ET for the U. S. Government
Securities Money Market Fund. If redemption requests are received
after these times, the Funds will attempt to wire payment the next
business day.
- The Funds also will attempt to honor requests for payment in two
business days, if the redemption request is received after the time
listed above.
WHAT WILL MY SHARES BE WORTH?
- The NAV of shares of the Funds is expected to remain constant at
$1.00 per share, although there is no assurance that this will
always be the case.
- If you own Class A, Service Class or Class I shares, you will
receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
- If you own Class C shares, you will receive the NAV calculated
after your redemption request is received, minus the amount of
any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
17
<PAGE> 397
- Call your Shareholder Servicing Agent or The One Group Service Company
at 1-800-480-4111 to relay your redemption request.
- Your redemption proceeds will be mailed or wired to the commercial
bank account you designated on your Account Application Form.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible for
any loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- Specify the amount you wish to receive and the frequency of the
payments.
- You may designate a person other than yourself as the payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan. This
is because Class A shares have an up-front sales charge.
2. If you own Class C shares, you or your designated payee may
receive systematic payments provided the payments are limited to
no more than 10% of your account value annually. Shares received
from dividend and capital gains reinvestment are included in
calculating the 10%. The applicable Class B or Class C sales
charge is waived provided your withdrawals do not exceed 10%
annually. Withdrawals in excess of 10% will subject the entire
annual withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments to the
extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned
by your account since the previous payment under the Systematic
Withdrawal Plan, payments will be made by redeeming some of your
shares. This will reduce the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- Generally, all redemptions will be for cash. However, if you redeem
shares worth $500,000 or more of a Fund's assets, the Fund reserves
the right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has
not yet received payment on the check, One Group will delay forwarding
your redemption proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small investments, One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account fee will not
apply to IRA accounts and the accounts of employees of Bank One
Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
18
<PAGE> 398
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.
19
<PAGE> 399
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B, Class C and Service Class
shares have higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You also may change the way you receive dividends
and distributions by calling The One Group Services Company at 1-800-480-4111.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares may produce either a taxable gain
or a loss. You are responsible for any tax liabilities generated by your
transactions.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income.
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (generally, all
of the Fund's net investment income) will be taxable as ordinary income.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for
tax-exempt treatment or by an individual who has received shares as a
distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
20
<PAGE> 400
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111, or visit "www.onegroup.com".
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
21
<PAGE> 401
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
22
<PAGE> 402
FINANCIAL HIGHLIGHTS
ONE GROUP TREASURY PRIME MONEY MARKET FUND Financial Highlights
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
23
<PAGE> 403
ONE GROUP U. S. GOVERNMENT SECURITIES MONEY MARKET FUND Financial Highlights
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 404
APPENDIX A
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
- --------- ---------
<S> <C>
One Group Treasury Prime Money Market Fund 1
One Group U. S. Government Securities Money Market Fund 2
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds. 1-2 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 2 Market
by agencies and instrumentalities of the U.S. Government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and 2 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 2 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money 2 Market
market mutual funds, including One Group money market funds
and shares of other money market funds for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for which it serves as investment
advisor.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 2 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 2 Pre-payment
by real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
</TABLE>
25
<PAGE> 405
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price and liquidity of a security can be adversely affected
prior to actual default as its credit status deteriorates and the
probability of default rises.
- - LEVERAGE RISK. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. For fixed
income securities, market risk is largely, but not exclusively, influenced
by changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in values.
Finally, key information about a security or market may be inaccurate or
unavailable. This is particularly relevant to investments in foreign
securities.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and
yield volatility. Pre-payments generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid, a Fund may have
to reinvest in securities with a lower yield. Further, with early
repayment, a Fund may fail to recoup any premium paid, resulting in an
unexpected capital loss.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a lender has when a borrower defaults on loans.
These laws include restrictions on foreclosures, redemption rights after
foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
26
<PAGE> 406
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by visiting www.onegroup.com, calling 1 800-480-4111 or by writing the
Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
27
<PAGE> 407
INSTITUTIONAL MONEY MARKET FUNDS
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
One Group(R) Institutional Prime Money Market Fund
One Group(R) Treasury Only Money Market Fund
One Group(R) Government Money Market Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES OF ANY OF THE FUNDS AS AN INVESTMENT
OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIME.
<PAGE> 408
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Institutional Prime Money Market Fund 2
---------
One Group Treasury Only Money Market Fund 6
---------
One Group Government Money Market Fund 10
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 14
---------
Investment Risks 15
---------
Investment Policies 16
---------
Portfolio Quality and Maturity 18
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 19
---------
Exchanging Fund Shares 21
---------
Redeeming Fund Shares 22
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 24
---------
Dividend Policies 24
---------
Tax Treatment of Shareholders 24
---------
Shareholder Inquires 25
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 26
---------
Year 2000 Readiness Disclosure 26
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 27
---------
APPENDIX A: INVESTMENT PRACTICES 30
---------
</TABLE>
<PAGE> 409
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 410
2
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Institutional Prime Money Market Fund
WHAT IS THE GOAL OF THE
INSTITUTIONAL PRIME
MONEY MARKET FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE
INSTITUTIONAL
PRIME MONEY MARKET
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests exclusively in high quality, short-term
money market instruments. These instruments include
commercial paper, bank obligations and deposit notes.
The Fund will comply with Securities and Exchange
("SEC") rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of
1940. The Fund will concentrate its investments in the
financial services industry, including asset-backed
commercial paper programs. For more information about
the Institutional Prime Money Market Fund's investment
strategies, please read "More About The Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INSTITUTIONAL PRIME
MONEY MARKET FUND? The main risks of investing in the Institutional Prime
Money Market Fund and the circumstances likely to
adversely affect your investment are described below.
Before you invest, please read "More About One Group
Mutual Funds" and "Investment Risks."
<PAGE> 411
3
- ---------------------------
Institutional Prime
Money Market Fund
MAIN RISKS
- --------------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Concentration. The Fund will invest a significant
portion of its assets in the securities of companies in
the financial services industry. Because of the Fund's
greater exposure to that industry, economic, political
and regulatory developments affecting the financial
services industry will have a disproportionate impact on
the Fund. These developments include changes in interest
rates, earlier than expected repayments by borrowers, an
inability to achieve the same yield on the reinvestment
of prepaid obligations, and Federal and state laws which
may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 412
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Institutional Prime
Money Market Fund
HOW HAS THE INSTITUTIONAL
PRIME MONEY MARKET
FUND PERFORMED? This section normally would include a bar chart and
average annual total return table. The Institutional
Prime Money Market Fund began operations on April 19,
1999 and did not have a full calendar year of investment
returns as of the date of this prospectus. However, to
obtain the Fund's current yield information, please call
toll-free 1-877-691-1118 or visit www.onegroup.com.
FEES AND EXPENSES This table describes the fees and expenses that you may
pay if you buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)(1) CLASS I CLASS S
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
---------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
---------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE
---------------------------------------------------------------------------------------
Exchange Fee NONE NONE
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)(2) CLASS I CLASS S
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .10% .10%
---------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
---------------------------------------------------------------------------------------
Other Expenses .15% .40%
---------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .25% .50%(3)
---------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement(4) (.07%) (.15%)
---------------------------------------------------------------------------------------
Net Expenses .18% .35%
---------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Class S shareholders pay a shareholder servicing
fee equal to .25% of the average daily net assets
of such shares. The services provided may include
providing reports and other information related
to the maintenance of shareholder accounts.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.18% for Class I shares and .35% for Class S
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<PAGE> 413
5
- ------------------------------------
INSTITUTIONAL PRIME
MONEY MARKET FUND
EXAMPLES
The examples are intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in the fund for the time periods indicated and reflect what you
would pay if you either redeemed all of your shares or continued to hold them at
the end of the periods shown. The examples also assume that your investment has
a 5% return each year and that the fund's operating expenses remain the same.
Your actual costs may be higher or lower than those shown below. There is no
sales charge (load) on reinvested dividends.
<TABLE>
<CAPTION>
CLASS I CLASS S
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 18 $ 36
----------------------------------------------
3 Years 73 145
----------------------------------------------
5 Years 134 265
----------------------------------------------
10 Years 311 614
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class I shares would be $26 and Class S
shares would be $51.
<PAGE> 414
6
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Only Money Market Fund
WHAT IS THE GOAL OF THE
TREASURY ONLY MONEY
MARKET FUND? The Fund seeks high current income with liquidity and
stability of principal with the added assurance of a
Fund that does not purchase securities that are subject
to repurchase agreements.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF
THE TREASURY ONLY
MONEY MARKET FUND? The Fund invests exclusively in short-term U.S. Treasury
bills, notes, and bonds. The Fund will comply with SEC
rules applicable to all money market funds, including
Rule 2a-7 under the Investment Company Act of 1940. For
more information about the Treasury Only Money Market
Fund's investment strategies, please read "More About
The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
TREASURY ONLY MONEY
MARKET FUND? The main risks of investing in the Treasury Only Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About One Group Mutual Funds"
and "Investment Risks."
<PAGE> 415
7
- ---------------------------
Treasury Only Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
<PAGE> 416
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Treasury Only Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year- by-year results.
HOW HAS THE TREASURY
ONLY MONEY MARKET
FUND PERFORMED? By showing the variability of the Treasury Only Money
Market Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
TREASURY ONLY MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ONE GROUP TREASURY ONLY MONEY MARKET FUND
-----------------------------------------
<S> <C>
1994 4.02
1995 5.67
1996 5.2
1997 5.28
1998 5.08
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.39%.
- --------------------------------------------------------------------------------
Best Quarter: 1.43% 2Q1995 Worst Quarter: .77% 4Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 4/16/93)
<S> <C> <C> <C>
One Group Treasury Only
Money Market Fund 5.08% 5.05% 4.80%
</TABLE>
(1) The Fund also offers Class S shares. Class S
shares had not commenced operations prior to the
date of this prospectus.
TO OBTAIN CURRENT YIELD INFORMATION, CALL
TOLL-FREE 1-877-691-1118 OR VISIT
WWW.ONEGROUP.COM.
<PAGE> 417
9
- ---------------------------
Treasury Only Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or continued to hold
them at the end of the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS I CLASS S
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
---------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
---------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE NONE
---------------------------------------------------------------------------------------
Exchange Fee NONE NONE
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS I CLASS S
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .08% .08%
---------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
---------------------------------------------------------------------------------------
Other Expenses .10% .35%(3)
---------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .18% .43%
---------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) NONE (.08%)
---------------------------------------------------------------------------------------
Net Expenses .18% .35%
---------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Class S shareholders pay a shareholder servicing
fee equal to .25% of the average daily net assets
of such shares. The services provided may include
providing reports and other information related
to the maintenance of shareholder accounts.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.18% for Class I shares and .35% for Class S
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I CLASS S
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 18 $ 36
---------------------------------------------------------------------------------------
3 Years 58 130
---------------------------------------------------------------------------------------
5 Years 101 233
---------------------------------------------------------------------------------------
10 Years 230 534
---------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class S shares would be $44.
<PAGE> 418
10
ONE GROUP(R)
- ---------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Government Money
Market Fund
WHAT IS THE GOAL OF THE
GOVERNMENT MONEY
MARKET FUND? The Fund seeks high current income with liquidity and
stability of principal.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF
THE GOVERNMENT MONEY
MARKET FUND? The Fund invests exclusively in high quality, short-term
securities that are issued or guaranteed by the U.S.
government or by U.S. government agencies and
instrumentalities. Some of the securities purchased by
the Fund may be subject to repurchase agreements. The
Fund will comply with SEC rules applicable to all money
market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the
Fund's investment strategies, please read "More About
The Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
GOVERNMENT MONEY
MARKET FUND? The main risks of investing in the Government Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About One Group Mutual Funds"
and "Investment Risks."
<PAGE> 419
11
- ---------------------------
Government Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
<PAGE> 420
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Government Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year- by-year results.
HOW HAS THE GOVERNMENT
MONEY MARKET FUND
PERFORMED? By showing the variability of the Government Money
Market Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
GOVERNMENT MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ONE GROUP GOVERNMENT MONEY MARKET FUND
--------------------------------------
<S> <C>
1994 4.24
1995 5.87
1996 5.42
1997 5.56
1998 5.47
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.72%.
- --------------------------------------------------------------------------------
Best Quarter: 1.47% 2Q1995 Worst Quarter: .81% 4Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1 ) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 6/14/93)
<S> <C> <C> <C>
One Group Government
Money Market Fund 5.47% 5.31% 5.10%
</TABLE>
(1) The Fund also offers Class S shares. Class S
shares had not commenced operations prior to the
date of this prospectus.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-877-691-1118 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 421
13
- ---------------------------
Government Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or continued to hold
them at the end of the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS I CLASS S
--------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
--------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
--------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
--------------------------------------------------------------------------
Exchange Fee NONE NONE
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS I CLASS S
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .08% .08%
-----------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE NONE
-----------------------------------------------------------------------------
Other Expenses .10% .35%(3)
-----------------------------------------------------------------------------
Total Annual Fund Operating Expenses .18% .43%
-----------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (4) NONE (.08%)
-----------------------------------------------------------------------------
Net Expenses .18% .35%
-----------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Class S shareholders pay a shareholder servicing
fee equal to .25% of the average daily net assets
of such shares. The services provided may include
providing reports and other information related
to the maintenance of shareholder accounts.
(4) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.18% for Class I shares and .35% for Class S
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I CLASS S
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 18 $ 36
----------------------------------------------
3 Years 58 130
----------------------------------------------
5 Years 101 233
----------------------------------------------
10 Years 230 534
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class S shares would be $44.
<PAGE> 422
14
ONE GROUP(R)
- ------------------------------------
MORE ABOUT THE FUNDS
Each of the three Funds described in this Prospectus is
a series of One Group Mutual Funds ("One Group") and is
managed by Banc One Investment Advisors Corporation
("Banc One Investment Advisors"). For more information
about One Group and Banc One Investment Advisors, please
read "Management of the Funds" and the Statement of
Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES The three mutual funds described in this Prospectus are
designed to produce high current income consistent with
liquidity and stability of principal. The principal
investment strategies that are used to meet each Fund's
investment objective are described in Fund Summaries:
Investments, Risk & Performance in the front of this
Prospectus. They are also described below.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
also may use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND. The
Fund invests only in U.S. dollar denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund invests exclusively in money market
instruments. These include, but are not limited to:
1. U.S. Treasury obligations and obligations issued or
guaranteed by U.S. agencies or instrumentalities.
2. mortgage backed securities.
3. commercial paper.
4. bank obligations and deposit notes.
5. notes/bonds.
6. medium term notes.
7. funding agreements.
8. domestic or Yankee or Euro certificates of deposit.
<PAGE> 423
15
- The Fund will invest at least 25% of its total assets
in securities issued by companies in the financial
services industry, although the Fund may invest less
than 25% of its total assets in that industry if
warranted due to adverse economic conditions and if
investing less than that amount would be in the best
interests of shareholders. The financial services
industry includes banks, broker-dealers, finance
companies and other issuers of asset-backed
securities.
- The Fund may lend its portfolio's securities.
- -----
ONE GROUP TREASURY ONLY MONEY MARKET FUND. The Fund
invests only in U.S. dollar denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund may lend its portfolio's securities.
- -----
ONE GROUP GOVERNMENT MONEY MARKET FUND. The Fund invests
only in U.S. dollar denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- In addition to fixed rate government securities, the
Fund also will invest in government securities that
are:
1. variable and floating rate instruments.
2. mortgage backed securities.
3. other money market funds that have similar
investment policies and objectives. These money
market funds must only invest in securities with
short-term ratings equivalent to or higher than in
which the Fund invests.
- The Fund may lend its portfolio's securities.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average weighted maturity,
the more fluctuation in yield you can
expect.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The main risks associated with investing in the
Institutional Money Market Funds are described in the
Fund Summaries: Investments, Risk & Performance in the
front of this Prospectus. Additional risks are described
below.
- -----
NET ASSET VALUE. There is no assurance that the Funds
will meet their investment objectives or be able to
maintain a net asset value of $1.00 per share on a
continuous basis.
<PAGE> 424
16
- -----
FIXED INCOME SECURITIES. Investments in fixed income
securities (for example, bonds) will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in a Fund will increase and
decrease as the value of a Fund's investments increase
and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are
subject to greater fluctuations in value when interest
rates change. Usually changes in the value of fixed
income securities will not affect cash income generated,
but may affect the value of your investment.
- -----
PREPAYMENT AND CALL RISK. As part of its investment
strategy, the Institutional Prime Money Market Fund
invests in mortgage-backed and asset-backed securities
and the Government Money Market Fund may invest in
mortgage-backed securities. These securities are subject
to prepayment and all risks. The issuers of these
securities may be able to repay principal early,
especially when interest rates fall. Changes in
prepayment rates can affect the return on investment and
yield of mortgage-backed and asset-backed securities.
When obligations are prepaid, the Fund may have to
reinvest in securities with lower yields. The Fund may
fail to recover premiums paid for the securities,
resulting in an unexpected capital loss.
- -----
DERIVATIVES. The Institutional Prime Money Market Fund
and the Government Money Market Fund may invest in
securities that are considered to be DERIVATIVES. These
securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit,
leverage, liquidity, and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
For more information about risks associated with the
types of investments that the Institutional Money Market
Funds purchase, please read the Fund Summaries:
Investments, Risk & Performance, Appendix A and the
Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
Each Fund:
1. Will use its best efforts to maintain a constant net
asset value of $1.00 per share, although there is no
guarantee that the Funds will be able to do so.
<PAGE> 425
17
2. Will not purchase the securities of an issuer if as a
result more than 5% of its total assets would be
invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting
securities of that issuer. This does not include
securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase
agreements involving these securities. This
restriction applies with respect to 75% of a Fund's
total assets. The Funds may invest the remaining 25%
of their total assets without regard to this
restriction as permitted by applicable law.
- -----
POLICIES OF SPECIFIC FUNDS
The Institutional Prime Money Market Fund:
1. Will not make loans, except that the Fund may (i)
purchase or hold debt instruments in accordance with
its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in
securities lending.
2. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries (except that the Fund may concentrate
its investments in securities issued by companies in
the financial services industry.) This does not
include obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities,
domestic bank certificates of deposit or banker's
acceptances, and repurchase agreements involving such
securities, municipal securities or governmental
guarantees of municipal securities. In addition,
private activity bonds backed only by the revenues
and assets of a non-governmental user will not be
deemed to be municipal securities.
The Treasury Only and Government Money Market Funds:
1. Will not purchase securities while borrowings
(including reverse repurchase agreements) exceed 5%
of the respective Fund's net assets.
2. Will not borrow money or issue senior securities,
except that the Funds may borrow from banks for
temporary purposes in amounts not exceeding 10% of
their total assets at the time of the borrowing.
3. Will not mortgage, pledge or hypothecate any assets,
except in connection with borrowing specified in 4
above and in amounts not in excess of the lesser of
the dollar amount borrowed or 10% of the value of the
respective Fund's total assets at the time of its
borrowing.
The Treasury Only Money Market Fund:
1. Will not purchase securities other than U.S. Treasury
bills and notes.
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.
<PAGE> 426
18
Additional investment policies can be found in the
Statement of Additional Information.
- -----
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of
its net assets in illiquid investments. A security is
illiquid if it cannot be sold at approximately the value
assessed by the Fund within seven (7) days. Banc One
Investment Advisors will follow guidelines adopted by
the Board of Trustees of One Group Mutual Funds in
determining whether an investment is illiquid.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
AND MATURITY The quality and maturity of money market funds are
subject to SEC rules. Quality is generally restricted to
the two highest short term ratings or their equivalent.
Maturity is limited both as to total portfolio average
and as to each individual security. With respect to
portfolio average, the rules limit the Fund's average
weighted maturity to 90 days. With respect to each
individual security, remaining maturity is restricted to
397 days at acquisition. Moreover, the SEC rules limit
exposure to a single issuer to 5% of a money market
fund's assets (although there is no limit on government
securities).
<PAGE> 427
19
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHO MAY PURCHASE FUND
SHARES? Fund shares may be purchased by:
- Institutional investors and other accredited
investors, including affiliates of Bank One
Corporation, that have opened accounts with the Fund's
transfer agent, State Street Bank and Trust Company,
either directly or through a Shareholder Servicing
Agent.
- If you have questions about eligibility, please call
The One Group Services Company at 1-877-691-1118.
WHEN CAN I BUY SHARES? - Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving, Christmas Eve and Christmas.
- Purchase requests will be effective on the day
received by The One Group Services Company and you
will be eligible to receive dividends declared the
same day, if such purchase orders are received by The
One Group Services Company:
(i) before 3:00 p.m. ET for the Treasury Only Money
Market Fund; and
(ii) before 5:00 p.m. ET for the Institutional Prime
and Government Money Market Funds.
- On occasion, the NYSE closes before 4:00 p.m. ET. When
the NYSE closes early, purchase requests received
after the NYSE closes will be effective the following
business day.
- 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.
<PAGE> 428
20
- 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.
WHAT KIND OF SHARES CAN I
BUY? One Group offers the following classes of shares:
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
refer to these entities as "Intermediaries".
- Class S shares are available to Intermediaries
purchasing shares on behalf of investors requiring
additional services.
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV").
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
(minus expenses) by the number of outstanding shares.
The Funds use their best efforts to maintain their NAV
at $1.00, although there is no guarantee that they
will be able to do so.
- NAV is calculated each business day as of 3:00 p.m. ET
for the Treasury Only and at 5:00 p.m. ET for all of
the Institutional Prime Money Market Fund and the
Government Money Market Fund.
HOW DO I OPEN AN
ACCOUNT?
1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000. You
also must maintain a minimum account balance of
$1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
4. Send the completed application and authorize a bank
transfer or initiate a wire transfer payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
5. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
6. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-877-691-1118.
<PAGE> 429
21
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-877-691-1118 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
payable to "One Group" to State Street Bank and Trust
Company to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY AND SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INSTITUTIONAL PRIME MONEY MARKET
FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the
telephone by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
- --------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may exchange your shares for shares of any other
Fund described in this prospectus.
- One Group may change the terms and conditions of your
exchange privileges upon 60 days written notice.
- One Group Funds offers a Systematic Exchange Privilege
which allows you to automatically exchange shares of
one fund to another on a monthly or quarterly basis.
This privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege,
please select it on your account application. To learn
more about it, please call The One Group Services
Company at 1-877-691-1118.
- One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by 3:00 p.m. ET.
- You have provided One Group with all of the
information necessary to process the exchange.
<PAGE> 430
22
- 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 3:00 p.m. ET for the Treasury Only
Money Market Fund and 5:00 p.m. ET for the
Institutional Prime and Government Money Market Funds,
will be effective that day.
HOW DO I REDEEM SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
- You may request redemption forms by calling The One
Group Services Company at 1-877-691-1118
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is payable to the shareholder of
record;
2. the redemption check is mailed to the shareholder
at the record address; or
3. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
<PAGE> 431
23
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. A designated commercial bank; or
2. Your Shareholder Servicing Agent.
- Your redemption proceeds will ordinarily be paid
within seven days after receipt of the redemption
request. If you have wire instructions on file, the
Funds will attempt to honor requests for same day
payment if the request is received before 3:00 p.m. ET
for the Treasury Only Money Market Fund and 5:00 p.m.
ET for the Institutional Prime and Government Money
Market Funds. If redemption requests are received
after those times, the Funds will attempt to wire
payment the next business day.
WHAT WILL MY SHARES BE
WORTH? - The NAV of shares of the Funds is expected to remain
constant at $1.00 per share, although there is no
assurance that this will always be the case.
- You will receive the NAV calculated after your
redemption request is received. Please read "How Much
Do Shares Cost?"
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Services Company at 1-877-691-1118 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank. One Group generally receives payment within ten
(10) calendar days of purchase.
- 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.
<PAGE> 432
24
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.
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. Dividends payable on Class I shares will be
more than those payable on Class S shares. This is
because Class S shares have higher expenses.
The Funds generally declare dividends each business day.
Dividends are distributed on the first business day of
the next month after they are declared. Capital gains,
if any, for all Funds are distributed at least annually.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You may change the way you receive dividends and
distributions by calling The One Group Services Company
at 1-877-691-1118.
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in
cash.
<PAGE> 433
25
TAXATION OF
DISTRIBUTIONS
- -------------------------
Each Fund will distribute substantially all of its net
investment income. Dividends you receive from a Fund
will be taxable to you, whether reinvested or received
in cash. Dividends from a Fund's net investment income
(generally all of the Fund's net investment income), if
any, will be taxable as ordinary income.
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid the previous December.
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to eligible taxpayers in
January details dividends and their federal tax
category. Even though the Funds provide this
information, you are responsible for verifying your tax
liability with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-877-691-1118 or visit www.onegroup.com.
REPORTING
- -------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 434
26
ONE GROUP(R)
- ---------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to One Group Mutual Funds
since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual
funds and individual corporate, charitable, and
retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary
of Bank One Corporation, managed over $126 billion in
assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each Fund. For the most recent fiscal year, the Funds
paid advisory fees at the following rates.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R)
Institutional
Prime Money
Market Fund .00%
------------------------------------------------
One Group(R)
Treasury Only
Money Market
Fund .08%
------------------------------------------------
One Group(R)
Government Money
Market Fund .08%
------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 435
27
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Institutional Prime
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 19, 1999
TO
JUNE 30, 1999(A)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.009
- ----------------------------------------------------------------------------------------
Distributions:
Net investment income (0.009)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
- ----------------------------------------------------------------------------------------
Total Return 0.94%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $24,874
Ratio of expenses to average net assets 0.18%(C)
Ratio of net investment income to average net assets 4.73%(C)
Ratio of expenses to average net assets* 0.33%(C)
Ratio of net investment income to average net assets* 4.58%(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> 436
28
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Treasury Only Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.046 0.052 0.051 0.052 0.051
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.046) (0.052) (0.051) (0.052) (0.051)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 4.69% 5.30% 5.24% 5.38% 5.22%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $947,205 $719,570 $480,860 $415,961 $288,697
Ratio of expenses to average net assets 0.17% 0.15% 0.15% 0.17% 0.20%
Ratio of net investment income to average net assets 4.58% 5.18% 5.12% 5.23% 5.14%
Ratio of expenses to average net assets* 0.17% 0.15% 0.15% 0.17% 0.21%
Ratio of net investment income to average net assets* 4.58% 5.18% 5.12% 5.23% 5.13%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<PAGE> 437
29
ONE GROUP(R)
- ---------------------------
FINANCIAL HIGHLIGHTS
Government Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
--------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.050 0.055 0.053 0.055 0.053
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.050) (0.055) (0.053) (0.055) (0.053)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 5.13% 5.64% 5.43% 5.61% 5.41%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $3,482,581 $3,712,252 $1,083,438 $855,613 $720,699
Ratio of expenses to average net assets 0.17% 0.15% 0.14% 0.18% 0.21%
Ratio of net investment income to average net assets 5.02% 5.48% 5.31% 5.46% 5.28%
Ratio of expenses to average net assets* 0.17% 0.15% 0.14% 0.18% 0.22%
Ratio of net investment income to average net assets* 5.02% 5.48% 5.31% 5.46% 5.27%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
<PAGE> 438
30
ONE GROUP(R)
- ------------------------------------
Appendix A
--------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, please see the Statement of Additional
Information. Following the table is a more complete
discussion of risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Institutional Prime Money
Market Fund 1
------------------------------------------------------
One Group(R) Treasury Only Money Market
Fund 2
------------------------------------------------------
One Group(R) Government Money Market Fund 3
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, and 1-3 Market
bonds.
--------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS, and CATS. 1 Market
--------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1, 3 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
--------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments 1 Market
with a stated maturity. Credit
Liquidity
--------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1 Liquidity
bank in exchange for the deposit of funds. Credit
Market
--------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security 1, 3 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
--------------------------------------------------------------------------------
</TABLE>
<PAGE> 439
31
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reverse Repurchase Agreements: The sale of a 1-3 Market
security and the simultaneous commitment to buy Leverage
the security back at an agreed upon price on an
agreed upon date. This is treated as a borrowing
by a Fund.
--------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% 1-3 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit.
--------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-3 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
--------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1, 3 Market
money market mutual funds, including One Group
money market funds and shares of other money
market mutual funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for
which it serves as investment advisor.
--------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes 1 Market
which normally mature within a short period of Credit
time (e.g., 1 month) but which may be extended by Liquidity
the issuer for a maximum maturity of thirteen
months.
--------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
--------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
--------------------------------------------------------------------------------
Foreign Securities: Commercial paper of foreign 1 Market
issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign
Investment
--------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A
securities.
--------------------------------------------------------------------------------
</TABLE>
<PAGE> 440
32
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable and Floating Rate Instruments: 1, 3 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
--------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1, 3 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
--------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
--------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 1 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, other
short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
--------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued 1 Market
by banks and highly rated insurance companies such Credit
as Guaranteed Investment Contracts ("GICs") and Liquidity
Bank Investment Contracts ("BICs").
--------------------------------------------------------------------------------
Participation Interests: Interests in municipal 1 Credit Tax
securities, including municipal leases, from Market
financial institutions such as commercial and
investment banks, savings and loan associations
and insurance companies. These interests may take
the form of participations, beneficial interests
in a trust, partnership interests or any other
form of indirect ownership that allows the Funds
to treat the income from the investment as exempt
from Federal Income Tax.
--------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
</TABLE>
<PAGE> 441
33
- --------------------------------------------------------------------------------
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.
<PAGE> 442
34
- 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.
<PAGE> 443
(Intentionally Left Blank)
<PAGE> 444
(Intentionally Left Blank)
<PAGE> 445
(Intentionally Left Blank)
<PAGE> 446
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling
1-800-480-4111 or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-124 [ONE GROUP LOGO]
<PAGE> 447
CASH MANAGEMENT MONEY MARKET FUNDS
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
One Group(R) Cash Management Money Market Fund
One Group(R) Treasury Cash Management Money Market Fund
One Group(R) Treasury Prime Cash Management Money Market
Fund
One Group(R) U.S. Government Securities Cash Management
Money Market Fund
One Group(R) Municipal Cash Management Money Market Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED THE SHARES OF ANY OF THE FUNDS AS AN
INVESTMENT OR DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
<PAGE> 448
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Cash Management Money Market Fund 2
---------
One Group Treasury Cash Management Money Market Fund 6
---------
One Group Treasury Prime Cash Management Money Market Fund 10
---------
One Group U.S. Government Securities Cash Management Money 14
Market Fund
---------
One Group Municipal Cash Management Money Market Fund 18
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT ONE GROUP MUTUAL FUNDS
Principal Investment Strategies 22
---------
Investment Risks 22
---------
Investment Policies 23
---------
Portfolio Quality 23
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 24
---------
Sales Charges 26
---------
Exchanging Fund Shares 27
---------
Redeeming Fund Shares 28
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 30
---------
Dividend Policies 30
---------
Tax Treatment of Shareholders 30
---------
Shareholder Inquiries 31
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 32
---------
Year 2000 Readiness Disclosure 33
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 34
---------
APPENDIX A: INVESTMENT PRACTICES 39
---------
</TABLE>
<PAGE> 449
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 450
2
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Cash Management
Money Market Fund
WHAT IS THE GOAL OF THE
CASH MANAGEMENT MONEY
MARKET FUND? The Fund seeks high current income with liquidity and
stability of principal.
WHAT ARE THE CASH
MANAGEMENT MONEY MARKET
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests in short-term, high quality money
market obligations, including securities that are issued
or guaranteed by the U.S. Government or its agencies and
instrumentalities, certificates of deposit, variable and
floating rate instruments, mortgage-backed securities,
puts, municipal securities and other short-term
obligations. Some of these securities are subject to
repurchase agreements. The Fund will 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 will comply with
SEC rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Cash Management
Money Market Fund's investment strategies, please read
"More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
CASH MANAGEMENT MONEY
MARKET FUND? The main risks of investing in the Cash Management Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About the Funds" and
"Investment Risks."
<PAGE> 451
3
- ------------------------------------
Cash Management Money
Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Derivatives. The Fund invests in securities that are
considered to be derivatives. The value of derivative
securities (like certain types of mortgage-related
securities) is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Concentration. The Cash Management Money Market Fund
will invest a significant portion of its assets in the
securities of companies in the financial services
industry. This increases the Fund's risk of loss if the
financial services industry experiences economic or
other difficulties that either increase the industry's
default rate or lowers the value of securities issued by
the industry. These developments include changes in
interest rates, earlier than expected repayments by
borrowers, an inability to achieve the same yield on the
reinvestment of prepaid obligations, and Federal and
state laws which may restrict the remedies that a lender
has when a borrower defaults on a loan.
Net Asset Value and Credit Risk. There is no assurance
that the Fund will meet its investment objective of
maintaining a net asset value of $1.00 per share on a
continuous basis. Credit risk is very low because the
Fund only invests in high quality obligations and limits
its average maturity to 90 days. Nonetheless, if an
issuer fails to pay interest or to repay principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund could also decrease
if the value of the securities in the portfolio
decreases in response to declining credit quality of a
credit enhancement provider.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 452
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Cash Management Money
Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year- by-year results.
HOW HAS THE CASH
MANAGEMENT MONEY MARKET
FUND PERFORMED? By showing the variability of the Cash Management Money
Market Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
CASH MANAGEMENT MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1, 2 ) -- CLASS I SHARES
- --------------------------------------------------------------------------------
[BAR CHART]
<TABLE>
<CAPTION>
CASH MANAGEMENT MONEY MARKET FUND
---------------------------------
<S> <C>
1993 3.27
1994 4.06
1995 5.72
1996 5.83
1997 5.41
1998 5.36
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.63%.
(2) Performance data includes performance of the
Pegasus Cash Management Fund for the period
before it was consolidated with the One Group
Cash Management Money Market Fund on March 29,
1999.
- --------------------------------------------------------------------------------
Best Quarter: 1.41% 1Q1995 Worst Quarter: 0.79% 4Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A 1 YEAR LIFE
<S> <C> <C> <C>
(since 7/17/95)
One Group Cash Management Money Market Fund 5.10% 5.17%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEAR LIFE
<S> <C> <C> <C>
(since 7/30/92)
One Group Cash Management Money Market Fund 5.36% 5.15% 4.73%
</TABLE>
(1) Performance data includes performance of the
Pegasus Cash Management Fund for the period
before it was consolidated with the One Group
Cash Management Money Market Fund on March 29,
1999.
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE
1-877-691-1118 OR VISIT www.onegroup.com.
<PAGE> 453
5
- ------------------------------------
Cash Management Money
Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you held
all of your shares for the
period. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS I
--------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
--------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
--------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
--------------------------------------------------------------------------
Exchange Fee NONE NONE
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS I
------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------------------
Other Expenses .20% .20%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .65% .40%
------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.05%) (.05%)
------------------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class A shares and .35% for Class I
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS I
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 61 $ 36
----------------------------------------------
3 Years 203 123
----------------------------------------------
5 Years 357 219
----------------------------------------------
10 Years 806 500
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $66
Class I $41
</TABLE>
<PAGE> 454
6
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Cash
Management Money
Market Fund
WHAT IS THE GOAL OF THE
TREASURY CASH
MANAGEMENT MONEY MARKET
FUND? The Fund seeks high current income with liquidity and
stability of principal.
WHAT ARE THE TREASURY
CASH MANAGEMENT MONEY
MARKET FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests exclusively in U. S. Treasury bills,
notes, bonds and other U. S. obligations issued or
guaranteed by the U. S. Treasury, some of which are
subject to repurchase agreements. The Fund will comply
with SEC rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of
1940. For more information about the Treasury Cash
Management Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
TREASURY CASH
MANAGEMENT MONEY MARKET
FUND? The main risks of investing in the Treasury Cash
Management Money Market Fund and the circumstances
likely to adversely affect your investment are described
below. Before you invest, please read "More About the
Funds" and "Investment Risks."
<PAGE> 455
7
- ------------------------------------
Treasury Cash Management
Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 456
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Treasury Cash Management
Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE TREASURY CASH
MANAGEMENT MONEY MARKET
FUND PERFORMED? By showing the variability of the Treasury Cash
Management Money Market Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE TREASURY CASH MANAGEMENT MONEY MARKET
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY PRIME CASH FUND
------------------------
<S> <C>
1998 5.20
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.43%.
(2) Performance data includes performance of the
Pegasus Treasury Cash Management Fund for the
period before it was consolidated with the One
Group Treasury Cash Management Money Market Fund
on March 29, 1999.
- -----------------------------------------------------------------------------
Best Quarter: 1.33% 4Q1997 Worst Quarter: 1.17% 4Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 9/12/97)
<S> <C> <C>
One Group Treasury Cash Management Money Market Fund 4.94% 4.99%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS I 1 YEAR LIFE
(since 9/12/97)
<S> <C> <C>
One Group Treasury Cash Management Money Market Fund 5.20% 5.25%
</TABLE>
(1) Performance data includes performance of the
Pegasus Treasury Cash Management Fund for the
period before it was consolidated with the One
Group Treasury Cash Management Money Market Fund
on March 29, 1999.
TO OBTAIN CURRENT YIELD INFORMATION CALL TOLL-FREE
1-877-691-1118 OR VISIT www.onegroup.com.
<PAGE> 457
9
- ------------------------------------
Treasury Cash Management
Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you held
all of your shares for the
period. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS I
--------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
--------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
--------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
--------------------------------------------------------------------------
Exchange Fee NONE NONE
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS I
------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------------------
Other Expenses .23% .23%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .68% .43%
------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.08%) (.08%)
------------------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account
fee may be applicable and a $7.00 charge may be
deducted from redemption amounts paid by wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class A shares and .35% for Class I
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS I
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 61 $ 36
----------------------------------------------
3 Years 210 130
----------------------------------------------
5 Years 371 233
----------------------------------------------
10 Years 839 534
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $69
Class I $44
</TABLE>
<PAGE> 458
10
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Treasury Prime Cash Management Money
Market Fund
WHAT IS THE GOAL OF THE
TREASURY PRIME CASH
MANAGEMENT MONEY MARKET
FUND? The Fund seeks high current income with liquidity and
stability of principal.
WHAT ARE THE TREASURY
PRIME CASH MANAGEMENT
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests in U.S. Treasury bills, notes, bonds
and other U.S. obligations issued or guaranteed by the
U.S. Treasury. The Fund does not invest in repurchase
agreements. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the Treasury Prime Cash Management
Money Market Fund's investment strategies, please read
"More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
TREASURY PRIME CASH
MANAGEMENT MONEY MARKET
FUND? The main risks of investing in the Treasury Prime Cash
Management Money Market Fund and the circumstances
likely to adversely affect your investment are described
below. Before you invest, please read "More About the
Funds" and "Investment Risks."
<PAGE> 459
11
- ------------------------------------
Treasury Prime Cash Management
Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 460
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Treasury Prime Cash Management Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE TREASURY
PRIME CASH MANAGEMENT
MONEY MARKET FUND
PERFORMED? By showing the variability of the Treasury Prime Cash
Management Money Market Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE TREASURY PRIME CASH MANAGEMENT MONEY
MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY PRIME CASH FUND
------------------------
<S> <C>
1996 4.86
1997 4.90
1998 4.76
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.25%.
(2) Performance data includes the performance of the
Pegasus Treasury Prime Cash Management Fund for
the period before it was consolidated with the
One Group Treasury Prime Cash Management Money
Market Fund on March 29, 1999.
- -----------------------------------------------------------------------------
Best Quarter: 1.32% 2Q1995 Worst Quarter: 1.04% 4Q1998.
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 3/22/95)
<S> <C> <C>
One Group Treasury Prime Cash Management Money Market Fund 4.50% 4.67%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CLASS I 1 YEAR LIFE
(since 3/22/95)
<S> <C> <C>
One Group Treasury Prime Cash Management Money Market Fund 4.76% 4.93%
</TABLE>
(1) Performance data includes the performance of the
Pegasus Treasury Prime Cash Management Fund for
the period before it was consolidated with the
One Group Treasury Prime Cash Management Money
Market Fund on March 29, 1999.
TO OBTAIN CURRENT YIELD INFORMATION CALL
TOLL-FREE 1-877-691-1118 OR VISIT
www.onegroup.com.
<PAGE> 461
13
- ------------------------------------
Treasury Prime Cash Management
Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you held
all of your shares for the
period. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS I
-------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
-------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS I
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .20% .20%
-----------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
-----------------------------------------------------------------------------
Other Expenses .22% .22%
-----------------------------------------------------------------------------
Total Annual Fund Operating Expenses .67% .42%
-----------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.07%) (.07%)
-----------------------------------------------------------------------------
Net Expenses .60% .35%
-----------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class A shares and .35% for Class I for
the period beginning November 1, 1999 and ending
on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS I
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 61 $ 36
----------------------------------------------
3 Years 207 128
----------------------------------------------
5 Years 366 228
----------------------------------------------
10 Years 828 523
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $68
Class I $43
</TABLE>
<PAGE> 462
14
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
U.S. Government Securities Cash Management
Money Market Fund
WHAT IS THE GOAL OF THE
U.S. GOVERNMENT
SECURITIES CASH
MANAGEMENT MONEY MARKET
FUND? The Fund seeks high current income with liquidity and
stability of principal.
WHAT ARE THE U.S.
GOVERNMENT SECURITIES
CASH MANAGEMENT MONEY
MARKET FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests in short-term securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities; and repurchase agreements relating to
such securities. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the U.S. Government Securities Cash
Management Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
U.S. GOVERNMENT
SECURITIES CASH
MANAGEMENT MONEY MARKET
FUND? The main risks of investing in the U.S. Government
Securities Cash Management Money Market Fund and the
circumstances likely to adversely affect your investment
are described below. Before you invest, please read
"More About the Funds" and "Investment Risks."
<PAGE> 463
15
- ------------------------------------
U.S. Government Securities Cash Management Money
Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 464
16
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
U.S. Government Securities Cash
Management Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE U.S.
GOVERNMENT SECURITIES
CASH MANAGEMENT MONEY
MARKET FUND
PERFORMED? By showing the variability of the U.S. Government
Securities Cash Management Money Market Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE U.S.
GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
US GOV'T SECURITIES
-------------------
<S> <C>
1993 3.04
1994 3.97
1995 5.65
1996 5.15
1997 5.34
1998 5.26
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.54%.
(2) Performance data includes the performance of the
Pegasus U.S. Government Securities Cash
Management Fund for the period before it was
consolidated with the One Group U.S. Government
Securities Cash Management Money Market Fund on
March 29, 1999.
- --------------------------------------------------------------------------------
Best Quarter: 1.40% 1Q1995 Worst Quarter: 0.72% 4Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 1/17/95)
<S> <C> <C> <C>
One Group U.S. Government Securities Cash Management Money
Market Fund 5.00% 5.09%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
(since 6/2/92)
<S> <C> <C> <C>
One Group U.S. Government Securities Cash Management Money
Market Fund 5.26% 5.07% 4.61%
</TABLE>
(1) Performance data includes the performance of the
Pegasus U.S. Government Securities Cash
Management Fund for the period before it was
consolidated with the One Group U.S. Government
Securities Cash Management Money Market Fund on
March 29, 1999.
TO OBTAIN CURRENT YIELD INFORMATION CALL
TOLL-FREE 1-877-691-1118 OR VISIT
www.onegroup.com.
<PAGE> 465
17
- ------------------------------------
U.S. Government Securities Cash
Management Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you held
all of your shares for the
period. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
--------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS I
--------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
--------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
--------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
--------------------------------------------------------------------------
Exchange Fee NONE NONE
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS I
------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .20% .20%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
------------------------------------------------------------------------------
Other Expenses .19% .19%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .64% .39%
------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.04%) (.04%)
------------------------------------------------------------------------------
Net Expenses .60% .35%
------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class A shares and .35% for Class I
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS I
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 61 $ 36
----------------------------------------------
3 Years 201 121
----------------------------------------------
5 Years 353 215
----------------------------------------------
10 Years 795 489
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $65
Class I $40
</TABLE>
<PAGE> 466
18
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Cash
Management Money
Market Fund
WHAT IS THE GOAL OF THE
MUNICIPAL CASH
MANAGEMENT MONEY MARKET
FUND? The Fund seeks high current income exempt from Federal
income tax with liquidity and stability of principal.
WHAT ARE THE MUNICIPAL
CASH MANAGEMENT MONEY
MARKET FUND'S MAIN
INVESTMENT STRATEGIES?As a matter of fundamental policy, the Fund will invest
at least 80% of its total assets in short-term, high
quality municipal securities. These are securities
issued by or on behalf of the states, territories and
possessions of the United States, including the District
of Columbia, and their political subdivisions, agencies,
instrumentalities and authorities. These municipal
securities produce interest that, in the opinion of bond
counsel for the issuer, is exempt from Federal income
tax. However, the Fund may invest as much as 100% of its
assets in municipal securities that produce income that
is subject to the Federal alternative minimum tax. If
you are subject to the Federal alternative minimum tax,
please read the section of this prospectus entitled "Tax
Treatment of Shareholders" before you invest. The Fund
also may invest up to 20% of its total assets in other
types of securities, such as taxable money market
instruments, including repurchase agreements. The Fund
will comply with SEC rules applicable to all money
market funds, including Rule 2a-7 under the Investment
Company Act of 1940. For more information about the
Municipal Cash Management Money Market Fund's investment
strategies, please read "More About the Funds" and
"Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MUNICIPAL CASH
MANAGEMENT MONEY MARKET
FUND? The main risks of investing in the Municipal Cash
Management Money Market Fund and the circumstances
likely to adversely affect your investment are described
below. Before you invest, please read "More About the
Funds" and "Investment Risks."
<PAGE> 467
19
- ------------------------------------
Municipal Cash Management
Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Derivatives. The Fund invests in securities that are
considered to be derivatives. The value of derivative
securities (like certain types of mortgage-related
securities) is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Generally, derivatives are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Net Asset Value and Credit Risk. There is no assurance
that the Fund will meet its investment objective of
maintaining a net asset value of $1.00 per share on a
continuous basis. Credit risk is very low because the
Fund only invests in high quality obligations and limits
its average maturity to 90 days. Nonetheless, if an
issuer fails to pay interest or to repay principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund could also decrease
if the value of the securities in the portfolio
decreases in response to declining credit quality of a
credit enhancement provider.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 468
20
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Municipal Cash Management
Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE MUNICIPAL
CASH MANAGEMENT MONEY
MARKET FUND
PERFORMED? By showing the variability of the Municipal Cash
Management Money Market Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE MUNICIPAL CASH MANAGEMENT MONEY
MARKET FUND IS NOT NECESSARILY AN INDICATION OF HOW THE
FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1,2) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY PRIME CASH FUND
------------------------
<S> <C>
1998 3.20
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.13%.
(2) Performance data includes the performance of the
Pegasus Municipal Cash Management Fund for the
period before it was consolidated with the One
Group Municipal Cash Management Money Market Fund
on March 29, 1999.
- --------------------------------------------------------------------------------
Best Quarter: 0.86% 4Q1997 Worst Quarter: 0.75% 4Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 8/18/97)
<S> <C> <C>
One Group Municipal Cash Management Money Market Fund 2.95% 3.02%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASS I 1 YEAR LIFE
(since 8/18/97)
<S> <C> <C>
One Group Municipal Cash Management Money Market Fund 3.20% 3.27%
</TABLE>
(1) Performance data includes the performance of the
Pegasus Municipal Cash Management Fund for the
period before it was consolidated with the One
Group Municipal Cash Management Money Market Fund
on March 29, 1999.
TO OBTAIN CURRENT YIELD INFORMATION CALL
TOLL-FREE 1-877-691-1118 OR VISIT
www.onegroup.com.
<PAGE> 469
21
- ------------------------------------
Municipal Cash Management
Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you held
all of your shares for the
period. The examples also
assume that your investment has
a 5% return each year and that
the fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS I
-------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE NONE
-------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE NONE
-------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE
-------------------------------------------------------------------------
Exchange Fee NONE NONE
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) CLASS A CLASS I
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Advisory Fees .20% .20%
-----------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .25% NONE
-----------------------------------------------------------------------------
Other Expenses .23% .23%
-----------------------------------------------------------------------------
Total Annual Fund Operating Expenses .68% .43%
-----------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.08%) (.08%)
-----------------------------------------------------------------------------
Net Expenses .60% .35%
-----------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class A shares and .35% for Class I
shares for the period beginning November 1, 1999
and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS I
----------------------------------------------
<S> <C> <C> <C>
1 Year (1) $ 61 $ 36
----------------------------------------------
3 Years 210 130
----------------------------------------------
5 Years 371 233
----------------------------------------------
10 Years 839 534
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $69
Class I $44
</TABLE>
<PAGE> 470
22
ONE GROUP(R)
- ------------------------------------
More About One Group Mutual Funds
Each of the five funds described in this Prospectus is a
series of One Group Mutual Funds and is managed by Banc
One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual
Funds" and the Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES This Prospectus describes five mutual funds that are
designed to seek high current income with liquidity and
stability of principal. The principal investment
strategies that are used to meet each Fund's investment
objective are described in "Fund Summaries: Investment,
Risk & Performance."
FUNDAMENTAL POLICIES
Each Fund's investment strategy may
involve "fundamental policies." A policy
is fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve
their investment objective. Please note that each Fund
also may use strategies that are not described in the
Fund Summaries, but which are described in the Statement
of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in all five of the
Cash Management Money Market Funds are described in the
Fund Summaries in the front of this Prospectus. Risks
associated with certain cash management funds are
described further below.
- -----
DERIVATIVES. The Cash Management Money Market Fund, the
U.S. Government Securities Cash Management Money Market
Fund and the Municipal Cash Management Money Market Fund
may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than
other investments. Derivatives present, to varying
degrees, market, credit, leverage, liquidity and
management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like certain types of mortgage-related
securities) that derive their value from
the performance of underlying assets or
securities.
<PAGE> 471
23
For more information about risks associated with the
types of investments that the Cash Management Money
Market Funds purchase, please read the Fund Summaries,
Appendix A and the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
Each Fund:
1. Will use its best efforts to maintain a constant net
asset value of $1.00 per share, although there is no
guarantee that the Funds will be able to do so.
2. Will not purchase the securities of an issuer if as a
result more than 5% of its total assets would be
invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting
securities of that issuer. This does not include
securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase
agreements involving these securities. This
restriction applies with respect to 75% of a Fund's
total assets. The Funds may invest the remaining 25%
of their total assets without regard to this
restriction as permitted by applicable law.
3. Will not purchase securities while borrowings
(including reverse repurchase agreements) exceed 5%
of the respective Fund's net assets.
4. Will not borrow money or issue senior securities,
except that the Funds may borrow from banks for
temporary purposes in amounts not exceeding 10% of
their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets,
except in connection with borrowing specified in 4
above and in amounts not in excess of the lesser of
the dollar amount borrowed or 10% of the value of the
respective Fund's total assets at the time of its
borrowing.
Additional investment policies can be found in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Securities will be purchased by the Funds only if: i)
the securities satisfy Securities and Exchange
Commission regulations intended to restrict these Funds
to short-term, high-quality investments; and ii) they
present minimal credit risk under guidelines adopted by
the One Group Board of Trustees. For more information
about ratings, please see "Description of Ratings" in
the Statement of Additional Information.
<PAGE> 472
24
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES?- Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 12:00 p.m. Eastern Time ("ET") for the
Municipal Cash Management Money Market Fund, 2:00 p.m.
ET for the Treasury Prime Cash Management Money Market
Fund, and 3:00 p.m. ET for the other Funds (Cash
Management Money Market Fund, Treasury Cash Management
Money Market Fund, and U.S. Government Securities Cash
Management Money Market Fund) will be effective that
day. On occasion, the NYSE will close before 4:00 p.m.
ET. When the NYSE closes before the times listed
above, purchase requests received after the NYSE
closes will be effective the following business day.
- Purchase orders may be cancelled if the Fund's
Custodian, State Street Bank and Trust Company, does
not receive "federal funds" by 4:00 p.m. ET (i) on the
business day after the order is placed if you are
buying Class I shares, and (ii) on the third business
day if you are purchasing Class A shares.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
<PAGE> 473
25
WHAT KIND OF SHARES CAN I
BUY? One Group offers the following classes of shares:
- Class A shares are available to the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
HOW MUCH DO SHARES COST?- Shares are sold at net asset value ("NAV"), which,
under normal circumstances, will equal $1.00.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day as of 12:00 p.m. ET for the Municipal
Cash Management Money Market Fund, 2:00 p.m. ET for
the Treasury Prime Cash Management Money Market and
3:00 p.m. ET for the Cash Management Money Market
Fund, Treasury Cash Management Money Market Fund and
U.S. Government Securities Cash Management Money
Market Fund. On occasion, the NYSE will close before
4:00 p.m. ET. When the NYSE closes before the times
listed above, NAV will be calculated as of the time
the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000. You
also must maintain a minimum account balance of
$1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
4. Send the completed application and authorize a bank
transfer or initiate a wire transfer payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
5. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
6. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-877-691-1118.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-877-691-1118 to relay your
purchase instructions.
<PAGE> 474
26
- Authorize a bank transfer or initiate a wire transfer
payable to "One Group" to State Street Bank and Trust
Company at the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP CASH MANAGEMENT MONEY MARKET FUND)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: ABC CORPORATION)
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the
telephone by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group.
Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own
resources.
12b-1
FEES
- -------------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees for the sale and distribution of shares
of the Funds. These fees are called 12b-1 fees. 12b-1
fees are paid by One Group to The One Group Services
Company as compensation for its services and expenses.
The One Group Services Company in turn pays all or part
of the 12b-1 fee to Shareholder Servicing Agents that
sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of the average
daily net assets of the Fund.
2. There are no 12b-1 fees for Class I shares.
- 12b-1 fees help The One Group Services Company sell
Class A shares without an "up-front" sales charge by
defraying the costs of advancing brokerage
commissions and other expenses paid to Shareholder
Servicing Agents. The One Group Services Company may
use up to .25% of the fees for shareholder
servicing.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors
and its affiliates (or any sub-advisor).
<PAGE> 475
27
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
- --------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may exchange your shares for shares of any other
Fund described in this prospectus. You may also exchange
your shares for shares of any institutional money market
fund that One Group may offer.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-877-691-1118.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by 12:00 p.m. ET.
- You have provided One Group with all of the
information necessary to process the exchange.
- You have received a current prospectus of the Fund or
Funds in which you wish to invest.
- You have contacted your Shareholder Servicing Agent,
if necessary.
ARE EXCHANGES TAXABLE?
Generally:
- An exchange between classes of shares of the same Fund
is not taxable for Federal income tax purposes.
- 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.
<PAGE> 476
28
- Exchange activity is excessive if it EXCEEDS TWO
SUBSTANTIVE EXCHANGE REDEMPTIONS (WITHIN 30 DAYS OF
EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- In addition, One Group reserves the right to reject
any exchange request (even those that are not
excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
- --------------------------------------------------------------------------------
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before:
- 12:00 p.m. ET for the Municipal Cash Management
Money Market Fund;
- 2:00 p.m. ET for the Treasury Prime Cash Management
Money Market Fund;
- 3:00 p.m. ET for the Cash Management Money Market
Fund, Treasury Cash Management Money Market Fund and
U. S. Government Securities Cash Management Money
Market Fund (or when the NYSE closes) will be
effective that day.
HOW DO I REDEEM SHARES?Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
- You may request redemption forms by calling The One
Group Services Company at 1-877-691-1118.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is payable to the shareholder of
record.
2. the redemption check is mailed to the shareholder
at the record address; or
3. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
<PAGE> 477
29
- Your redemption proceeds will be paid ordinarily
within seven days after receipt of the redemption
request. However, the Funds will attempt to honor
requests for same day payment on redemptions, if the
request is received before the time listed in "When
Can I Redeem Shares?" If the request is received after
the time listed in "When Can I Redeem Shares?", then
the Funds will attempt to honor requests for payments
in the next business day.
WHAT WILL MY SHARES BE
WORTH? - The NAV of shares of the Funds is expected to remain
constant at $1.00 per share, although there is no
assurance that this will always be the case.
You will receive the NAV calculated after your
redemption request is received. Please read "How Much
Do Shares Cost?"
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-877-691-1118 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- All redemptions will be for cash. However, if you
redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank. One Group generally receives payment within ten
(10) calendar days of purchase.
- 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.
<PAGE> 478
30
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, votes separately on matters relating solely
to that Fund or class, or which affect that Fund or
class differently. However, all shareholders will have
equal voting rights on matters that affect all
shareholders equally.
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. The Funds generally declare dividends on each
business day. Dividends are distributed on the first
business day of the each month. Capital gains, if any,
for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share
basis.
Dividends payable on Class I shares will be more than
those payable on Class A shares. This is because Class A
shares have higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you may write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call The One Group Services Company at
1-877-691-1118 to make this change.
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares may produce either a
taxable gain or a loss. You are responsible for any tax
liabilities generated by your transactions. Reinvested
dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF
DISTRIBUTIONS
- -------------------------
ALL FUNDS OTHER THAN ONE GROUP MUNICIPAL CASH
MANAGEMENT MONEY MARKET FUND. Each Fund will distribute
substantially all of its net investment income.
Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from
a Fund's net investment income (generally all of the
Fund's net investment income), if any, will be taxable
as ordinary income.
<PAGE> 479
31
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
TAXATION OF
DISTRIBUTIONS
- -------------------------
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND.
The Fund will distribute substantially all of its net
investment income. Distributions you receive from the
Fund, whether reinvested or received in cash, will be
taxable to you except as discussed below. The Fund
expects to pay much or all of its dividends in the form
of "exempt-interest dividends." It will be able to do so
if at least 50% of the value of the Fund's assets at the
end of each quarter of the Fund's taxable year consists
of obligations the interest on which is excludable from
gross income. Exempt-interest dividends are generally
excludable from an investor's gross income for regular
Federal income tax purposes. However, the receipt of
exempt-interest dividends may result in liability for
Federal alternative minimum tax and for state and local
taxes, both for individual and corporate shareholders.
Corporate shareholders will be required to take the
interest on municipal securities into account in
determining their alternative minimum taxable income.
Dividends from a Fund's net investment income that do
not qualify as "exempt-interest dividends" will be
taxable as ordinary income and distributions, if any, of
gains from investments that the Fund has held for more
than one year will be taxable to you as such, regardless
of how long you have held the shares.
Dividends paid in January, but declared in October,
November, or December of the previous year, will be
considered to have been paid the previous year.
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-877-691-1118 or visit www.onegroup.com.
REPORTING
- -------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 480
32
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Cash
Management Money
Market Fund .15%
------------------------------------------------
One Group(R)
Treasury Cash
Management Money
Market Fund .13%
------------------------------------------------
One Group(R)
Treasury Prime
Cash Management
Money Market
Fund .13%
------------------------------------------------
One Group(R) U.S.
Government
Securities Cash
Management Money
Market Fund .17%
------------------------------------------------
One Group(R)
Municipal Cash
Management Money
Market Fund .14%
------------------------------------------------
</TABLE>
<PAGE> 481
33
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 482
34
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS JULY 1, JANUARY 17,
ENDED YEAR ENDED DECEMBER 31, 1995 TO 1995 TO
JUNE 30, ---------------------------------- DECEMBER 31, JUNE 30,
CLASS A 1999(F) 1998 1997 1996 1995(A) 1995(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.022 0.050 0.050 0.048 0.026 0.025
Net realized gains (losses) from
investments - -(C) - -(C) -(C) -(C)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.022 0.050 0.050 0.048 0.026 0.025
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.022) (0.050) (0.050) (0.048) (0.026) (0.025)
Total Distributions (0.022) (0.050) (0.050) (0.048) (0.026) (0.025)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.22%(D) 5.10% 5.15% 4.98% 2.68%(D) 2.47%(D)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $1,259,860 $1,521,827.. $992,763 $232,249 $121,750 $11,372
Ratio of expenses to average net
assets 0.60%(E) 0.60% 0.60% 0.60% 0.60%(E) 0.60%(E)
Ratio of net investment income to
average net assets 4.45%(E) 5.04% 5.11% 4.94% 5.25%(E) 5.46%(E)
Ratio of expenses to average net
assets* 0.65%(E) 0.64% 0.63% 0.67% 0.69%(E) 0.71%(E)
Ratio of net investment income to
average net assets* 4.40%(E) 5.00% 5.08% 4.87% 5.16%(E) 5.35%(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) Effective July 1, 1995 the Fund changed its fiscal year end from June
30 to December 31. (B) Period from commencement of operations. (C) Amount
is less than .001. (D) Not annualized. (E) Annualized. (F) Upon
reorganizing as a fund of One Group, the Pegasus Cash Management Fund
became One Group Cash Management Money Market Fund. Financial highlights
for periods prior to March 29, 1999 represent the Pegasus Cash Management
Fund.
<TABLE>
<CAPTION>
SIX MONTHS JULY 1, YEAR
ENDED YEAR ENDED DECEMBER 31, 1995 TO ENDED
JUNE 30, ---------------------------------- DECEMBER 31, JUNE 30,
CLASS I 1999(F) 1998 1997 1996 1995(A) 1995(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.023 0.052 0.053 0.051 0.028 0.051
Net realized gains (losses) from
investments - -(B) - -(B) -(B) (0.006)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.023 0.052 0.053 0.051 0.028 0.045
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.023) (0.052) (0.053) (0.051) (0.028) (0.051)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.023) (0.052) (0.053) (0.051) (0.028) (0.051)
Increase due to capital contribution
from an affiliate of the investment
adviser - - - - - 0.006
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.35%(D) 5.36% 5.41% 5.23% 2.80%(D) 5.19(C)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $947,776 $1,076,045 $705,270 $885,946 $389,127 $319,214
Ratio of expenses to average net
assets 0.34%(E) 0.35% 0.35% 0.35% 0.35%(E) 0.35%
Ratio of net investment income to
average net assets 4.69%(E) 5.21% 5.36% 5.19% 5.51%(E) 5.11%
Ratio of expenses to average net
assets* 0.40%(E) 0.39% 0.38% 0.42% 0.43%(E) 0.44%
Ratio of net investment income to
average net assets* 4.63%(E) 5.17% 5.33% 5.12% 5.43%(E) 5.02%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(A) Effective July 1, 1995 the Fund changed its fiscal year end from June
30 to December 31. (B) Amount is less than .001. (C) 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%. (D) Not annualized. (E)
Annualized. (F) Upon reorganizing as a fund of One Group, the Pegasus Cash
Management Fund became One Group Cash Management Money Market Fund.
Financial highlights for periods prior to March 29, 1999 represent the
Pegasus Cash Management Fund.
<PAGE> 483
35
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Treasury Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS SEPTEMBER 12,
ENDED YEAR ENDED 1997 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS A 1999(D) 1998 1997(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.021 0.048 0.015
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.021 0.048 0.015
- -------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.021) (0.048) (0.015)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.021) (0.048) (0.015)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------------------------------
Total Return 2.10%(B) 4.94% 5.04%(C)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $130,989 $331,015 $205,722
Ratio of expenses to average net assets 0.60%(C) 0.60% 0.60%(C)
Ratio of net investment income to average net assets 4.19%(C) 4.82% 5.03%(C)
Ratio of expenses to average net assets* 0.68%(C) 0.65% 0.66%(C)
Ratio of net investment income to average net assets* 4.11%(C) 4.77% 4.97%(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. (D) Upon reorganizing as a fund of One Group, the Pegasus
Treasury Cash Management Fund became the One Group Treasury Cash Management
Money Market Fund. Financial highlights for the period prior to March 29,
1999 represent the Pegasus Treasury Cash Management Fund.
<TABLE>
<CAPTION>
SIX MONTHS SEPTEMBER 12,
ENDED YEAR ENDED 1997 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS I 1999(D) 1998 1997(A)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $1.000
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.022 0.051 0.016
- -------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.022 0.051 0.016
- -------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.022) (0.051) (0.016)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.022) (0.051) (0.016)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $1.000
- -------------------------------------------------------------------------------------------------------------------
Total Return 2.22%(B) 5.20% 5.29%(C)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $191,181 $32,196 $ 850
Ratio of expenses to average net assets 0.35%(C) 0.35% 0.35%(C)
Ratio of net investment income to average net assets 4.44%(C) 4.97% 5.28%(C)
Ratio of expenses to average net assets* 0.43%(C) 0.40% 0.41%(C)
Ratio of net investment income to average net assets* 4.36%(C) 4.92% 5.22%(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. (D) Upon reorganizing as a fund of One Group, the Pegasus
Treasury Cash Management Fund became the One Group Treasury Cash Management
Money Market Fund. Financial highlights for the period prior to March 29,
1999 represent the Pegasus Treasury Cash Management Fund.
<PAGE> 484
36
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Treasury Prime Cash Management Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS MARCH 22,
ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, ---------------------------------- DECEMBER 31,
CLASS A 1999(E) 1998 1997 1996 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.020 0.044 0.045 0.045 0.038
Net realized gains (losses) from investments -(B) - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.020 0.044 0.045 0.045 0.038
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.020) (0.044) (0.045) (0.045) (0.038)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.020) (0.044) (0.045) (0.045) (0.038)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.00%(C) 4.50% 4.64% 4.60% 3.86%(C)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $474,180 $469,443 $233,590 $215,040 $130,559
Ratio of expenses to average net assets 0.60%(D) 0.60% 0.60% 0.60% 0.60%(D)
Ratio of net investment income to average net
assets 3.99%(D) 4.35% 4.54% 4.59% 4.72%(D)
Ratio of expenses to average net assets* 0.67%(D) 0.65% 0.65% 0.71% 0.74%(D)
Ratio of net investment income to average net
assets* 3.92%(D) 4.30% 4.49% 4.48% 4.58%(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) Amount is less than .001.
(C) Not Annualized. (D) Annualized. (E) Upon reorganizing as a fund of One
Group, the Pegasus Treasury Prime Cash Management Fund became One Group
Treasury Prime Cash Management Money Market Fund. Financial highlights for
periods prior to March 29, 1999 represent the Pegasus Treasury Prime Cash
Management Fund.
<TABLE>
<CAPTION>
SIX MONTHS MARCH 22,
ENDED YEAR ENDED DECEMBER 31, 1995 TO
JUNE 30, -------------------------------- DECEMBER 31,
CLASS I 1999(E) 1998 1997 1996 1995(A)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.021 0.047 0.048 0.047 0.040
Net realized gains (losses) from investments -(B) - - -(B) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.021 0.047 0.048 0.047 0.040
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.021) (0.047) (0.048) (0.047) (0.040)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.021) (0.047) (0.048) (0.047) (0.040)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.12%(C) 4.76% 4.90% 4.86% 4.06%(C)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $125,645 $189,630 $90,813 $70,120 $14,008
Ratio of expenses to average net assets 0.35%(D) 0.35% 0.35% 0.35% 0.35%(D)
Ratio of net investment income to average net assets 4.24%(D) 4.55% 4.79% 4.84% 5.16%(D)
Ratio of expenses to average net assets* 0.42%(D) 0.40% 0.40% 0.46% 1.23%(D)
Ratio of net investment income to average net assets* 4.17%(D) 4.50% 4.74% 4.73% 4.28%(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) Amount is less than .001.
(C) Not Annualized. (D) Annualized. (E) Upon reorganizing as a fund of One
Group, the Pegasus Treasury Prime Cash Management Fund became One Group
Treasury Prime Cash Management Money Market Fund. Financial highlights for
periods prior to March 29, 1999 represent the Pegasus Treasury Prime Cash
Management Fund.
<PAGE> 485
37
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
U.S. Government Securities Cash
Management Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS JUNE 1, JANUARY 17,
ENDED YEAR ENDED DECEMBER 31, 1995 TO 1995 TO
JUNE 30, ---------------------------------- DECEMBER 31, MAY 31,
CLASS A 1999(F) 1998 1997 1996 1995(A) 1995(B)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.021 0.049 0.050 0.048 0.031 0.020
Net realized gains (losses) from
investments -(C) - -(C) -(C) -(C) -(C)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.021 0.049 0.050 0.048 0.031 0.020
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.021) (0.049) (0.050) (0.048) (0.031) (0.020)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.021) (0.049) (0.050) (0.048) (0.031) (0.020)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.16%(D) 5.00% 5.08% 4.89% 3.09%(D) 2.01%(D)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $767,457 $559,770 $357,663 $207,046 $56,000 $16,702
Ratio of expenses to average net
assets 0.60%(E) 0.60% 0.60% 0.60% 0.60%(E) 0.57%(E)
Ratio of net investment income to
average net assets 4.31%(E) 4.87% 5.02% 4.84% 5.17%(E) 5.48%(E)
Ratio of expenses to average net
assets* 0.63%(E) 0.62% 0.61% 0.68% 0.69%(E) 0.66%(E)
Ratio of net investment income to
average net assets* 4.28%(E) 4.85% 5.01% 4.76% 5.08%(E) 5.39%(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)
Effective June 1, 1995, the Fund changed its fiscal year end from May 31 to
December 31. (B) Period from commencement of operations. (C) Amount is less
than .001. (D) Not Annualized. (E) Annualized. (F) Upon reorganizing as a fund
of One Group, the Pegasus U.S. Government Securities Cash Management Fund
became One Group U.S. Government Securities Cash Management Money Market Fund.
Financial highlights for periods prior to March 29, 1999 represent the Pegasus
U.S. Government Securities Cash Management Fund.
<TABLE>
<CAPTION>
SIX MONTHS JUNE 1, YEAR
ENDED YEAR ENDED DECEMBER 31, 1995 TO ENDED
JUNE 30, ------------------------------------ DECEMBER 31, MAY 31,
CLASS I 1999(E) 1998 1997 1996 1995(A) 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.023 0.051 0.052 0.050 0.032 0.049
Net realized gains (losses) from
investments -(B) - -(B) -(B) -(B) -(B)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.023 0.051 0.052 0.050 0.032 0.049
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.023) (0.051) (0.052) (0.050) (0.032) (0.049)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.023) (0.051) (0.052) (0.050) (0.032) (0.049)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 2.28%(C) 5.26% 5.34% 5.15% 3.24%(C) 5.03%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $856,449 $1,017,830 $534,364 $369,163 $489,395 $475,248
Ratio of expenses to average net
assets 0.35%(D) 0.35% 0.35% 0.35% 0.35%(D) 0.34%
Ratio of net investment income to
average net assets 4.56%(D) 5.11% 5.27% 5.09% 5.46%(D) 4.94%
Ratio of expenses to average net
assets* 0.38%(D) 0.37% 0.36% 0.43% 0.42%(D) 0.41%
Ratio of net investment income to
average net assets* 4.53%(D) 5.09% 5.26% 5.01% 5.39%(D) 4.87%
</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) Effective June 1, 1995, the Fund changed its fiscal year end from May
31 to December 31. (B) Amount is less than .001. (C) Not Annualized. (D)
Annualized. (E) Upon reorganizing as a fund of One Group, the Pegasus U.S.
Government Securities Cash Management Fund became One Group U.S. Government
Securities Cash Management Money Market Fund. Financial highlights for
periods prior to March 29, 1999 represent the Pegasus U.S. Government
Securities Cash Management Fund.
<PAGE> 486
38
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Municipal Cash Management
Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
financial performance for the last five years or the period of the Fund's
operations, whichever is shorter. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS AUGUST 18,
ENDED YEAR ENDED 1997 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS A 1999(E) 1998 1997(A)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.013 0.029 0.012
- ------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) from investments -(B) - -
- ------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.013 0.029 0.012
- ------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.013) (0.029) (0.012)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.013) (0.029) (0.012)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Total Return 1.27%(C) 2.95% 3.14%(D)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $16,299 $61,243 $56,534
Ratio of expenses to average net assets 0.60%(D) 0.60% 0.60%(D)
Ratio of net investment income to average net assets 2.52%(D) 2.90% 3.12%(D)
Ratio of expenses to average net assets* 0.66%(D) 0.64% 0.66%(D)
Ratio of net investment income to average net assets* 2.46%(D) 2.86% 3.06%(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) Amount is less than .001.
(C) Not annualized. (D) Annualized. (E) Upon reorganizing as a fund of One
Group, the Pegasus Municipal Cash Management Fund became One Group
Municipal Cash Management Money Market Fund. Financial highlights for
periods prior to March 29, 1999 represent the Pegasus Municipal Cash
Management Fund.
<TABLE>
<CAPTION>
SIX MONTHS AUGUST 18,
ENDED YEAR ENDED 1997 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
CLASS I 1999(E) 1998 1997(A)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.014 0.032 0.013
Net realized gains (losses) from investments -(B) - -
- ------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.014 0.032 0.013
- ------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.014) (0.032) (0.013)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.014) (0.032) (0.013)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------------------------------
Total Return 1.39%(C) 3.20% 3.39%(D)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $476,802 $588,602 $201,705
Ratio of expenses to average net assets 0.35%(D) 0.35% 0.35%(D)
Ratio of net investment income to average net assets 2.77%(D) 3.12% 3.37%(D)
Ratio of expenses to average net assets* 0.41%(D) 0.39% 0.41%(D)
Ratio of net investment income to average net assets* 2.71%(D) 3.08% 3.31%(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) Amount is less than .001.
(C) Not annualized. (D) Annualized. (E) Upon reorganizing as a fund of One
Group, the Pegasus Municipal Cash Management Fund became One Group
Municipal Cash Management Money Market Fund. Financial highlights for
periods prior to March 29, 1999 represent the Pegasus Municipal Cash
Management Fund.
<PAGE> 487
39
ONE GROUP(R)
- ------------------------------------
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Cash Management Money Market
Fund 1
------------------------------------------------------
One Group(R)Treasury Cash Management Money
Market Fund 2
------------------------------------------------------
One Group(R) Treasury Prime Cash
Management Money Market Fund 3
------------------------------------------------------
One Group(R) U.S. Government Securities
Cash Management Money Market Fund 4
------------------------------------------------------
One Group(R) Municipal Cash Management
Money Market Fund 5
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes and bonds. 1-5 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1, 4, 5 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security 1, 2, 4, 5 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1, 4, 5 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 488
40
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Company Securities: Shares of other 1, 4, 5 Market
money market mutual funds, including One Group
money market funds and shares of other money
market mutual funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for
which it serves as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes 1 Market
with a maximum stated maturity of thirteen months Credit
which, on a designated day each month, may be Liquidity
extended by the purchaser for an additional
thirteen months. The note's maturity cannot be
extended beyond the tenth anniversary of its
issuance.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1, 4, 5 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1, 4, 5 Pre-Payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments 1, 5 Market
with a stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1, 5 Liquidity
bank in exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1, 5 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1, 5 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1, 5 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 489
41
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Securities: Securities issued by a state 1, 5 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, other
short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued 1 Market
by banks and highly rated insurance companies such Credit
as Guaranteed Investment Contracts ("GICs") and Liquidity
Bank Investment Contracts ("BICs").
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1, 5 Liquidity
under the Securities Act of 1933, such as Credit
privately placed commercial paper and Rule 144A Market
securities.
-------------------------------------------------------------------------------
Foreign Securities: U.S. dollar-denominated 1 Market
commercial paper of foreign issuers and Political
obligations of foreign banks, overseas branches of Liquidity
U.S. banks and supranational entities. Foreign
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal 1, 5 Credit
securities, including municipal leases, from Tax
financial institutions such as commercial and Market
investment banks, savings and loan associations
and insurance companies. These interests may take
the form of participations, beneficial interests
in a trust, partnership interests or any 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 1, 5 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
</TABLE>
<PAGE> 490
42
- --------------------------------------------------------------------------------
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.
<PAGE> 491
43
- 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.
<PAGE> 492
(Intentionally Left Blank)
<PAGE> 493
(Intentionally Left Blank)
<PAGE> 494
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visiting www.onegroup.com, by calling
1-877-691-1118, or by writing the Funds at:
one group(R) mutual funds
3435 stelzer road
columbus, ohio 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-126 [ONE GROUP LOGO]
<PAGE> 495
[BACKGROUND GRAPHIC]
ONE GROUP(R) INVESTOR FUNDS
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
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
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES OF ANY OF THE FUNDS AS AN INVESTMENT
OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIME.
<PAGE> 496
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Investor Growth Fund 2
---------
One Group Investor Growth & Income Fund 6
---------
One Group Investor Balanced Fund 10
---------
One Group Investor Conservative Growth 14
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 18
---------
Investment Risks 22
---------
Investment Policies 24
---------
Temporary Defensive Positions 24
---------
Portfolio Turnover 25
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 26
---------
Sales Charges 29
---------
Sales Charge Reductions and Waivers 32
---------
Exchanging Fund Shares 34
---------
Redeeming Fund Shares 36
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Dividend Policies 39
---------
Tax Treatment of Shareholders 39
---------
Shareholder Inquires 40
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 42
---------
The Fund Managers 42
---------
Year 2000 Readiness Disclosure 43
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 44
---------
APPENDIX A: UNDERLYING FUNDS 52
---------
APPENDIX B: INVESTMENT PRACTICES 60
---------
</TABLE>
<PAGE> 497
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 498
2
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth Fund
WHAT IS THE GOAL OF ONE
GROUP INVESTOR GROWTH
FUND? The Fund seeks long-term capital appreciation by
investing primarily in a diversified group of One Group
mutual funds which invest primarily in equity
securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF
ONE GROUP INVESTOR
GROWTH FUND? One Group Investor Growth Fund is a "Fund of Funds". The
Fund's investment strategy is to invest in a diversified
group of other One Group mutual funds. Because this is a
growth fund, the majority of the Fund's assets will be
invested in One Group equity funds, although a portion
of its assets also will be invested in One Group bond
and money market funds. The Fund's investment return is
diversified by its investment in the underlying mutual
funds which invest in growth and income stocks, foreign
securities, debt securities, and cash or cash
equivalents. For more information about the Fund's
investment strategies, please read "More About The
Funds" and "Principal Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR GROWTH
FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR GROWTH
FUND? The main risks of investing in the One Group Investor
Growth Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of One Group Investor Growth Fund will change
every day in response to market conditions. You may lose
money if you invest in One Group Investor Growth Fund.
<PAGE> 499
3
- ---------------------------
Investor Growth Fund
MAIN RISKS
- --------------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses incurred by the underlying
funds.
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Growth Fund will
be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor Growth
Fund will change as the value of investments of the
underlying One Group funds increase and decrease.
Index Funds. An index fund's investment objective is to
track the performance of a specified index. Therefore,
securities may be purchased, retained and sold by an
index fund at times when an actively managed fund may
not do so. If the value of securities that are heavily
weighted on an index change, you can expect a greater
risk of loss than would be the case if a fund were not
fully invested in such securities.
Foreign Securities. Funds investing in foreign
securities are subject to special risks in addition to
those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards
of some foreign markets. These risks can make foreign
investments more volatile and potentially less liquid
than U.S. investments.
Emerging Markets. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 500
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Investor Growth Fund
The Bar Chart shows changes in
the Fund's performance from
year to year. Total returns
assume reinvestment of
dividends and distributions.
The returns shown DO NOT
reflect applicable sales
charges. If these charges were
included, the returns would be
lower than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE ONE GROUP
INVESTOR GROWTH FUND
PERFORMED? By showing the variability of the One Group Investor
Growth Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INVESTOR GROWTH FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 25.07
1998 21.76
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
1.75%.
- --------------------------------------------------------------------------------
Best Quarter: 19.73% 4Q1998 Worst Quarter: -9.92% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 12/10/96)
<S> <C> <C>
One Group Investor Growth Fund 14.99% 18.64%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 13.70% 16.95%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 12/10/96)
<S> <C> <C>
One Group Investor Growth Fund 15.49% 20.43%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 13.70% 16.95%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 7/1/97)
<S> <C> <C>
One Group Investor Growth Fund 19.42% 19.86%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 20.41%
--------------------------------------------------------------------------
Lipper Mix (2) 13.70% 10.54%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Growth Fund 21.76% 22.39%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 13.70% 16.95%
</TABLE>
(1) The S&P 1500 Index is an unmanaged index
generally representative of the performance of
large and small companies in the U.S. stock
market. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as management fees. By
contrast, the performance of the One Group
Investor Growth Fund reflects the deduction of
these services as well as the deduction of sales
charges on Class A shares and contingent deferred
sales charges on Class B and Class C shares.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (75%), the Lipper International Funds
Universe (10%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (15%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 501
5
- ---------------------------
Investor Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE(2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .23% .23% .23% .23%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (4) .63% 1.28% 1.28% .28%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (.18%) (.08%) (.08%) (.08%)
------------------------------------------------------------------------------------------------
Net Expenses (5) .45% 1.20% 1.20% .20%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
fund with those of the underlying funds, the
estimated average weighted expense ratio would be
1.30% For Class A shares, 2.05% For Class B
shares, 2.05% For Class C shares, and 1.05% For
Class I shares.
(5) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares, and .20% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
----------------------------------------------------------------------------------------------------------
3 Years 699 698 398 398 398 82
----------------------------------------------------------------------------------------------------------
5 Years 841 895 695 695 695 149
----------------------------------------------------------------------------------------------------------
10 Years 1,254 1,359 1,359 1,538 1,538 348
----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $586
Class B (no redemption) $130
Class B (with redemption) $630
Class C (no redemption) $130
Class C (with redemption) $230
Class I $29
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 502
6
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth &
Income Fund
WHAT IS THE GOAL OF ONE
GROUP INVESTOR GROWTH
& INCOME FUND? The Fund seeks long-term capital appreciation and growth
by investing primarily in a diversified group of One
Group mutual funds which invest primarily in equity
securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF ONE GROUP INVESTOR
GROWTH & INCOME FUND? One Group Investor Growth & Income Fund is a "Fund of
Funds". The Fund's investment strategy is to invest in a
diversified group of other One Group mutual funds.
Because this is a growth and income fund, the majority
of the Fund's assets will be invested in One Group
equity and bond funds, although a portion of its assets
also will be invested in One Group money market funds.
The Fund's investment return is diversified by its
investment in the underlying mutual funds which invest
in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR GROWTH
& INCOME FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR GROWTH
& INCOME FUND? The main risks of investing in the One Group Investor
Growth & Income Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of One Group Investor Growth & Income
Fund will change every day in response to market
conditions. You may lose money if you invest in One
Group Investor Growth & Income Fund.
MAIN RISKS
- ----------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses incurred by the underlying
Funds.
<PAGE> 503
7
- ---------------------------
Investor Growth & Income Fund
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Growth & Income
Fund will be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor Growth &
Income Fund will change as the value of investments of
the underlying One Group funds increase and decrease.
Index Funds. An index fund's investment objective is to
track the performance of a specified index. Therefore,
securities may be purchased, retained and sold by an
index fund at times when an actively managed fund would
not do so. If the value of securities that are heavily
weighted on an index change, you can expect a greater
risk of loss than may be the case if a fund were not
fully invested in such securities.
Foreign Securities. Funds investing in foreign
securities are subject to special risks in addition to
those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards
of some foreign markets. These risks can make foreign
investments more volatile and potentially less liquid
than U.S. investments.
Emerging Markets. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
Not FDIC Insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 504
8
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Investor Growth & Income Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE ONE GROUP
INVESTOR GROWTH &
INCOME FUND
PERFORMED? By showing the variability of the One Group Investor
Growth & Income Fund's performance from year to year,
the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE INVESTOR GROWTH & INCOME FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 20.87
1998 19.10
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
1.21%.
- --------------------------------------------------------------------------------
Best Quarter: 14.92% 4Q1998 Worst Quarter: -6.52% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 12/10/96)
<S> <C> <C>
One Group Investor Growth & Income Fund 12.67% 16.24%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 12.74% 15.29%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 12/10/96)
<S> <C> <C>
One Group Investor Growth & Income Fund 12.76% 17.09%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 12.74% 15.29%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 7/1/97)
<S> <C> <C>
One Group Investor Growth & Income Fund 16.92% 17.46%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 20.41%
--------------------------------------------------------------------------
Lipper Mix (2) 12.74% 10.43%
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Growth & Income Fund 19.10% 19.12%
--------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
--------------------------------------------------------------------------
Lipper Mix (2) 12.74% 15.29%
</TABLE>
(1) The S&P 1500 Index is an unmanaged index
generally representative of the performance of
large and small companies in the U.S. stock
market. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as management fees. By
contrast, the performance of the One Group
Investor Growth & Income Fund reflects the
deduction of these services as well as the
deduction of sales charges on Class A shares and
contingent deferred sales charges on Class B and
Class C shares.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (60%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (35%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 505
9
- ---------------------------
Investor Growth & Income Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continue to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(fees paid directly from your investment) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(expenses that are deducted from fund assets) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .22% .22% .22% .22%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (4) .62% 1.27% 1.27% .27%
------------------------------------------------------------------------------------------------
Fee Waiver [and/or Expense Reimbursement] (.17%) (.07%) (.07%) (.07%)
------------------------------------------------------------------------------------------------
Net Expenses (5) .45% 1.20% 1.20% .20%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
Fund with those of the underlying funds, the
estimated average weighted expense ratio would be
1.28% for Class A shares, 2.03% for Class B
shares, 2.03% for Class C shares, and 1.03% for
Class I shares.
(5) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares, and .20% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------------------------------------------------------
3 Years 697 696 396 396 396 80
------------------------------------------------------------------------------------------------------------------------------
5 Years 837 890 690 690 690 145
------------------------------------------------------------------------------------------------------------------------------
10 Years 1,243 1,351 1,351 1,528 1,528 336
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $585
Class B (no redemption) $129
Class B (with redemption) $629
Class C (no redemption) $129
Class C (with redemption) $229
Class I $28
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 506
10
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Balanced Fund
WHAT IS THE GOAL OF
ONE GROUP INVESTOR
BALANCED FUND? The Fund seeks high total return consistent with the
preservation of capital by investing primarily in a
diversified group of One Group mutual funds which invest
primarily in equity and fixed income securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF ONE GROUP
INVESTOR BALANCED FUND?
One Group Investor Balanced Fund is a "Fund of Funds".
The Fund's investment strategy is to invest in a
diversified group of other One Group mutual funds.
Because this is a balanced fund, approximately half of
the Fund's assets will be invested in One Group equity
funds and approximately half will be invested in One
Group bond funds, although a portion of One Group
Balanced Fund's assets also will be invested in a One
Group money market fund. The Fund's investment return is
diversified by its investment in the underlying mutual
funds which invest in growth and income stocks, foreign
securities, debt securities, and cash or cash
equivalents. For more information about the Fund's
investment strategies, please read "More About The
Funds" and "Principal Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR BALANCED
FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR BALANCED
FUND? The main risks of investing in the One Group Investor
Balanced Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of One Group Investor Balanced Fund will change
every day in response to market conditions. You may lose
money if you invest in One Group Investor Balanced Fund.
MAIN RISKS
- ----------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses incurred by the underlying
Funds.
<PAGE> 507
11
- ---------------------------
Investor Balanced Fund
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Balanced Fund will
be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor Balanced
Fund will change as the value of investments of the
underlying One Group funds increase and decrease.
Index Funds. An index fund's investment objective is to
track the performance of a specified index. Therefore,
securities may be purchased, retained and sold by an
index fund at times when an actively managed fund would
not do so. If the value of securities that are heavily
weighted on an index change, you can expect a greater
risk of loss than may be the case if a fund were not
fully invested in such securities.
Foreign Securities. Funds investing in foreign
securities are subject to special risks in addition to
those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards
of some foreign markets. These risks can make foreign
investments more volatile and potentially less liquid
than U.S. investments.
Not FDIC Insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 508
12
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Investor Balanced Fund
The Bar Chart shows changes in
the Fund's performance from
year to year. Total returns
assume reinvestment of
dividends and distributions.
The returns shown DO NOT
reflect applicable sales
charges. If these charges were
included, the returns would be
lower than those shown.
The Average Annual Total
Return Table shows how the
Fund's average annual returns
for the periods indicated
compare to those of a broad
measure of market
performance. Average annual
total returns for more than
one year tend to smooth out
variations in a Fund's total
return and are not the same
as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
HOW HAS THE ONE GROUP
INVESTOR BALANCED FUND
PERFORMED? By showing the variability of the One Group Investor
Balanced Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INVESTOR BALANCED FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 16.93
1998 16.25
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
0.94%.
- --------------------------------------------------------------------------------
Best Quarter: 10.33% 4Q1998 Worst Quarter: -3.34% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 12/10/96)
<S> <C> <C>
One Group Investor Balanced Fund 9.78% 12.54%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 11.44% 12.99%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 12/10/96)
<S> <C> <C>
One Group Investor Balanced Fund 9.95% 13.58%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 11.44% 12.99%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 7/1/97)
<S> <C> <C>
One Group Investor Balanced Fund 14.01% 14.65%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 7.73%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 11.44% 9.62%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Balanced Fund 16.25% 15.87%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 11.44% 12.99%
</TABLE>
(1) The Lehman Brothers Intermediate Aggregate Bond
Index is an unmanaged index comprised of U.S.
Government, mortgage, corporate and asset-backed
securities with maturities of one to ten years.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the
performance of the One Group Investor Balanced
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
shares and contingent deferred sales charges on
Class B and Class C shares.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (40%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (55%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 509
13
- ---------------------------
Investor Balanced Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continue to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .20% .20% .20% .20%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (4) .60% 1.25% 1.25% .25%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (.15%) (.05%) (.05%) (.05%)
------------------------------------------------------------------------------------------------
Net Expenses (5) .45% 1.20% 1.20% .20%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see "Sales Charges."
(3) Expense information has been restated to reflect
current fees.
(4) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
Fund with those of the underlying funds, the
estimated average weighted expense ratio would be
1.23% for Class A shares, 1.98% for Class B
shares, 1.98% for Class C shares, and .98% for
Class I shares.
(5) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares, and .20% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------------------------------------------------------
3 Years 693 692 392 392 392 75
------------------------------------------------------------------------------------------------------------------------------
5 Years 828 882 682 682 682 136
------------------------------------------------------------------------------------------------------------------------------
10 Years 1,222 1,327 1,327 1,507 1,507 313
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $583
Class B (no redemption) $127
Class B (with redemption) $627
Class C (no redemption) $127
Class C (with redemption) $227
Class I $26
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 510
14
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Conservative
Growth Fund
WHAT IS THE GOAL OF ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? The Fund seeks income and capital appreciation by
investing primarily in a diversified group of One Group
mutual funds which invest primarily in fixed income and
equity securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF ONE GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? One Group Investor Conservative Growth Fund is a "Fund
of Funds". The Fund's investment strategy is to invest
in a diversified group of other One Group mutual funds.
Because this is a conservative growth fund, the majority
of the Fund's assets will be invested in One Group bond
funds, although a portion of its assets also will be
invested in One Group equity and money market funds. The
Fund's investment return is diversified by its
investment in the underlying mutual funds which invest
in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? The main risks of investing in the One Group Investor
Conservative Growth Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of One Group Investor Conservative
Growth Fund will change every day in response to market
conditions. You may lose money if you invest in One
Group Investor Conservative Growth Fund.
MAIN RISKS
- ----------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses incurred by the underlying
Funds.
<PAGE> 511
15
- ---------------------------
Investor Conservative Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions. The returns
shown DO NOT reflect
applicable sales charges. If
these charges were included,
the returns would be lower
than those shown.
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Conservative
Growth Fund will be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor
Conservative Growth Fund will change as the value of
investments of the underlying One Group funds increase
and decrease.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
HOW HAS THE ONE GROUP
INVESTOR CONSERVATIVE
GROWTH FUND PERFORMED?By showing the variability of the One Group Investor
Conservative Growth Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE INVESTOR CONSERVATIVE GROWTH FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 12.50
1998 11.71
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
0.59%.
- --------------------------------------------------------------------------------
Best Quarter: 6.21% 2Q1997 Worst Quarter: -0.28% 3Q1998
- --------------------------------------------------------------------------------
<PAGE> 512
16
ONE GROUP(R)
- ---------------------------
FUND SUMMARY
Investor Conservative Growth Fund
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results. The average annual
returns shown on the Average
Annual Total Return Table DO
include applicable sales
charges.
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS A (since 12/10/96)
<S> <C> <C>
One Group Investor Conservative Growth Fund 5.48% 8.17%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 9.88% 10.55%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS B (since 12/10/96)
<S> <C> <C>
One Group Investor Conservative Growth Fund 5.68% 9.06%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 9.88% 10.55%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C (since 7/1/97)
<S> <C> <C>
One Group Investor Conservative Growth Fund 9.65% 10.51%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 7.73%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 9.88% 8.61%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Conservative Growth Fund 11.71% 11.52%
-----------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------------------
Lipper Mix (2) 9.88% 10.55%
</TABLE>
(1) The Lehman Brothers Intermediate Aggregate Bond
Index is an unmanaged index comprised of U.S.
Government, mortgage, corporate and asset-backed
securities with maturities of one to ten years.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the
performance of the One Group Investor
Conservative Growth Fund reflects the deduction
of these services as well as the deduction of
sales charges on Class A shares and contingent
deferred sales charges on Class B and Class C
shares.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (20%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (75%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 513
17
- ---------------------------
Investor Conservative Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS A CLASS B CLASS C CLASS I
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases 5.25% NONE NONE NONE
---------------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE (2) 5.00% 1.00% NONE
---------------------------------------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
Exchange Fee NONE NONE NONE NONE
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (3) CLASS A CLASS B CLASS C CLASS I
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees .05% .05% .05% .05%
------------------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% NONE
------------------------------------------------------------------------------------------------
Other Expenses .25% .25% .25% .25%
------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (4) .65% 1.30% 1.30% .30%
------------------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (.20%) (.10%) (.10%) (.10%)
------------------------------------------------------------------------------------------------
Net Expenses (5) .45% 1.20% 1.20% .20%
------------------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more.
Please see Sales Charges.
(3) Expense information has been restated to reflect
current fees.
(4) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
Fund with those of the underlying funds, the
estimated average weighted expense ratio would be
1.17% for Class A shares, 1.92% for Class B
shares, 1.92% for Class C shares, and .92% for
Class I shares.
(5) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.45% for Class A shares, 1.20% for Class B
shares, 1.20% for Class C shares, and .20% for
Class I shares for the period beginning November
1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS A CLASS B (2) CLASS B (2) CLASS C CLASS C CLASS I
ASSUMING ASSUMING NO ASSUMING ASSUMING NO
REDEMPTION AT REDEMPTION REDEMPTION AT REDEMPTION
THE END OF THE END OF
EACH PERIOD EACH PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (1) $ 569 $ 622 $ 122 $ 222 $ 122 $ 20
------------------------------------------------------------------------------------------------------------------------------
3 Years 703 702 402 402 402 86
------------------------------------------------------------------------------------------------------------------------------
5 Years 849 903 703 703 703 159
------------------------------------------------------------------------------------------------------------------------------
10 Years 1,275 1,380 1,380 1,559 1,559 371
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be as follows:
<TABLE>
<S> <C>
Class A $588
Class B (no redemption) $132
Class B (with redemption) $632
Class C (no redemption) $132
Class C (with redemption) $232
Class I $31
</TABLE>
(2) Class B shares automatically convert to Class A
shares after eight (8) years. Therefore, the
number in the "10 years" example for Class B
Shares represents a combination of Class A and
Class B operating expenses.
<PAGE> 514
18
[PHOTO]
ONE GROUP(R)
- ---------------------------
More About the Funds
Each of the four funds described in this Prospectus is a
series of One Group Mutual Funds and is managed by Banc
One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of the Funds" and the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES The mutual funds described in this Prospectus are
designed to provide diversification across the three
major asset classes: stocks, bonds and cash or cash
equivalents. Diversification is achieved by investing in
other One Group mutual funds. A brief description of
these underlying One Group funds can be found in
Appendix A. The Funds attempt to take advantage of the
most attractive types of stocks and bonds by shifting
their asset allocation to favor mutual funds that focus
on the most promising securities. The principal
investment strategies that are used to meet each Fund's
investment objective are described in Fund Summaries:
Investments, Risk & Performance in the front of this
Prospectus. They are also described below.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
also may use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP INVESTOR GROWTH FUND. The Fund is diversified
between stocks and bonds, with a heavy emphasis on
stocks.
1. From 80% to 100% of the Fund's total assets are
invested in One Group equity funds.
2. Up to 20% of its total assets are invested in One
Group bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
<PAGE> 515
19
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- The Fund also may hold cash and cash equivalents.
- -----
ONE GROUP INVESTOR GROWTH & INCOME FUND. The Fund is
diversified between stocks and bonds, with an emphasis
on stocks.
1. From 60% to 80% of the Fund's total assets are
invested in One Group equity funds.
2. From 20% to 40% of its total assets are invested in
One Group bond funds.
<PAGE> 516
20
3. Up to 10% of its total assets are invested in a One
Group money market fund.
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- The Fund also may hold cash and cash equivalents.
- -----
ONE GROUP INVESTOR BALANCED FUND. The Fund invests in
both stock and bond mutual funds -- stock funds for
long-term growth potential and bond funds for principal
stability and current income.
1. From 40% to 60% of the Fund's total assets are
invested in One Group equity funds.
2. From 40% to 60% of its total assets are invested in
One Group bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
<PAGE> 517
21
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- Fund also invests in cash and cash equivalents.
- -----
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND. The Fund is
diversified between stocks and bonds, with an emphasis
on bonds.
1. From 20% to 40% of the Fund's total assets are
invested in One Group equity funds.
2. From 60% to 80% of its total assets are invested in
One Group bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
<PAGE> 518
22
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND NAME FUND HOLDINGS
----------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- Fund also invests in cash and cash equivalents.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The main risks of investing in the Funds are described
in the Fund Summaries. Additional risks are described
below.
- -----
DERIVATIVES. The Funds may invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of
derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use
such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
<PAGE> 519
23
- -----
JUNK BONDS. One Group High Yield Bond and One Group
Income Bond Fund invest in debt securities that are
considered to be speculative. These securities are
issued by companies which are highly leveraged, less
creditworthy or financially distressed. While these
investments generally provide a higher yield than higher
rated debt securities, the high degree of risk involved
in these investments can result in substantial or total
losses. The market price of these securities can change
suddenly and unexpectedly.
- -----
CREDIT RISK. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the underlying funds. Such
default could result in losses to the underlying funds
and to the Fund. In addition, the credit quality of
securities held by the Fund may be lowered if an
issuer's financial condition changes. Lower credit
quality may lead to greater volatility in the price of a
security and in shares of the Fund. Lower credit quality
also may affect liquidity and make it difficult for the
Fund to sell the security.
- -----
PREPAYMENT AND CALL RISK. Some of the underlying funds
may invest a portion of their assets in mortgage-backed
securities. These securities are subject to prepayment
and call risk. The issuers of mortgage-backed and other
callable securities may be able to repay principal in
advance, especially when interest rates fall. Changes in
prepayment rates can affect the return on investment and
yield of mortgage-backed securities. When mortgages are
prepaid, a fund may have to reinvest in securities with
a lower yield. A fund also may fail to recover premiums
paid for the securities, resulting in unexpected capital
loss.
- -----
INTERNATIONAL FUNDS. Foreign securities are subject to
special risks. These risks may include future
unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits,
currency controls, higher transaction costs, and delayed
settlements of transactions. Securities of some foreign
companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies.
Additionally, there may be less public information
available about foreign issuers. Since the underlying
funds may invest in securities denominated in foreign
currencies, changes in exchange rates also may affect
the value of investments in the underlying funds.
- -----
EMERGING MARKETS. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
<PAGE> 520
24
- -----
SMALLER COMPANIES. Investments by funds in smaller,
newer companies may be riskier than investments in
larger, more established companies. Securities of
smaller companies tend to be less liquid than securities
of large companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their debt securities and/or stock
price. This may cause unexpected and frequent decreases
in the value of underlying funds investing in small
companies, and may affect your investment in the funds.
- --------------------------------------------------------------------------------
INVESTMENT
POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of the
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
Each Fund may not:
1. Purchase an issuer's securities if as a result more
then 5% of its total assets would be invested in the
securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of any
of that issuer. This does not include securities
issued or guaranteed by the United States, its
agencies or instrumentalities, securities of other
registered investment companies and repurchase
agreements involving these securities. This
restriction applies with respect to 75% of a Fund's
total assets.
2. Concentrate its investments in the securities of one
or more issuers conducting their principal business
in a particular industry or group of industries. This
does not include obligations issued or guaranteed by
the U.S. government or its agencies and
instrumentalities and repurchase agreements involving
such securities.
3. Make loans, except that a Fund may (i) purchase or
hold debt instruments in accordance with its
investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities
lending.
Additional investment policies are set forth in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
TEMPORARY
DEFENSIVE
POSITION For liquidity and to respond to unusual market
conditions, the Funds may invest all or most of their
assets in short-term fixed income securities for
temporary defensive purposes. These types of securities
are known as "cash equivalents". These investments may
result in a lower yield than lower-quality or longer
term investments and may prevent the Funds from meeting
their investment objectives.
<PAGE> 521
25
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
While the Funds are engaged in a temporary defensive
position, they will not be pursuing their investment
objectives. Therefore, the Funds will pursue a temporary
defensive position only when market conditions warrant.
- --------------------------------------------------------------------------------
PORTFOLIO
TURNOVER Portfolio turnover may vary greatly from year to year,
as well as within a particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds and may result in
additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights. To
the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at
ordinary income tax rates.
<PAGE> 522
26
[PHOTO]
ONE GROUP(R)
- ---------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
- The One Group Services Company, and
- Shareholder Servicing Agents. These include investment
advisors, brokers, financial planners, banks,
insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased
this way will be held for you by the Shareholder
Servicing Agent.
WHEN CAN I BUY SHARES? - Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close
before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the
following business day.
- Purchase orders may be cancelled if the Fund's
Custodian, State Street Bank and Trust Company, does
not receive "federal funds" by 4:00 p.m. ET (i) on the
business day after the order is placed if you are
buying Class I shares, and (ii) on the third business
day if you are purchasing Class A, Class B or Class C
shares.
- If your shares are held by a Shareholder Servicing
Agent, it is the responsibility of the Shareholder
Servicing Agent to send your purchase or redemption
order to the Fund. Your Shareholder Servicing Agent
may have an earlier cut-off time for purchase and
redemption requests.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
WHAT KIND OF SHARES CAN
I BUY? One Group offers the following classes of shares:
- Class A, Class B and Class C shares are available to
the general public.
- Class I shares are available to institutional
investors and any organization authorized to act in a
fiduciary, advisory, custodial or agency capacity. We
will refer to these entities as "Intermediaries."
<PAGE> 523
27
- When deciding what class of shares to buy, you should
consider the amount of your investment, the length of
time you intend to hold the shares, and the sales
charges and expenses applicable to each class of
shares. If you intend to hold your shares for seven or
more years, Class A shares may be more appropriate for
you. If you intend to hold your shares for less than
seven years, you may want to consider Class B or Class
C shares. Sales charges are discussed in the section
of this prospectus entitled SALES CHARGES.
One Group Fund Direct IRA 403(b). One Group offers
retirement plans. These plans allow participants to
defer taxes while their retirement savings grow. Call
The One Group Services Company at 1-800-480-4111 for an
Adoption Agreement.
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV") plus a
sales charge, if any.
- Each class of shares in each Fund has a different NAV.
This is primarily because each class has different
distribution expenses.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4
p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
HOW DO I OPEN AN
ACCOUNT? 1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per
Fund -- ($100 for employees of Bank One Corporation
and its affiliates). The minimum initial investment
for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B
shares. This is because Class A shares offer a reduced
sales charge on purchases of $250,000 or more and have
lower expenses. The section of this prospectus
entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate
share class.
- The One Group Services Company may waive these
minimums.
3. Complete the Account Application Form. Be sure to
sign up for all of the Account privileges that you
plan to take advantage of. Doing so now means that
you will not have to complete additional paperwork
later.
4. Send the completed application and a personal check
(unless you choose to pay by wire) payable to "One
Group" to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
<PAGE> 524
28
Contributions to Fund Direct IRAs should be made
payable to "State Street Bank and Trust Company for
the Benefit of (your name)."
5. All checks must be in U.S. dollars. One Group does
not accept "third party checks". Checks made payable
to any individual and endorsed to One Group are
considered third party checks. All checks must be
payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- The specific Fund in which you are investing.
Checks made payable to any party other than those
listed above will be returned to the address provided
on the account application.
6. If you redeem shares purchased under the Systematic
Investment Plan (see below) or that were purchased by
check, One Group will delay forwarding your
redemption proceeds until payment has been collected
from your bank. One Group generally receives payment
within ten (10) calendar days of purchase.
7. If you purchase shares through a Shareholder
Servicing Agent, you may be required to complete
additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder
Servicing Agent or call The One Group Services
Company at 1-800-480-4111.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Account
Application Form and then:
- Contact your Shareholder Servicing Agent or The One
Group Services Company at 1-800-480-4111 to relay your
purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
STATE STREET BANK AND TRUST COMPANY
ATTN: CUSTODY & SHAREHOLDER SERVICES
ABA 011 000 028
DDA 99034167
FBO ONE GROUP FUND
(EX: ONE GROUP INVESTOR GROWTH FUND--A)
YOUR ACCOUNT NUMBER
(EX: 123456789)
YOUR ACCOUNT REGISTRATION
(EX: JOHN SMITH & MARY SMITH, JTWROS)
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the
telephone by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
<PAGE> 525
29
CAN I AUTOMATICALLY
INVEST ON A
SYSTEMATIC BASIS? Yes. After your Account is established, you may purchase
additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account.
The minimum initial investment is still $1,000 per Fund,
but minimum automatic additions are only $25 per Fund.
The One Group Services Company may waive these minimums.
To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the
Account Application Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future. However, your
bank may impose a charge for debiting your bank
account.
- You may revoke your right to make systematic
investments by calling The One Group Services Company
at 1-800-480-4111 or by sending a letter to:
STATE STREET BANK AND TRUST COMPANY
C/O ONE GROUP
P.O. BOX 8528
BOSTON, MA 02266-8528
CONVERSION FEATURE Your Class B shares automatically convert to Class A
shares after eight years (measured from the end of the
month in which they were purchased).
- After conversion, your shares will be subject to the
lower distribution and shareholder servicing fees
charged on Class A shares.
- You will not be assessed any sales charges or fees for
conversion of shares, nor will you be subject to any
Federal income tax.
- Because the share price of the Class A shares may be
higher than that of the Class B shares at the time of
conversion, you may receive fewer Class A shares;
however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for
Class B shares of another, the time you held the
shares in each Fund will be added together.
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group.
Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own
resources. The tables below show the sales charges for
each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder
Servicing Agent.
<PAGE> 526
30
CLASS A
SHARES
- -------------------------
This table shows the amount of sales charge you pay and
the commissions paid to Shareholder Servicing Agents.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AMOUNT OF AS A % OF THE AS A % AS A %
PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
<S> <C> <C> <C>
LESS THAN $50,000 5.25% 5.54% 4.75%
----------------------------------------------------------------------------------------------------
$50,000-$99,999 4.50% 4.71% 4.05%
----------------------------------------------------------------------------------------------------
$100,000-$249,999 3.50% 3.63% 3.05%
----------------------------------------------------------------------------------------------------
$250,000-$499,999 2.50% 2.56% 2.05%
----------------------------------------------------------------------------------------------------
$500,000-$999,999 2.00% 2.04% 1.60%
----------------------------------------------------------------------------------------------------
$1,000,000* 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------------------
</TABLE>
* If you purchase $1 million or more of Class A shares
and are not assessed a sales charge at the time of
purchase, you will be charged the equivalent of 1% of
the purchase price if you redeem any or all of the
Class A shares within one year of purchase and 0.50%
of the purchase price if you redeem within two years
of purchase, unless The One Group Services Company
receives notice before you invest indicating that your
Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
- -------------------------
Class B shares are offered at NAV, without any up-front
sales charges. However, if you redeem these shares
within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC")
according to the following schedule:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
CDSC AS A %
YEARS OF DOLLAR AMOUNT
SINCE PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 5.00%
-------------------------------------------------------------
1-2 4.00%
-------------------------------------------------------------
2-3 3.00%
-------------------------------------------------------------
3-4 3.00%
-------------------------------------------------------------
4-5 2.00%
-------------------------------------------------------------
5-6 1.00%
-------------------------------------------------------------
MORE THAN 6 0.00%
-------------------------------------------------------------
</TABLE>
The One Group Services Company pays a commission of
4.00% of the original purchase price to Shareholder
Servicing Agents who sell Class B shares.
CLASS C SHARES
- -------------------------
Class C shares are offered at NAV, without any up-front
sales charge. However, if you redeem your shares within
one year of the purchase date, you will be assessed a
CDSC as follows:
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEARS CDSC AS A %
SINCE OF DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 1.00%
--------------------------------------------------------
AFTER FIRST
YEAR NONE
--------------------------------------------------------
</TABLE>
<PAGE> 527
31
Shareholder Servicing Agents selling Class C shares
receive a commission of 1.00% of the original purchase
price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given
month were made on the first day of the month.
- The CDSC is based on the current market value or the
original cost of the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a
CDSC assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
- To keep your CDSC as low as possible, the Fund first
will redeem the shares acquired through dividend
reinvestment followed by shares you have held for the
longest time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an
unrelated mutual fund for Class B or Class C shares of
One Group in connection with a fund reorganization,
the CDSC applicable to your original shares (including
the period of time you have held those shares) will be
applied to One Group shares you receive in the
reorganization.
12B-1 FEES
- --------------------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees. These fees are called "12b-1 fees".
12b-1 fees are paid by One Group to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to Shareholder Servicing
Agents that sell shares of One Group.
The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average
daily net assets of the Fund, which is currently
being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00%
of the average daily net assets of the Fund. This
will cause expenses for Class B and Class C shares to
be higher and dividends to be lower than for Class A
shares.
3. There are no 12b-1 fees for Class I shares.
12b-1 fees, together with the CDSC, help The One Group
Services Company sell Class B and Class C shares without
an "up-front" sales charge by defraying the costs of
advancing brokerage commissions and other expenses paid
to Shareholder Servicing Agents.
- The One Group Services Company may use up to .25% of
the fees for shareholder servicing and up to .75% for
distribution. During the last fiscal year, The One
Group Services Company received 12b-1 fees totaling
.25% of its average daily net assets of Class A, and
1.00% and 1.00% of the average daily net assets of
Class B and Class C shares, respectively.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
<PAGE> 528
32
- --------------------------------------------------------------------------------
SALES CHARGE
REDUCTIONS AND
WAIVERS
REDUCING YOUR CLASS A There are several ways you can reduce the sales charges
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 No sales charge is imposed on Class A shares of the
SALES CHARGE Funds if the shares were:
- --------------------------------
1. Bought with the reinvestment of dividends and capital
gains distributions.
2. Acquired in exchange for other Fund shares if a
comparable sales charge has been paid for the
exchanged shares.
3. Bought by officers, directors or trustees, retirees
and employees (and their spouses and immediate family
members) of:
- One Group.
- Bank One Corporation and its subsidiaries and
affiliates.
- The One Group Services Company and its subsidiaries
and affiliates.
- State Street Bank and Trust Company and its
subsidiaries and affiliates.
- Broker/dealers who have entered into dealer
agreements with One Group and their subsidiaries and
affiliates.
- An investment sub-advisor of a fund of One Group and
such sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain
accounts (other than IRA Accounts) for which an
Intermediary acts in a fiduciary, advisory, agency,
custodial or Accounts which participate in select
affinity programs with Bank One Corporation and its
affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges
an asset allocation fee, provided the bank or
broker-dealer has an agreement with The One Group
Services Company.
<PAGE> 529
33
- 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 Class A shares of a One Group
Fund, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution
from an employee benefit plan, but only if the
purchase is made within 60 days of the sale or
distribution and, at the time of the distribution,
the employee benefit plan had plan assets invested in
a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of
a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B No sales charge is imposed on redemptions of Class B
SALES CHARGE shares of the Funds:
- -------------------------
1. If you withdraw no more than 10% of the value of your
account in a 12 month period. Shares received from
dividend and capital gains reinvestment are included
in calculating the amounts eligible for this waiver.
You need to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read the Do I Pay a Sales Charge on an
Exchange?.
<PAGE> 530
34
WAIVER OF THE CLASS C No sales charge is imposed on redemptions of Class C
SALES CHARGE shares of the Funds:
- ---------------------
1. If you withdraw no more than 10% of the value of your
account. Shares received from dividend and capital
gains reinvestment are included in calculating the
amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take
advantage of this waiver.
2. If you buy the shares in connection with certain
retirement plans, such as 401(k) and similar
qualified plans.
3. If you are the shareholder (or a joint shareholder),
or a participant or beneficiary of certain retirement
plans and you die or become disabled (as defined by
the Tax Code), but only if the redemption is made
within one year of such death or disability.
4. That represent a minimum required distribution from
your One Group IRA Account or other One Group
qualifying retirement plan, but only if you are at
least age 70 1/2.
5. Exchanged in connection with plans of reorganizations
of a Fund, such as mergers, asset acquisitions and
exchange offers to which a Fund is a party.
6. Exchanged for Class C shares of other One Group
Funds. However, you may pay a sales charge when you
redeem the Fund shares you received in the exchange.
Please read the Do I Pay a Sales Charge on an
Exchange?.
7. If The One Group Services Company receives notice
before you invest indicating that your Shareholder
Servicing Agent, due to the type of account that you
have, is waiving its commission.
To take advantage of any of these sales charge waivers,
you must qualify for such waiver in advance. To see if
you qualify, contact The One Group Services Company at
1-800-480-4111 or your Shareholder Servicing Agent.
These waivers will not continue indefinitely and may be
discontinued at any time without notice.
- --------------------------------------------------------------------------------
EXCHANGING FUND
SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I
shares of that Fund or for Class A or Class I shares
of another One Group Fund, but only if you are
eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B
shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C
shares of another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please
select it on your account application. To learn more
about it, please call The One Group Services Company at
1-800-480-4111.
<PAGE> 531
35
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.
<PAGE> 532
36
ARE THERE LIMITS ON
EXCHANGES? Yes. The exchange privilege is not intended as a way for
you to speculate on short term movements in the market.
Therefore:
- To prevent disruptions in the management of the Funds,
One Group limits excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO
SUBSTANTIVE EXCHANGE REDEMPTIONS (WITHIN 30 DAYS OF
EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- In addition, One Group reserves the right to reject
any exchange request (even those that are not
excessive) if the Fund reasonably believes that the
exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
- --------------------------------------------------------------------------------
REDEEMING FUND
SHARES
WHEN CAN I REDEEM
SHARES? You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
HOW DO I REDEEM SHARES? Unless you have selected the telephone option on your
Account Application Form, you must send a written
redemption request to your Shareholder Servicing Agent,
if applicable, or to State Street Bank and Trust Company
at the following address:
ONE GROUP
C/O STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8528
BOSTON, MA 02266-8528
- All requests for redemptions from IRA accounts must be
in writing.
- You may request redemption forms by calling The One
Group Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that
the signature on your redemption request be guaranteed
by a participant in the Securities Transfer
Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or
less;
2. the redemption is payable to the shareholder of
record;
3. the redemption check is mailed to the shareholder
at the record address; or
4. the redemption is payable by wire or bank transfer
(ACH) to a pre-existing bank account.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
<PAGE> 533
37
- Your redemption proceeds will ordinarily will be paid
within seven days after receipt of the redemption
request. If you have wire instructions on file, the
Funds will attempt to honor requests for same day
payment if the request is received by 4:00 p.m. ET. If
redemption requests are received after 4:00 p.m. ET,
the Funds will attempt to wire payment the next
business day.
WHAT WILL MY SHARES BE
WORTH? - If you own Class A and Class I shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV.
- If you own Class B or Class C shares and the Fund
receives your redemption request by 4:00 p.m. ET (or
when the NYSE closes), you will receive that day's
NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Account
Application Form.
- Call your Shareholder Servicing Agent or The One Group
Service Company at 1-800-480-4111 to relay your
redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- State Street Bank and Trust Company may charge you a
wire redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These
procedures include recording telephone instructions
and asking for personal identification. If these
procedures are followed, One Group will not be
responsible for any loss, liability, cost or expense
of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the
Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy
additional Class A shares while participating in a
Systematic Withdrawal Plan. This is because Class A
shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than
10% of your account value annually. Shares received
from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable
Class B and Class C sales charge is waived provided
your withdrawals do not exceed 10% annually.
Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales
charge.
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 a One Group
IRA or other One Group qualifying retirement plan.
<PAGE> 534
38
4. If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $800 that are not participating in
a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account
fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
<PAGE> 535
39
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. The Funds generally declare dividends
quarterly. The Investor Conservative Growth Fund,
however, generally declares dividends monthly. Dividends
are distributed on the first business day of the next
month after they are declared. Capital gains, if any,
for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share
basis. This means that the value of your shares will be
reduced by the amount of the payment. If you purchase
shares shortly before the record date for a dividend or
the distribution of capital gains, you will pay the full
price for the shares and receive some portion of the
price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than
those payable on other classes of shares. This is
because Class A, Class B and Class C shares have higher
distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call The One Group Services Company at
1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES. Class B
shares received as dividends and capital gains
distributions will be accounted for separately. Each
time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of
the Class B shares in the sub-account will also convert
to Class A shares. (See "Conversion Feature.")
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in
cash.
<PAGE> 536
40
TAXATION OF
DISTRIBUTIONS
- -------------------------
Each Fund will distribute substantially all of its net
investment income (including, for this purpose, the
excess of net short-term capital gains over net
long-term capital losses and net capital gains (i.e.,
the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis.
Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from
a Fund's net investment income will be taxable as
ordinary income and distributions from a Fund's
long-term capital gains will be taxable to you as such,
regardless of how long you have held the shares.
Distributions are taxable to you even if they are paid
from income or gains earned by a Fund prior to your
investment (and thus were included in the price you
paid).
A Fund's use of a fund-of-funds structure could affect
the amount, timing and character of distributions to
shareholders. See "Additional Tax Information Concerning
the Funds of Funds" in the Statement of Additional
Information.
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
TAXATION OF
RETIREMENT PLANS
- -------------------------
Distributions by the Funds to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual as described
in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets,
you should consult your tax advisor for a more complete
explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an
investment.
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write The One Group Services Company
at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
- -------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 537
41
(Intentionally Left Blank)
<PAGE> 538
42
[PHOTO]
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
THE SUB-ADVISORS Banc One High Yield Partners, LLC, 8044 Montgomery Road,
Suite 382, Cincinnati, Ohio 45236, is the sub-advisor to
the High Yield Bond Fund. Banc One High Yield Partners
was formed in June, 1998 to provide investment advisory
services related to high yield, high risk investments to
the High Yield bond Fund and other advisory clients.
Banc One High Yield Partners is controlled by Banc One
Investment Advisors and Pacholder Associates, Inc. As of
June 30, 1999, Banc One High Yield Partners had
approximately $126 million in assets under management.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Investor Growth Fund .03%
----------------------------------------------------------------------
One Group(R) Investor Growth & Income
Fund .05%
----------------------------------------------------------------------
One Group(R) Investor Balanced Fund .04%
----------------------------------------------------------------------
One Group(R) Investor Conservative
Growth Fund .03%
----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
THE FUND
MANAGERS No single person is responsible for managing the assets
of the Funds. Rather, investment decisions for the Funds
are made by committee. Banc One Investment Advisors also
serves as the advisor to the underlying mutual funds,
for which it receives a fee.
<PAGE> 539
43
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 540
44
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.33 $ 11.21 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.29 0.10 0.07
Net realized and unrealized gains (losses) from
investments 1.74 2.47 1.21
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.03 2.57 1.28
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.40) (0.10) (0.07)
From net realized gain (0.66) (0.35) -
Total Distributions (1.06) (0.45) (0.07)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.30 $ 13.33 $ 11.21
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.40% 23.44% 12.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $100,789 $55,057 $ 4,439
Ratio of expenses to average net assets 0.45% 0.45% 0.46%(C)
Ratio of net investment income to average net assets 2.08% 0.78% 1.82%(C)
Ratio of expenses to average net assets* 0.66% 0.70% 1.62%(C)
Ratio of net investment income to average net assets* 1.87% 0.53% 0.66%(C)
Portfolio turnover(D) 14.62% 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.47 $ 11.34 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.20 0.02 0.04
Net realized and unrealized gains (losses) from
investments 1.76 2.48 1.34
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.96 2.50 1.38
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.33) (0.02) (0.04)
Net realized gains (0.66) (0.35) -
Total Distributions (0.99) (0.37) (0.04)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.44 $ 13.47 $ 11.34
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.57% 22.52% 13.88%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $168,823 $70,515 $ 7,651
Ratio of expenses to average net assets 1.20% 1.20% 1.20%(C)
Ratio of net investment income to average net assets 1.44% 0.04% 0.97%(C)
Ratio of expenses to average net assets* 1.31% 1.35% 2.18%(C)
Ratio of net investment income to average net assets* 1.33% (0.11%) (0.01%)(C)
Portfolio turnover(D) 14.62% 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> 541
45
- -------------------------------------
Investor Growth Fund
<TABLE>
<CAPTION>
JULY 1,
1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.34 $ 11.25
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.18 0.02
Net realized and unrealized gains (losses) from
investments 1.77 2.45
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.95 2.47
- --------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.33) (0.03)
From net realized gains (0.66) (0.35)
Total Distributions (0.99) (0.38)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.30 $ 13.34
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.65% 22.42%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $15,071 $ 8,772
Ratio of expenses to average net assets 1.20% 1.20%
Ratio of net investment income to average net assets 1.50% 0.04%
Ratio of expenses to average net assets* 1.31% 1.35%
Ratio of net investment income to average net assets* 1.39% (0.11%)
Portfolio turnover(B) 14.62% 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. (B) 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,
YEAR ENDED 1996
JUNE 30, THROUGH
------------------------ JUNE 30,
CLASS I 1999 1998 1997(A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.39 $ 11.25 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.32 0.12 0.09
Net realized and unrealized gains (losses) from
investments 1.77 2.49 1.25
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.09 2.61 1.34
- ---------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.43) (0.12) (0.09)
From net realized gain (0.66) (0.35) -
Total Distributions (1.09) (0.47) (0.09)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.39 $ 13.39 $ 11.25
- ---------------------------------------------------------------------------------------------------------------
Total Return 16.84% 23.81% 13.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $100,566 $86,355 $31,318
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 2.57% 1.04% 1.70%(C)
Ratio of expenses to average net assets* 0.31% 0.36% 0.77%(C)
Ratio of net investment income to average net assets* 2.46% 0.88% 1.13%(C)
Portfolio turnover(D) 14.62% 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> 542
46
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Growth & Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.69 $ 11.02 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.36 0.22 0.12
Net realized and unrealized gains from investments 1.27 1.95 1.02
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.63 2.17 1.14
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.45) (0.22) (0.12)
Net realized gain (0.47) (0.28) -
Total Distributions (0.92) (0.50) (0.12)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.40 $ 12.69 $ 11.02
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 13.62% 20.18% 11.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $245,151 $39,874 $ 4,262
Ratio of expenses to average net assets 0.45% 0.45% 0.46%(C)
Ratio of net investment income to average net assets 1.54% 1.91% 2.67%(C)
Ratio of expenses to average net assets* 0.62% 0.67% 1.26%(C)
Ratio of net investment income to average net assets* 1.37% 1.69% 1.87%(C)
Portfolio turnover(D) 17.87% 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.64 $ 11.00 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.14 0.09
Net realized and unrealized gains from investments 1.29 1.92 1.00
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.55 2.06 1.09
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.14) (0.09)
Net realized gain (0.47) (0.28) -
Total Distributions (0.83) (0.42) (0.09)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.36 $ 12.64 $ 11.00
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.93% 19.13% 11.02%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $221,088 $85,468 $ 8,896
Ratio of expenses to average net assets 1.20% 1.20% 1.21%(C)
Ratio of net investment income to average net assets 2.12% 1.15% 1.94%(C)
Ratio of expenses to average net assets* 1.27% 1.32% 1.89%(C)
Ratio of net investment income to average net assets* 2.05% 1.03% 1.26%(C)
Portfolio turnover(D) 17.87% 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> 543
47
- -------------------------------------
Investor Growth & Income Fund
<TABLE>
<CAPTION>
JULY 1, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.54 $ 10.93
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.14
Net realized and unrealized gains (losses) from
investments 1.28 1.90
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.54 2.04
- --------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.36) (0.15)
Net realized gains (0.47) (0.28)
Total Distributions (0.83) (0.43)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.25 $ 12.54
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.94% 19.08%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $12,347 $ 6,429
Ratio of expenses to average net assets 1.20% 1.20%
Ratio of net investment income to average net assets 2.20% 1.14%
Ratio of expenses to average net assets* 1.27% 1.31%
Ratio of net investment income to average net assets* 2.13% 1.03%
Portfolio turnover(B) 17.87% 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. (B) 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,
YEAR ENDED 1996
JUNE 30, THROUGH
------------------------ JUNE 30,
CLASS I 1999 1998 1997(A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.57 $ 10.93 $ 10.00
- ---------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35 0.25 0.15
Net realized and unrealized gains (losses) from
investments 1.32 1.92 0.93
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.67 2.17 1.08
- ---------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.48) (0.25) (0.15)
Net realized gain (0.47) (0.28) -
Total Distributions (0.95) (0.53) (0.15)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.29 $ 12.57 $ 10.93
- ---------------------------------------------------------------------------------------------------------------
Total Return 14.11% 20.34% 10.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $209,770 $98,060 $43,660
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 3.70% 2.17% 2.78%(C)
Ratio of expenses to average net assets* 0.27% 0.34% 0.66%(C)
Ratio of net investment income to average net assets* 3.63% 2.03% 2.32%(C)
Portfolio turnover(D) 17.87% 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> 544
48
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Balanced Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.83 $ 10.66 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.34 0.17
Net realized and unrealized gains from investments 0.79 1.39 0.66
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.21 1.73 0.83
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.48) (0.34) (0.17)
Net realized gains (0.32) (0.22) -
Total Distributions (0.80) (0.56) (0.17)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.24 $ 11.83 $ 10.66
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.70% 16.62% 8.41%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $177,336 $32,605 $ 2,176
Ratio of expenses to average net assets 0.45% 0.45% 0.47%(C)
Ratio of net investment income to average net assets 3.27% 3.01% 3.78%(C)
Ratio of expenses to average net assets* 0.61% 0.66% 1.12%(C)
Ratio of net investment income to average net assets* 3.11% 2.80% 3.13%(C)
Portfolio turnover(D) 13.51% 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,
YEAR ENDED 1996
JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.82 $ 10.65 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.33 0.26 0.16
Net realized and unrealized gains from investments 0.81 1.39 0.65
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.14 1.65 0.81
- -----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.40) (0.26) (0.16)
Net realized gains (0.32) (0.22) -
Total Distributions (0.72) (0.48) (0.16)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.24 $ 11.82 $ 10.65
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.01% 15.85% 8.22%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $229,671 $70,463 $ 5,672
Ratio of expenses to average net assets 1.20% 1.20% 1.22%(C)
Ratio of net investment income to average net assets 2.78% 2.26% 2.93%(C)
Ratio of expenses to average net assets* 1.26% 1.31% 1.73%(C)
Ratio of net investment income to average net assets* 2.72% 2.15% 2.42%(C)
Portfolio turnover(D) 13.51% 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> 545
49
- -------------------------------------
Investor Balanced Fund
<TABLE>
<CAPTION>
JULY 1, 1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.77 $ 10.63
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.32 0.26
Net realized and unrealized gains (losses) from
investments 0.81 1.37
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 1.13 1.63
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.27)
Net realized gains (0.32) (0.22)
Total Distributions (0.71) (0.49)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.19 $ 11.77
- -------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.04% 15.66%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $14,963 $ 6,653
Ratio of expenses to average net assets 1.20% 1.20%
Ratio of net investment income to average net assets 2.85% 2.24%
Ratio of expenses to average net assets* 1.26% 1.30%
Ratio of net investment income to average net assets* 2.79% 2.14%
Portfolio turnover(B) 13.51% 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. (B) 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,
YEAR ENDED 1996
JUNE 30, THROUGH
------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.81 $ 10.63 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.37 0.21
Net realized and unrealized gains from investments 0.79 1.39 0.63
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.26 1.76 0.84
- ----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.51) (0.36) (0.21)
Net realized gains (0.32) (0.22) -
Total Distributions (0.83) (0.58) (0.21)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.24 $ 11.81 $ 10.63
- ----------------------------------------------------------------------------------------------------------
Total Return 11.16% 17.02% 8.48%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $84,447 $93,557 $72,155
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 3.85% 3.31% 3.84%(C)
Ratio of expenses to average net assets* 0.26% 0.32% 0.56%(C)
Ratio of net investment income to average net assets* 3.79% 3.19% 3.48%(C)
Portfolio turnover(D) 13.51% 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> 546
50
[PHOTO]
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Conservative Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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,
YEAR ENDED 1996
JUNE 30, THROUGH
------------------- JUNE 30,
CLASS A 1999 1998 1997(A)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.04 $ 10.32 $10.00
- ----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.44 0.43 0.22
Net realized and unrealized gains (losses) from
investments 0.29 0.82 0.32
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.73 1.25 0.54
- ----------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.46) (0.43) (0.22)
Net realized gains (0.13) (0.10) -
Total Distributions (0.59) (0.53) (0.22)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 11.04 $10.32
- ----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.77% 12.38% 5.46%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $29,714 $12,538 $1,299
Ratio of expenses to average net assets 0.45% 0.45% 0.47%(C)
Ratio of net investment income to average net assets 4.07% 4.12% 4.76%(C)
Ratio of expenses to average net assets* 0.67% 0.82% 3.05%(C)
Ratio of net investment income to average net assets* 3.85% 3.75% 2.18%(C)
Portfolio turnover(D) 9.73% 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,
YEAR ENDED 1996
JUNE 30, THROUGH
--------------------- JUNE 30,
CLASS B 1999 1998 1997(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 10.33 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.36 0.37 0.19
Net realized and unrealized gains (losses) from
investments 0.29 0.81 0.33
- ------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 1.18 0.52
- ------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.38) (0.36) (0.19)
Net realized gains (0.13) (0.10) -
Total Distributions (0.51) (0.46) (0.19)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.19 $ 11.05 $ 10.33
- ------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.10% 11.53% 5.30%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 121,348 $39,489 $ 2,616
Ratio of expenses to average net assets 1.20% 1.20% 1.21%(C)
Ratio of net investment income to average net assets 3.33% 3.37% 4.06%(C)
Ratio of expenses to average net assets* 1.32% 1.47% 3.52%(C)
Ratio of net investment income to average net assets* 3.21% 3.10% 1.75%(C)
Portfolio turnover(D) 9.73% 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> 547
51
- -------------------------------------
Investor Conservative Growth Fund
<TABLE>
<CAPTION>
JULY 1,
1997
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
CLASS C 1999 1998(A)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.03 $ 10.33
- -------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.36 0.35
Net realized and unrealized gains (losses) from
investments 0.29 0.81
- -------------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 1.16
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.38) (0.36)
Net realized gains (0.13) (0.10)
Total Distributions (0.51) (0.46)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.17 $ 11.03
- -------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.00% 11.48%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 8,742 $ 3,788
Ratio of expenses to average net assets 1.20% 1.20%
Ratio of net investment income to average net assets 3.32% 3.39%
Ratio of expenses to average net assets* 1.33% 1.47%
Ratio of net investment income to average net assets* 3.19% 3.12%
Portfolio turnover(B) 9.73% 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. (B) 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,
YEAR ENDED 1996
JUNE 30, THROUGH
---------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 10.33 $ 10.00
- -------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.46 0.26
Net realized and unrealized gains (losses) from
investments 0.28 0.82 0.33
- -------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.75 1.28 0.59
- -------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.48) (0.45) (0.26)
Net realized gains (0.13) (0.10) -
Total Distributions (0.61) (0.55) (0.26)
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.20 $ 11.06 $ 10.33
- -------------------------------------------------------------------------------------------------------------
Total Return 7.01% 12.70% 6.00%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $37,131 $30,352 $15,038
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 4.31% 4.43% 4.92%(C)
Ratio of expenses to average net assets* 0.32% 0.56% 1.46%(C)
Ratio of net investment income to average net assets* 4.19% 4.07% 3.66%(C)
Portfolio turnover(D) 9.73% 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> 548
52
[PHOTO]
ONE GROUP(R)
- ---------------------------
Appendix A
--------------------------------------------------------
INVESTMENT
PRACTICES The following is a brief description of the principal
investment policies of each of the underlying funds.
ONE GROUP PRIME
MONEY MARKET FUND One Group Prime Money Market Fund seeks current income
with liquidity and stability of principal by investing
exclusively in high quality, short-term money market
instruments. These instruments include corporate notes,
commercial paper, funding agreements, certificates of
deposit, bank obligations and deposit notes. The Fund
will concentrate in the financial services industry,
including asset-backed commercial paper programs. The
Fund intends to comply with the regulations of the
Securities and Exchange Commission applicable to money
market funds using the amortized cost method for
calculating net asset value. These regulations impose
certain quality, maturity and diversification restraints
on investments by the fund. Under these regulations, the
fund will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will
acquire only "eligible securities" that present minimal
credit risks and are treated as having a maturity of 397
days or less.
ONE GROUP SHORT-TERM
BOND FUND One Group Short-Term Bond Fund seeks current income
consistent with preservation of capital through
investment in high and medium-grade fixed-income
securities. The Fund normally invests at least 80% of
total assets in debt securities of all types with short
to intermediate maturities. Debt securities include
bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one
of the four highest investment grade categories at the
time of investment, or if unrated, determined by Banc
One Investment Advisors to be of comparable quality,
some of which may be subject to repurchase agreements.
Many investments will satisfy both requirements. Under
normal market conditions, it is anticipated that the
fund's average weighted maturity ordinarily will be
three years taking into account expected amortization
and prepayment of principal on certain investments,
although for temporary defensive purposes the effective
average weighted maturity may exceed three years. The
fund may also purchase taxable or tax-exempt municipal
securities. Up to 20% of the fund's total assets may be
invested in preferred stocks. This Fund was formerly
called The One Group Limited Volatility Bond Fund.
<PAGE> 549
53
ONE GROUP INTERMEDIATE
BOND FUND One Group Intermediate Bond Fund seeks current income
consistent with the preservation of capital through
investments in high and medium-grade fixed-income
securities with intermediate maturities. The fund will
normally invest at least 80% of total assets in debt
securities of all types. Debt securities include bonds,
notes and other obligations. At least 65% of the fund's
total assets will consist of bonds rated in one of the
four highest investment grade categories at the time of
investment, or if unrated, determined by Banc One
Investment Advisors to be of comparable quality, and at
least 50% of total assets will consist of obligations
issued by the U.S. government or its agencies and
instrumentalities, some of which may be subject to
repurchase agreements. Many investments will satisfy
both requirements. The Fund also may invest in more
speculative debt securities if they present attractive
opportunities and are rated in the lowest investment
grade category. The fund may also purchase taxable or
tax-exempt municipal securities. Under normal market
conditions, it is anticipated that the fund's average
weighted maturity will range between three and ten
years. Up to 20% of the fund's total assets may be
invested in preferred stocks.
ONE GROUP INCOME
BOND FUND One Group Income Bond Fund seeks a high level of current
income by investing primarily in a diversified portfolio
of high, medium and low grade debt securities. The Fund
normally will invest at least 70% of its total assets in
debt securities of all types rated as investment grade
at the time of investment or, if unrated, determined by
Banc One Investment Advisors to be of comparable
quality. In addition, up to 30% of the Fund's total
assets may be invested in convertible securities,
preferred stock, loan participations and debt securities
rated below investment grade or, if unrated, determined
by Banc One Investment Advisors to be of comparable
quality. Securities rated below investment grade are
called "high yield bonds," "non-investment grade bonds"
and "junk bonds." These securities are rated in the
fifth or lower rating categories, for example, BB or
lower by Standard & Poor's Corporation ("S&P") and Ba or
lower by Moody's Investors Service, Inc. ("Moody's"),
and are considered to have speculative characteristics.
Even though it may invest in debt securities in all
rating categories, the Fund will not invest more than
20% of its total assets in securities rated below the
fifth rating category. As a matter of fundamental
policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or
tax-exempt municipal securities.
Under normal market conditions, it is anticipated that
the Fund's average weighted maturity will range between
five and twenty years. The Fund may shorten its
effective weighted average maturity to as little as two
years if deemed appropriate for temporary defensive
purposes.
ONE GROUP BOND FUND One Group Bond Fund seeks to maximize total return by
investing primarily in a diversified portfolio of
intermediate and long-term debt securities. The Fund
invests in all types of debt securities rated as
investment grade, as well as convertible securities,
preferred stock, and loan participations. The Fund's
average weighted maturity will normally range between
four and twelve years, although the Fund may shorten its
weighted average if deemed appropriate for temporary
defensive purposes. The Fund invests at least 65% of its
total assets in debt securities of all types with
intermediate to long maturities. As a matter of
fundamental policy, at least 65% of the Fund's total
assets will consist of bonds. The Fund also may purchase
taxable or tax-exempt municipal securities.
<PAGE> 550
54
ONE GROUP HIGH YIELD
BOND FUND The Fund seeks a high level of current income by
investing primarily in a diversified portfolio of debt
securities which are rated below investment grade or
unrated. Capital appreciation is a secondary objective.
The Fund invests in all types of high yield, high risk
debt securities. The Fund also may invest in convertible
securities, preferred stock, common stock, and loan
participations. The Fund's weighted average maturity
will normally range between five and ten years, although
the Fund may shorten its weighted average maturity to as
little as two years if deemed appropriate for temporary
defensive purposes. The Fund normally invests at least
80% of the Fund's total assets in debt securities which
are rated below investment grade or unrated, although
the Fund may invest up to 100% of the Fund's total
assets in such securities. Securities rated below
investment grade are called "high yield bonds,"
"non-investment grade bonds," "below investment grade
bonds" and "junk bonds." These securities are rated in
the fifth or lower rating categories (for example, BB or
lower by Standard & Poor's Corporation and Ba or lower
by Moody's Investors Service, Inc.), and are considered
to be speculative. The Fund also may invest up to 20% of
its total assets in other securities, including
investment grade debt securities. As a matter of
fundamental policy, at least 65% of the Fund's total
assets will consist of bonds.
ONE GROUP GOVERNMENT
BOND FUND One Group Government Bond Fund seeks a high level of
current income with liquidity and safety of principal.
The Fund will limit its investments to securities issued
by the U.S. Government and its agencies and
instrumentalities or related to securities issued by the
U.S. Government and its agencies and instrumentalities.
At least 65% of the total assets of the Fund will be
invested in obligations guaranteed as to principal and
interest by the U.S. government or its agencies and
instrumentalities, some of which may be subject to
repurchase agreements, and other securities representing
an interest in or collateralized by mortgages that are
issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The average weighted
maturity of the fund is expected to be between three and
fifteen years, however, the Fund's average weighted
remaining maturity may be outside this range if
warranted by market conditions. The balance of the
Fund's assets may be invested in debt securities and
taxable or tax-exempt municipal securities.
<PAGE> 551
55
ONE GROUP ULTRA
SHORT-TERM BOND FUND One Group Ultra Short-Term Bond Fund seeks a high level
of current income consistent with low volatility of
principal by investing in a diversified portfolio of
short-term investment grade securities. The Fund
normally invests at least 80% of its total assets in
debt securities of all types, including money market
instruments. In addition, up to 20% of the fund's total
assets may be invested in other securities, including
preferred stock. The fund will invest in adjustable rate
mortgage pass-through securities and other securities
representing an interest in or collateralized by
mortgages with periodic interest rate resets, some of
which may be subject to repurchase agreements. These
securities often are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. However,
the Fund also may purchase mortgage-backed securities
that are issued by non-governmental entities. Such
securities may or may not have private insurer
guarantees as to timely payments. The fund also may
purchase mortgage and interest rate swaps and interest
rate floors and caps. The fund also may employ other
investment techniques to enhance returns, such as loans
of fund securities, mortgage dollar rolls, repurchase
agreements, options contracts and reverse repurchase
agreements. The Fund will maintain a maximum duration of
approximately two years. This Fund was formerly called
The One Group Ultra Short-Term Income Fund.
ONE GROUP MID CAP
VALUE FUND One Group Mid Cap Value Fund seeks capital appreciation
with the secondary goal of achieving current income by
investing primarily in equity securities. The Fund will
invest mainly in equity securities with below-market
average price-to-earnings and price-to-book value
ratios. The issuer's soundness and earnings prospects
also will be considered. If Banc One Investment Advisors
determines that a company's fundamentals are declining
or that the company's ability to pay dividends has been
impaired, it likely will eliminate the Fund's holding of
the company's stock. The Fund normally invests at least
80% of the value of its total assets in equity
securities consisting of common stocks and debt
securities and preferred stocks that are convertible
into common stocks. The Fund also may enter into options
and futures transactions. The balance of the fund's
assets will be held in cash equivalents. This Fund was
formerly called The One Group Disciplined Value Fund.
ONE GROUP INTERNATIONAL
EQUITY INDEX FUND One Group International Equity Index Fund seeks to
provide investment results that correspond to the
aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan
Stanley Capital International Europe, Australasia and
Far East Index ("MSCI EAFE GDP Index" or "EAFE GDP
Index").(1) The Fund normally will invest at least 65%
of the value of its total assets in foreign equity
securities, which are representative of the Index and
secondarily in stock index futures. The Fund's
investments will consist of common stocks (including
sponsored and unsponsored American Depository Receipts)
and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges
or actively traded in the over-the-counter market),
warrants and depository receipts. No more than 10% of
the fund's net assets will be held in cash or cash
equivalents. The fund may invest up to 10% of its net
assets in securities of emerging international markets.
A substantial portion of the fund's assets will be
denominated in foreign currencies.
(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.
<PAGE> 552
56
ONE GROUP
DIVERSIFIED
INTERNATIONAL FUND One Group Diversified International Fund seeks long-term
capital growth by investing primarily in equity
securities of foreign issuers. The Fund invests
primarily in the securities of companies located in
Europe, Asia and Latin America. The Fund also will
invest in other regions and countries that present
attractive investment opportunities, including
developing countries. In selecting a country for
investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the
securities markets of selected countries. In selecting
individual securities, Banc One Investment Advisors
selects a representative sampling of the companies
comprising the individual country's stock market index.
Banc One Investment Advisors uses its best judgment,
experience and certain quantitative techniques to
determine the countries in which the Fund will invest,
as well as the amount invested in each country. Fund
assets will be invested in at least three countries. The
Fund will invest at least 65% of its total assets in
foreign equity securities, consisting of common stocks
(including American Depository Receipts), preferred
stocks, rights, warrants, convertible securities,
foreign currencies and options on foreign currency, and
other equity securities. Up to 20% of the Fund's total
assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash and
cash equivalents.
ONE GROUP LARGE CAP
GROWTH FUND One Group Large Cap Growth Fund seeks long-term capital
appreciation and growth of income by investing primarily
in equity securities. The Fund will normally invest at
least 65%, of the value of its total assets in equity
securities consisting of common stocks, warrants and any
rights to purchase common stocks. To achieve its
objective, the Fund will invest primarily in equity
securities of large, well established companies with
weighted average capitalization in excess of the market
median capitalization of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")(2) The
Fund may invest the remainder of its assets in
nonconvertible fixed income securities, repurchase
agreements, options and futures contracts, securities
issued by the U.S. government and its agencies and
instrumentalities, and cash equivalents. This Fund was
formerly called The One Group Large Company Growth Fund.
ONE GROUP LARGE CAP
VALUE FUND One Group Large Cap Value Fund seeks capital
appreciation with the incidental goal of achieving
current income by investing primarily in equity
securities. The Fund will invest in equity securities of
large capitalization companies that are believed to be
selling below their long-term investment values. The
average weighted market capitalization of the companies
in which the Fund invests will normally exceed the
median market capitalization of the S&P 500 Index. In
addition, the Fund may invest in stock of companies
which have "breakup" values well in excess of current
market values or which have uniquely undervalued
corporate assets. The Fund normally will invest at least
80% of the value of its total assets in equity
securities consisting of common stocks and debt
securities and preferred stocks which are convertible
into common stocks. The remainder of the fund's assets
will be held in cash equivalents. This Fund was formerly
called The One Group Large Company Value Fund.
(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> 553
57
ONE GROUP MID CAP
GROWTH FUND
One Group Mid Cap Growth Fund seeks growth of capital
and, secondarily, current income by investing primarily
in equity securities. The Fund invests in securities
that have the potential to produce above-average
earnings growth per share over a one-to-three year
period. Typically, the Fund acquires shares of
established companies with a history of above-average
growth, as well as those companies expected to enter
periods of above-average growth. Not all the securities
purchased by the Fund will pay dividends. The Fund also
invests in smaller companies in emerging growth
industries. At least 80% of the value of its total
assets will be invested in equity securities consisting
of common stocks and debt securities and preferred
stocks that are convertible into common stocks. The Fund
also may enter into options and futures transactions.
The remainder of the fund's assets will be held in cash
equivalents. This Fund was formerly called The One Group
Growth Opportunities Fund.
ONE GROUP
DIVERSIFIED MID CAP
FUND
One Group Diversified Mid Cap Fund seeks long-term
capital growth by investing primarily in equity
securities of companies with intermediate
capitalizations. The Fund invests primarily in equity
securities of companies with market capitalizations of
$500 million to $10 billion. Banc One Investment
Advisors believes that there are many companies of this
size with strong growth potential, stable market share,
and an ability to quickly respond to new business
opportunities, all of which increase their likelihood of
obtaining superior levels of profitability and
investment returns. The Fund normally invests at least
65% of its total assets in common and preferred stock,
rights, warrants, convertible securities, and other
equity securities. While the Fund invests primarily in
securities of U.S. companies, up to 25% of its total
assets may be invested in equity securities of foreign
issuers. Up to 20% of the Fund's total assets may be
invested in U.S. Government Securities, other investment
grade fixed income securities, cash and cash
equivalents.
ONE GROUP
DIVERSIFIED EQUITY
FUND One Group Diversified Equity Fund seeks long-term
capital growth and growth of income with a secondary
objective of providing a moderate level of current
income. The Fund invests primarily in common stocks of
overlooked or undervalued companies that have the
potential for earnings growth over time. The Fund uses a
multi-style approach, meaning that it may invest across
varied capitalization levels targeting both value and
growth oriented companies. Because the Fund seeks return
over the long term, Banc One Investment Advisors will
not attempt to time the market. The Fund normally will
invest at least 65% of the value of its total assets in
securities with the characteristics described above.
Although the Fund intends to invest all of its assets in
such securities, up to 35% of its total assets may be
held in cash or invested in U.S. Government Securities,
other investment grade fixed-income securities cash and
cash equivalents. This Fund was formerly called The One
Group Value Growth Fund.
<PAGE> 554
58
ONE GROUP SMALL CAP
GROWTH FUND
One Group Small Cap Growth Fund seeks long-term capital
growth primarily by investing in a portfolio of equity
securities of small-capitalization and emerging growth
companies. The Fund invests primarily in a portfolio of
common stocks, debt securities, preferred stocks,
convertible securities, warrants and other equity
securities of small capitalization companies. Generally,
Banc One Investment Advisors selects a portfolio of
companies with a capitalization equivalent to the median
market capitalization of the S&P Small-Cap 600 Index,(3)
although the Fund may occasionally hold securities of
companies whose market capitalizations are considerably
larger if doing so contributes to the Fund's investment
objective. At least 65% of the value of the Fund's total
assets normally will be invested in securities with the
characteristics described above. Up to 35% of its total
assets may be held in cash or invested in U.S.
Government Securities, other investment grade
fixed-income securities and cash equivalents. This Fund
was formerly called The One Group Small Capitalization
Fund.
ONE GROUP SMALL CAP
VALUE FUND One Group Small Cap Value Fund seeks long-term capital
growth by investing primarily in equity securities of
companies with small capitalizations. The Fund invests
primarily in equity securities of small domestic issuers
with market capitalizations of $100 million to $3
billion. In reviewing investment opportunities, Banc One
Investment Advisors looks for high quality management, a
dominant position in a major product line, significant
equity ownership positions by management, a sound
financial position, and a relatively high rate of return
on invested capital. The Fund also will invest in
companies that demonstrate a potential for earnings
growth due to management changes, new products, or a
changing marketplace. The Fund normally invests at least
65% of its total assets in common and preferred stocks,
rights, warrants, convertible securities, and other
equity securities of companies described above.
While the Fund invests primarily in securities of U.S.
companies, up to 25% of its total assets may be invested
in equity securities of foreign issuers. Up to 20% of
the Fund's total assets may be invested in U.S.
Government Securities, other investment grade fixed
income securities, cash and cash equivalents.
ONE GROUP EQUITY
INCOME FUND
One Group Equity Income Fund seeks current income
through regular payment of dividends with the secondary
goal of achieving capital appreciation by investing
primarily in equity securities. The Fund attempts to
keep its dividend 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.
(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> 555
59
ONE GROUP
EQUITY INDEX FUND One Group Equity Index Fund seeks investment results
that correspond to the aggregate price and dividend
performance of the securities in the S&P 500 Index. The
Fund normally invests in many of the stocks which
comprise the S&P 500 Index and secondarily in stock
index futures. Cash reserves will not normally exceed
10% of the fund's net assets. The Advisor generally
selects stocks for the Fund in the order of their
weightings in the S&P 500 Index beginning with the
heaviest weighted stocks. The percentage of the Fund's
assets to be invested in each stock is approximately the
same as the percentage it represents in the S&P 500
Index.
<PAGE> 556
60
[PHOTO]
ONE GROUP(R)
- ---------------------------
Appendix B
--------------------------------------------------------
INVESTMENT
PRACTICES The underlying funds invest in a variety of securities
and employ a number of investment techniques. Each
security and technique involves certain risks. What
follows is a list of the securities and techniques
utilized by the Funds, as well as the risks inherent in
their use. For a more complete discussion, see the
Statement of Additional Information. Following the table
is a more complete discussion of risk.
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
----------------------------------------------------------
<S> <C> <C>
One Group(R) Prime Money Market Fund 1
----------------------------------------------------------
One Group(R) Short-Term Bond Fund 2
----------------------------------------------------------
One Group(R) Intermediate Bond Fund 3
----------------------------------------------------------
One Group(R) Income Bond Fund 4
----------------------------------------------------------
One Group(R) Bond Fund 5
----------------------------------------------------------
One Group(R) High Yield Bond Fund 6
----------------------------------------------------------
One Group(R) Government Bond Fund 7
----------------------------------------------------------
One Group(R) Ultra Short-Term Bond Fund 8
----------------------------------------------------------
One Group(R) Mid Cap Value Fund 9
----------------------------------------------------------
One Group(R) International Equity Index Fund 10
----------------------------------------------------------
One Group(R) Diversified International Fund 11
----------------------------------------------------------
One Group(R) Large Cap Growth Fund 12
----------------------------------------------------------
One Group(R) Large Cap Value Fund 13
----------------------------------------------------------
One Group(R) Mid Cap Growth Fund 14
----------------------------------------------------------
One Group(R) Diversified Mid Cap Fund 15
----------------------------------------------------------
One Group(R) Diversified Equity Fund 16
----------------------------------------------------------
One Group(R) Small Cap Growth Fund 17
----------------------------------------------------------
One Group(R) Small Cap Value Fund 18
----------------------------------------------------------
One Group(R) Equity Income Fund 19
----------------------------------------------------------
One Group(R) Equity Index Fund 20
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-20 Market
STRIPS, and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRs, and CATS. 1-20 Market
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 557
61
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Agency Securities: Securities 1-20 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments 1-6, 8-20 Market
with a stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1-6, 8-20 Liquidity
bank in 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 1-20 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
-------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1-20 Market
security and the simultaneous commitment to buy Leverage
the security back at an agreed upon price on an
agreed upon date. This is treated as a borrowing
by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% 1-20 Credit
of a Fund's total assets. In return the Fund will Market
receive cash, other securities, and/or letters of Leverage
credit.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-20 Market
Purchase or contract to purchase securities at a Leverage
fixed price for deliver at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1-6, 8-20 Market
mutual funds, including One Group money market
funds and shares of other money market mutual
funds for which Banc One Investment serves as
investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as
investment advisor.
-------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock 3-6, 8-20 Market
that convert to common stock. Credit
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 558
62
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call and Put Options: A call option gives the 3-20 Management
buyer the right to buy, and obligates the seller Liquidity
of the option to sell, a security at a specified Credit
price. A put option gives the buyer the right to Market
sell, and obligates the seller of the option to Leverage
buy, a security at a specified price. The Funds
will sell only covered call and secured put
options.
-------------------------------------------------------------------------------
Futures and Related Options: A contract providing 2-20 Management
for the future sale and purchase of a specified Market
amount of a specified security, class of Credit
securities, or an index at a specified time in the Liquidity
future and at a specified price. Leverage
-------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITS"): Pooled 2-20 Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Pre-payment
Tax
Regulatory
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1-6, 8, 9, Credit
drafts drawn on and accepted by a commercial bank. 12-20 Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1-6, 8, 9, Credit
promissory notes issued by corporations and other 12-20 Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Foreign Securities: Stocks or debt issued by 1-6, 8-20 Market
foreign companies, as well as commercial paper of Political
foreign issuers and obligations of foreign banks, Liquidity
overseas branches of U.S. banks and supranational Foreign
entities. Includes American Depository Receipts. Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1-6, 8-20 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A Credit
securities.
-------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-9, 11-20 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 559
63
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warrants: Securities, typically issued with 1, 4, 6, Market
preferred stock or bonds, that give the holder the 10-13, 15, Credit
right to buy a proportionate amount of common 17-19
stock at a specified price.
-------------------------------------------------------------------------------
Preferred Stock: A class of stock that generally 2-6, 10, 11, Market
pays a dividend at a specified rate and has 13, 15,
preference over common stock in the payment of 17-19
dividends and in liquidation.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1-8, 15, 18 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Investment Conduits Regulatory
("REMICs"), and Stripped Mortgage-Backed
Securities ("SMBS").
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1-6, 8, 15, Market
puts and standby commitments to purchase the 18 Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1-6, 8, 15, Pre-payment
company receivables, home equity loans, truck and 18 Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivable or other assets.
-------------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a 2-8 Pre-payment
Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
-------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): Loans in 2-8 Pre-payment
a mortgage pool which provide for a fixed initial Market
mortgage interest rate for a specified period of Credit
time, after which the rate may be subject to Regulatory
periodic adjustments.
-------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds and 3-6, 8 Market
non-convertible debt securities. Credit
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 560
64
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps, Caps and Floors: A Fund may enter into 2-20 Market
these transactions to manage its exposure to Management
changing interest rates and other factors. Swaps Credit
involve an exchange of obligations by two parties. Liquidity
Caps and floors entitle a purchaser to a principal
amount from the seller of the cap or floor to the
extent that a specified index exceeds or falls
below a predetermined interest rate or amount.
-------------------------------------------------------------------------------
New Financial Products: New options and futures 3-20 Management
contracts, and other financial products continue Credit
to be developed and the Fund may invest in such Market
options, contracts and products. Liquidity
-------------------------------------------------------------------------------
Structured Instruments: Debt securities issued by 3-8 Market
agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign currency Foreign
exchange rates, interest rates, or one or more Investment
other referenced indices.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 2-6, 8 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Project Notes,
other short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Obligations of Supranational Agencies: Obligations 10, 11 Credit
of supranational agencies who are chartered to Foreign
promote economic development and are supported by Investment
various governments and governmental agencies.
-------------------------------------------------------------------------------
Currency Futures and Related Options: The Fund may 10, 11 Management
engage in transactions in financial futures and Liquidity
related options, which are generally described Credit
above. The Fund will enter into these transactions Market
in foreign currencies and for hedging purposes Political
only. Leverage
Foreign
Investment
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 561
65
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forward Foreign Exchange Transactions: Contractual 10, 11 Management
agreement to purchase or sell one specified Liquidity
currency for another currency at a specified Credit
future date and price. The Fund will enter into Market
forward foreign exchange transactions for hedging Political
purposes only. Leverage
Foreign
Investment
-------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other debt 2-6, 8 Credit
that pay no interest, but are issued at a discount Market
from their value at maturity. When held to Zero
maturity, their entire return equals the Coupon
difference between their issue price and their
maturity value.
-------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero-coupon 2-6, 8 Credit
debt securities which convert on a specified date Market
to interest-bearing debt securities. Zero
Coupon
-------------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative 3-8 Pre-payment
multi-class mortgage securities usually structured Market
with two classes of shares that receive different Credit
proportions of the interest and principal from a Regulatory
pool of mortgage backed obligations. These include
IOs and POs.
-------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Leveraged 3-8 Market
variable rate debt instruments with interest rates Leverage
that reset in the opposite direction from the Credit
market rate of interest to which the inverse
floater is indexed.
-------------------------------------------------------------------------------
Loan Participations and Assignments: 2-6, 8 Credit
Participations in, or assignments of all or a Political
portion of loans to corporations or to governments Foreign
of the less developed countries ("LDCs"). Investment
Market
Liquidity
-------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in fixed 2-6, 8 Credit
rate mortgage loans or mortgage pools which bear Pre-payment
simple interest at fixed annual rates and have Regulatory
short to long final maturities. Market
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 562
66
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Funding Agreements: Investments in 1-6, 8 Credit
short-term funding agreements issued by banks and Liquidity
highly rated U.S. insurance companies such as Market
Guaranteed Investment Contracts (GICs) and Bank
Investment Contracts (BICs).
-------------------------------------------------------------------------------
Index Shares: Ownership in unit investment trusts 9, 12-20 Market
and other pooled investment vehicles that hold a
portfolio of securities or stocks designed to
track the price performance and dividend yield of
a particular index, such as Standard and Poor's
Depository Receipts ("SPDR's") and NASDAQ 100's.
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the 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.
<PAGE> 563
67
- 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.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
<PAGE> 564
68
- 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> 565
(Intentionally Left Blank)
<PAGE> 566
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by visting www.onegroup.com, by calling
1-800-480-4111, or by writing the Funds at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
TOG-F-125 [ONE GROUP LOGO]
<PAGE> 567
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) EQUITY INDEX FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of the Fund
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 568
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Equity Index Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 569
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP EQUITY INDEX FUND
WHAT IS THE GOAL OF THE EQUITY INDEX FUND?
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index").1
WHAT ARE THE EQUITY INDEX FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests mainly in stocks included in the S&P 500 Index. The Fund may
also invest in stock index futures. Banc One Investment Advisors attempts to
track the performance of the S&P 500 Index to achieve a correlation of 0.95
between the performance of the Fund and that of the S&P 500 Index without taking
into account the Fund's expenses. For more information about the Equity Index
Fund's investment strategies, please read "More About The Fund"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE EQUITY INDEX FUND?
The main risks of investing in the Equity Index Fund and the circumstances
likely to adversely affect your investment are described below. The share price
of the Equity Index Fund will change every day in response to market conditions.
You may lose money if you invest in the Equity Index Fund.
Index Investing. The Fund attempts to track the performance of
the S&P 500 Index. Therefore, securities may be purchased,
retained and sold by the Fund at times when an actively managed
fund would not do so. If the value of securities that are heavily
weighted in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully invested
in such securities
Market Risk. The Fund invests in equity securities (such as
stocks) that are more volatile and carry more risks than some
other forms of investment. The price of equity securities may
rise or fall because of economic or political changes or changes
in a company's financial condition. Equity securities are also
subject to "stock market risk" meaning that stock prices in
general (or S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value of the
Fund's securities goes down, your investment in the Fund
decreases in value.
Not FDIC insured. An investment in the Fund is not a deposit of
Bank One Corporation or any of its affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other governmental agency.
HOW HAS THE EQUITY INDEX FUND PERFORMED?
By showing the variability of the Equity Index Fund's performance from year to
year, the charts below help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX FUND IS NOT NECESSARILY
AN INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
The Total Return Chart shows changes in the Fund's performance from year to
year. Total returns assume reinvestment of dividends and distributions. The
returns shown DO NOT reflect applicable sales charges. If these charges were
included, the returns would be lower than those shown.
- --------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
3
<PAGE> 570
ONE GROUP EQUITY INDEX FUND
TOTAL RETURN (PER CALENDAR YEAR)(1)
CLASS I SHARES
[BAR GRAPH]
1992 1993 1994 1995 1996 1997 1998
6.86% 9.37% 0.75% 37.07% 22.59% 33.00% 28.24%
1. For the period from January 1, 1999 through June 30, 1999, the Fund's total
return was 12.21%.
BEST QUARTER: 21.26% 4Q 1998; WORST QUARTER: - 9.96% 3Q 1998
The Average Annual Total Return Table shows how the Fund's average annual
returns for the periods indicated compare to those of a broad measure of market
performance. Average annual total returns for more than one year tend to smooth
out variations in the Fund's total returns and are not the same as actual
year-by-year results. The average annual returns shown on the Average Annual
Total Return Table DO include applicable sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH JUNE 30, 1999)
- ----------------------------------------------------------------------------------------------------------
CLASS A 1 YEAR 5 YEARS LIFE
- ------- ------ ------- (SINCE 2/18/92)
---------------
<S> <C> <C> <C>
15.82% 25.80% 18.94%
One Group Equity Index Fund
S&P 500 Index(1) 22.76% 26.88% 20.54%
- ----------------------------------- ------------------------- ------------------ ----------------------
1 YEAR 5 YEARS LIFE
------ ------ (SINCE 1/14/94)
CLASS B ------------------
16.32% 26.05% 22.40%
One Group Equity Index Fund
S&P 500 Index(1) 22.76% 26.88% 23.91%
</TABLE>
4
<PAGE> 571
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1 YEAR LIFE
CLASS C -------- (SINCE 11/4/97)
------- ---------------
<S> <C> <C>
One Group Equity Index Fund 20.52% 26.33%
S&P 500 Index(1) 22.76% 27.54%
- --------------------------------------------------------------------------------------------------
CLASS I 1 YEAR 5 YEARS LIFE
------- ------ ------- (SINCE 7/2/91)
--------------
One Group Equity Index Fund 22.50% 27.50% 20.00%
S&P 500 Index(1) 22.76% 26.88% 20.12%
- --------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
1 The S&P 500 Index is a widely recognized, unmanaged index generally
representative of the performance of large companies in the U.S. stock market.
Investors are unable to purchase the index directly, although they can invest
in the underlying securities. The performance of the index does not reflect
the deduction of expenses associated with a mutual fund, such as investment
management. By contrast, the performance of the Fund reflects the deduction
of these value-added services as well as the deduction of sales charges on Class
A Shares and applicable contingent deferred sales charges on Class B and Class C
Shares.
5
<PAGE> 572
FEES AND EXPENSES OF THE EQUITY INDEX FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your
investment)(1) CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) 5.25% none none none
Maximum Deferred Sales Charge (Load)(as a
percentage of original purchase price of
redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .30% .30% .30% .30%
Distribution [and/or Service] (12b-1) Fees .35% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Annual Fund Operating Expenses .91% 1.56% 1.56% .56%
Fee Waiver and/or Expense Reimbursement(4) (.26%) (.16%) (.16%) (.16%)
Net Expenses .65% 1.40% 1.40% .40%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1. If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
2. Except for purchases of $1 million or more. Please see "Sales Charges."
3. Expense Information has been restated to reflect current fees.
4. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .65% for Class A shares, 1.40% for Class B shares, 1.40
for Class C shares, and .40% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUED
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
6
<PAGE> 573
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Assuming no Assuming redemption Assuming no Assuming redemption at
redemption at the end redemption the end of each period
of each period
1 Year(1) $654 $143 $543 $143 $243 $41
3 Years $698 $477 $777 $477 $477 $163
5 Years $845 $835 $1,035 $835 $835 $297
10 Years $1,270 $1,668 $1,668 $1,843 $1,843 $686
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $588
Class B (no redemption) $159
Class B (with redemption) $659
Class C (no redemption) $159
Class C (with redemption) $259
Class I $ 57
2. Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
7
<PAGE> 574
MORE ABOUT THE FUND
The Fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that attempts to track the performance
of a specified index. Unlike an actively managed fund, the Equity Index Fund
purchases and sells securities based on changes in the applicable index. The
principal investment strategies that are used to meet the Fund's investment
objective are described in the Fund Summary: Investments, Risk, & Performance
and below. There can be no assurance that the Fund will achieve its investment
objective. Please note that the Fund may also use strategies that are not
described below, but which are described in the Statement of Additional
Information.
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks included in the S&P 500
Index. (The Fund also invests in stock index futures.) Banc One Investment
Advisors seeks to achieve a correlation of 0.95% between the performance of the
Fund and that of the S&P 500 Index. The Fund may hold up to 10% of its net
assets in cash or cash equivalents.
- --------------------------------------------------------------------------------
HOW INDEX INVESTING WORK IN THE EQUITY INDEX FUND?
- The percentage of stock that the Fund holds will be approximately
the same percentage that the stock represents in the S&P 500
Index.
- Banc One Investment Advisors generally picks stock in the order of
their weightings in the S&P 500 Index, starting with the heaviest
weighted stock.
- The Fund attempts to achieve a correlation between the performance
of its Fund and that of the S&P 500 Index of at least 0.95,
without taking into account Fund expenses. Perfect correlation
would be 1.00.
- --------------------------------------------------------------------------------
INVESTMENT RISKS. The risks associated with investing in the Equity Index Fund
are described below and in the Fund Summary: Investments, Risk, & Performance.
INDEX FUNDS: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities.
SMALL CAPITALIZATION COMPANIES: Investments in smaller, younger companies may be
riskier than investments in larger, more established companies. These companies
may be more vulnerable to changes in economic conditions, specific industry
conditions, market fluctuations, and other factors effecting the profitability
of other companies. Because economic events may have a greater impact on smaller
companies, there may be a greater and more frequent fluctuation in their stock
price. This may cause frequent and unexpected increases or decreases in the
value of your investment.
For more information about risks associated with the types of investments that
the Equity Index Fund purchases, please read the Fund Summary, Appendix A and
the Statement of Additional Information.
INVESTMENT POLICIES
- --------------------
1 "S&P 500" is a registered service mark of Standard & Poor's Corporation, which
does not sponsor and is in no way affiliated with the Fund.
8
<PAGE> 575
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its total
assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or guaranteed by the
United States, its agencies or instrumentalities, and repurchase
agreements involving these securities. This restriction applies with
respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
4. Invest more than 10% of its total assets in securities issued or
guaranteed by the United States, its agencies or instrumentalities.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE EQUITY INDEX FUND'S SECURITIES
Corporate bonds generally will be rated in one of the three highest
investment grade categories. Banc One Investment Advisors reserves the
right to invest in corporate bonds that present attractive opportunities
and are rated in the lowest investment grade category. These corporate
bonds are usually riskier than higher rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest up to 10% of its total assets in CASH AND CASH EQUIVALENTS (see
below) for temporary defensive purposes. These investments may result in a lower
yield than lower-quality or longer term investments and may prevent the Fund
from meeting its investment objective.
- --------------------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its
agencies and instrumentalities, repurchase agreements (other than
equity repurchase agreements), certificates of deposit, bankers'
acceptances, commercial paper (rated in one of the two highest
rating categories), variable rate master demand notes, and bank
money market deposit accounts.
- --------------------------------------------------------------------------------
9
<PAGE> 576
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund and may result in additional tax consequences to you. The portfolio
turnover rate for the Fund for the fiscal year ended June 30, 1999 is shown on
the Financial Highlights. To the extent portfolio turn over results in
short-term capital gains, such gains will generally be taxed at ordinary income
tax rates.
10
<PAGE> 577
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New
York Stock Exchange ("NYSE") is closed, and the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas Eve,
and Christmas.
- - Purchase requests received by The One Group Services Company before 4
p.m. Eastern Time ("ET") will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
- - Purchase orders may be cancelled if the Fund's Custodian, State Street
Bank and Trust Company does not receive "federal funds" by 4:00 p.m. ET
(i) on the business day after the order is placed if you are buying Class
I shares, and (ii) on the third business day if you are purchasing Class
A, Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders
to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. If you
intend to hold your shares for six or more years, Class B shares may be
more appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
11
<PAGE> 578
- - NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each business
day following the close of the NYSE at 4:00 p.m. ET. On occasion,
the NYSE will close before 4 p.m. ET. When that happens, NAV will
be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund ($100 for
employees of Bank One Corporation and its affiliates). The minimum
initial investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases
of $250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State Street
Bank and Trust Company for the Benefit of (your name)."
If you choose to pay by wire, please call The One Group Services Company
at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to One
Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed
above will be returned to the address provided on the
account application.
6. Redemptions from a Fund will not be permitted for ten (10) calendar days
if purchases are made by check or under the Systematic Investment Plan
(see below).
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures.
You should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
12
<PAGE> 579
8. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- Send a personal check made payable to "One Group" to State Street
Bank and Trust Company (see address above), authorize a bank
transfer, or initiate a wire transfer to the following wire
address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Equity Index Fund--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible
for any loss, liability, cost or expense of acting upon
unauthorized or fraudulent instructions; you bear the risk of
loss.
- You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25 per Fund. The One Group Services Company may
waive these minimums. To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the Account
Application Form.
- Provide the necessary information about the bank account from
which your investments will be made.
- Shares purchased under a Systematic Investment Plan may not be
redeemed for five (5) calendar days.
- One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a
charge for debiting your bank account.
- You may revoke your right to make systematic investments by
calling The One Group Services Company at 1-800-480-4111 or by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
13
<PAGE> 580
- After conversion, your shares will be subject to the lower
distribution and shareholder servicing fees charged on Class A
shares.
- You will not be assessed any sales charges or fees for conversion
of shares, nor will you be subject to any Federal income tax.
- Because the share price of the Class A shares may be higher than
that of the Class B shares at the time of conversion, you may
receive fewer Class A shares; however, the dollar value will be
the same.
- If you have exchanged Class B shares of one Fund for Class B
shares of another, the time you held the shares in each Fund will
be added together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The tables
below show the charges for each class of shares and the percentage of your
investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be
charged the equivalent of 1% of the purchase price if you redeem
any or all of the Class A shares within one year of purchase and
0.50% of the purchase price if you redeem within two years of
purchase, unless The One Group Services Company receives notice
before you invest indicating that your Shareholder Servicing
Agent is waiving its commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
14
<PAGE> 581
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given month were
made on the first day of the month.
- The CDSC is based on the current market value or the original cost
of the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a CDSC assessed
on shares acquired through reinvestment of dividends or capital
gains distributions.
- To keep your CDSC as low as possible, the Fund first will redeem
the shares you have held for the longest time and thus have the
lowest CDSC.
- If you exchange Class B or Class C shares of an unrelated mutual
fund for Class B or Class C shares of One Group in connection with
a fund reorganization, the CDSC applicable to your original shares
(including the period of time you have held those shares) will be
applied to One Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
One Group Mutual Funds to The One Group Services Company as compensation for its
services and expenses. The One Group Services Company in turn pays all or part
of the 12b-1 fee to Shareholder Servicing Agents that sell shares of One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the
average daily net assets of the Fund, which is
currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00%
of the average daily net assets of the Fund. This
will cause expenses for Class B and Class C shares
to be higher and dividends to be lower than for
Class A shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other expenses
paid to Shareholder Servicing Agents.
- The One Group Services Company may use up to
.25% of the fees for shareholder servicing
and up to .75% for distribution. During the
last fiscal year, The One Group Services
Company received 12b-1 fees totaling .25%,
1.00%, and 1.00% of the average daily net
assets of Class A, Class B and Class C
shares, respectively.
- The One Group Services Company may pay -
12b-1 fees to its affiliates and to Banc One
Investment Advisors and its affiliates (or
any sub-advisor).
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
15
<PAGE> 582
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A, Class
B or Class C shares of a Fund (except a money market fund) that you (and
your spouse and minor children) already own to the amount of your next
Class A purchase for purposes of calculating the sales charge. An
Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased
at once. A percentage of your investment will be held in escrow until the
full amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
contact The One Group Services Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- One Group.
- Bank One Corporation and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with One
Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a fiduciary,
advisory, agency, custodial or Accounts which participate in
select affinity programs with Bank One Corporation and its
affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an
agreement with The One Group Services Company.
- Certain retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code and
"rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement with
The One Group Services Company, who place trades for their own
accounts or for the accounts of their clients and who charge a
management, consulting or other fee for their services, as well as
clients of such Shareholder Servicing Agents who place trades for
their own accounts if the accounts are linked to the master
account of such Shareholder Servicing Agent.
16
<PAGE> 583
5. Bought with proceeds from the sale of Class I shares of a One Group Fund
or acquired in an exchange of Class I shares of a Fund for Class A
shares of the same Fund, but only if the purchase is made within 60 days
of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including
a One Group Fund, for which a sales charge was paid, but only if the
purchase is made within 60 days of the sale or distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need to participate in the Systematic Withdrawal Plan to
take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need to participate in
the Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
17
<PAGE> 584
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A shares of
that Fund or for Class A or Class I shares of another One Group
Fund.
- Class A shares of a Fund may be exchanged for Class I shares of
that Fund or for Class A or Class I shares of another One Group
Fund, but only if you are eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B shares of
another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your account application. To
learn more about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by 4:00
p.m., ET.
- You have provided One Group with all of the information
necessary to process the exchange.
- You have received a current prospectus of the Fund or Funds in
which you wish to invest.
- You have contacted your Shareholder Servicing Agent, if
necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- You will pay a sales charge if you own Class I shares of a Fund
and you want to exchange those shares for Class A shares, unless
you qualify for a sales charge waiver (see above).
- You will pay a sales charge if you bought Class A shares of a
Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that
Fund's sales charge and all other sales charges you have already paid.
- If you exchange Class B or Class C shares of a Fund, you will
not pay a sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
18
<PAGE> 585
2. The current holding period for your exchanged Class B or Class C shares
is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- An exchange between classes of shares of the same Fund is not
taxable for Federal income tax purposes.
- An exchange between Funds is considered a sale and generally
results in a capital gain or loss for Federal income tax
purposes.
- You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group
limits excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE
EXCHANGE REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A
TWELVE MONTH PERIOD.
- In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund
reasonably believes that the exchange will result in excessive
transaction costs or otherwise adversely affect other
shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Funds are open for
business.
- Redemption requests received by The One Group Services
Company before 4:00 p.m. ET (or when the NYSE closes)
will be effective that day.
HOW DO I REDEEM SHARES?
- Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to
your Shareholder Servicing Agent, if applicable, or to State
Street Bank and Trust Company at the following address:
One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- All requests for redemptions from IRA accounts must be in
writing.
- You may request redemption forms by calling The One Group
Services Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that the
signature on your redemption request be guaranteed by a
participant in the Securities Transfer Association Medallion
Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH)
to a pre-existing bank account.
19
<PAGE> 586
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a wire
redemption fee. The current charge is $7.00.
- Your redemption proceeds will be paid within seven days after
receipt of the redemption request.
WHAT WILL MY SHARES BE WORTH?
- If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes),
you will receive that day's NAV.
- If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes),
you will receive that day's NAV, minus the amount of any
applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- Call your Shareholder Servicing Agent or The One Group Service
Company at 1-800-480-4111 to relay your redemption request.
- Your redemption proceeds will be mailed or wired to the
commercial bank account you designated on your Account
Application Form.
- State Street Bank and Trust Company may charge you a wire
redemption fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that
instructions given by telephone are genuine. These procedures
include recording telephone instructions and asking for personal
identification. If these procedures are followed, One Group will
not be responsible for any loss, liability, cost or expense of
acting upon unauthorized or fraudulent instructions; you bear
the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- Specify the amount you wish to receive and the frequency of the
payments.
- You may designate a person other than yourself as the payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional
Class A shares while participating in a Systematic
Withdrawal Plan. This is because Class A shares have an
up-front sales charge.
2. If you own Class B or Class C shares, you or your
designated payee may receive systematic payments
provided the payments are limited to no more than 10% of
your account value annually, measured from the date you
begin participating in the Plan. The applicable Class B
or Class C sales charge is waived provided your
withdrawals do not exceed 10% annually; withdrawals in
excess of that amount will subject the entire annual
withdrawal to the applicable sales load.
3. If you are age 70 1/2, you may elect to receive payments
to the extent that the payment represents a minimum
required distribution from an IRA or other qualifying
retirement plan.
20
<PAGE> 587
4. If the amount of the systematic payment exceeds the
income earned by your account since the previous payment
under the Systematic Withdrawal Plan, payments will be
made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- Generally all redemptions will be for cash. However, if you
redeem shares worth $500,000 or more of a Fund's assets, the
Fund reserves the right to pay part or all of your redemption
proceeds in readily marketable securities instead of cash. If
payment is made in securities, the Fund will value the
securities selected in the same manner in which it computes its
NAV. this process minimizes the effect of large redemptions on
the Fund and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group
has not yet received payment on the check, One Group will delay
forwarding your redemption proceeds until payment has been
collected from your bank.
- Because of the high cost of handling small investments, One
Group charges a sub-minimum account fee. Accounts under $1,000
that are not participating in a Systematic Investment Plan will
be assessed an annual fee of $10.00 per Fund. The sub-minimum
account fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details
about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
21
<PAGE> 588
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Equity Index Fund generally declares dividends on the last business day of
each quarter. Dividends for the Equity Index Fund are distributed on the first
business day of the next month. Capital gains, if any, for the Equity Index Fund
are distributed at least annually.
The Equity Index Fund pays dividends and distributions on a per-share basis.
This means that the value of your shares will be reduced by the amount of the
payment. If you purchase shares shortly before the record date for a dividend or
the distribution of capital gains, you will pay the full price for the shares
and receive some portion of the price back as a taxable dividend or
distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for
tax-exempt treatment or by an individual who has received shares as a
distribution from a
22
<PAGE> 589
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
23
<PAGE> 590
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of each Fund. For the most recent fiscal year, the
Fund paid advisory fees at the following rates.
ANNUAL RATE AS PERCENTAGE
OF AVERAGE DAILY NET ASSETS
Equity Index Fund .14%
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign subcustodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
24
<PAGE> 591
FINANCIAL HIGHLIGHTS
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements are incorporated by reference in the Statement
of Additional Information.
ONE GROUP EQUITY INDEX FUND Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02 $ 11.59
Investment Activities:
Net investment income 0.22 0.26 0.29 0.27 0.29
Net realized and
unrealized gains (losses)
from investments 5.56 5.97 5.28 3.18 2.58
Total from Investment
Activities 5.78 6.23 5.57 3.45 2.87
Distributions:
Net investment income (0.23) (0.26) (0.28) (0.27) (0.28)
In excess of net
investment income -- -- -- (0.01) --
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (1.15) (0.89) (0.43) (0.80) (0.44)
NET ASSET VALUE, END
OF PERIOD $ 31.78 $ 27.15 $ 21.81 $ 16.67 $ 14.02
Total Return (Excludes
Sales Charge) 22.22% 29.33% 33.94% 25.16% 25.43%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) 732,325 $ 218,518 $ 98,338 $ 32,186 $ 3,003
Ratio of expenses
to average net assets 0.60% 0.60% 0.55% 0.55% 0.56%
Ratio of net investment
income to average
net assets 0.79% 1.11% 1.59% 1.93% 2.38%
Ratio of expenses to
average net assets* 0.92% 0.96% 0.95% 0.94% 1.01%
Ratio of net investment
income to average
net assets* 0.47% 0.75% 1.19% 1.54% 1.94%
Portfolio turnover (a) 5.37% 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares
issued.
</TABLE>
25
<PAGE> 592
<TABLE>
<CAPTION>
ONE GROUP EQUITY INDEX FUND Financial Highlights
YEAR ENDED JUNE 30,
CLASS B 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05 $ 11.61
Investment Activities:
Net investment income 0.04 0.10 0.16 0.16 0.18
Net realized and
unrealized gains
(losses) from
investments 5.53 5.97 5.27 3.16 2.61
Total from Investment
Activities 5.57 6.07 5.43 3.32 2.79
Distributions:
Net investment
income (0.06) (0.11) (0.16) (0.16) (0.19)
In excess of net
investment income -- -- -- (0.01) --
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (0.98) (0.74) (0.31) (0.69) (0.35)
NET ASSET VALUE,
END OF PERIOD $ 31.72 $ 27.13 $ 21.80 $ 16.68 $ 14.05
Total Return (Excludes
Sales Charge) 21.32% 28.47% 32.93% 24.05% 24.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at
end of period
(000) $ 534,777 $ 351,624 $ 168,699 $ 38,538 $ 1,408
Ratio of expenses
to average net assets 1.35% 1.35% 1.30% 1.30% 1.34%
Ratio of net investment
income to average
net assets 0.12% 0.36% 0.83% 1.18% 1.60%
Ratio of expenses
to average net assets* 1.57% 1.61% 1.61% 1.59% 1.67%
Ratio of net investment
income to average
net assets* (0.10)% 0.10% 0.52% 0.89% 1.27%
Portfolio turnover (a) 5.37% 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
</TABLE>
26
<PAGE> 593
<TABLE>
<CAPTION>
ONE GROUP EQUITY INDEX FUND Financial Highlights
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1999 1998(a)
- ------- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.14 $ 22.60
Investment Activities:
Net investment income (loss) 0.07 0.07
Net realized and unrealized gains
(losses) from investments 5.55 4.67
Total from Investment Activities 5.62 4.74
Distributions:
Net investment income (0.08) (0.08)
Net realized gains (0.92) (0.12)
Total Distributions (1.00) (0.20)
NET ASSET VALUE, END OF PERIOD $ 31.76 $ 27.14
Total Return (Excludes Sales Charge) 21.52%(b) 21.07%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $59,042 $ 3,214
Ratio of expenses to average net assets 1.35% 1.35%(c)
Ratio of net investment income to average net assets 0.11% 0.27%(c)
Ratio of expenses to average net assets* 1.57% 1.60%(c)
Ratio of net investment income to average net assets* (0.11)% 0.02%(c)
Portfolio turnover (d) 5.37% 4.32%
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
</TABLE>
27
<PAGE> 594
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS I 1999 1998 1997 1996 1995
- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
Investment Activities:
Net investment income 0.31 0.33 0.35 0.33 0.32
Net realized and
unrealized gains
(losses) from
investments 5.54 5.98 5.27 3.16 2.59
Total from Investment
Activities 5.85 6.31 5.62 3.49 2.91
Distributions:
Net investment income (0.30) (0.32) (0.33) (0.33) (0.29)
In excess of net
investment income -- -- -- (0.01) (0.02)
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (1.22) (0.95) (0.48) (0.86) (0.47)
NET ASSET VALUE, END
OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
Total Return 22.50% 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end
of period (000) $1,855,947 $671,422 $480,819 $321,058 $234,895
Ratio of expenses
to average net assets 0.35% 0.35% 0.30% 0.30% 0.33%
Ratio of net investment
income to average
net assets 1.14% 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to
average net assets* 0.57% 0.62% 0.61% 0.59% 0.66%
Ratio of net investment
income to average
net assets* 0.92% 1.10% 1.56% 1.89% 2.24%
Portfolio turnover (a) 5.37% 4.32% 5.81% 9.08% 2.71%
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary fee reductions had not occurred, the
ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares
issued.
</TABLE>
28
<PAGE> 595
APPENDIX A
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information.
Following the table is a more complete discussion of risk.
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
</TABLE>
29
<PAGE> 596
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of other money market funds
for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as
investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
</TABLE>
30
<PAGE> 597
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the
cap or floor to the extent that a specified
index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued Market
by agencies and instrumentalities of the U.S. Liquidity
government, banks, municipalities, corporations Management
and other businesses whose interest and/or Credit
principal payments are indexed to foreign Foreign Investment
currency exchange rates, interest rates, or
one or more other referenced indices.
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRs"): Market
Ownership interests in unit investment trusts and
other pooled investment vehicles that hold a portfolio
of securities or stocks designed to track the price
and dividend yield of the S&P 500.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - Credit Risk. The risk that the issuer of a security, or the counterparty
to a contract, will default or otherwise become unable to honor a
financial obligation. Credit risk is generally higher for non-investment
grade securities. The price of a security can be adversely affected
prior to actual default as its credit status deteriorates and the
probability of default rises.
- - Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the Fund also holds, any loss generated
by the derivative should be substantially offset by gains on the
hedged investment, and vice versa. While hedging can reduce or
eliminate losses, it can also reduce or eliminate gains. Hedges
are sometimes subject to imperfect matching between the
derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a
hedge, the Fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
31
<PAGE> 598
- - Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail
in the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on Fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
- - Management Risk. The risk that a strategy used by a Fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of the
asset being hedged. Incomplete matching can result in unanticipated
risks.
- - Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for it,
or less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole.
There is also the risk that the current interest rate may not accurately
reflect existing market rates. For fixed income securities, market risk
is largely, but not exclusively, influenced by changes in interest
rates. A rise in interest rates typically causes a fall in values, while
a fall in rates typically causes a rise in values. Finally, key
information about a security or market may be inaccurate or unavailable.
This is particularly relevant to investments in foreign securities.
- - Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
- - Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also my
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- - Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- - Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would
cause adverse tax consequences.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor relief
laws, restrictions on "due on sale" clauses, and state usury laws.
- - Zero Coupon Risk. The market prices of securities structured as zero
coupon or pay-in-kind securities are generally affected to a greater
extent by interest rate changes. These securities tend to be more
volatile than securities which pay interest periodically.
32
<PAGE> 599
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by visiting www.onegroup.com, by calling 1 800-480-4111 or by writing
the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-221 [LOGO]
<PAGE> 600
INDEX FUNDS
CLASS I SHARES
PROSPECTUS
November 1, 1999
[ONE GROUP LOGO]
One Group(R) Equity Index Fund
One Group(R) Market Expansion Index Fund
One Group(R) International Equity Index Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES OF ANY OF THE FUNDS AS AN INVESTMENT
OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIME.
FOR USE BY WINGSPAN INVESTMENT SERVICES, INC.
<PAGE> 601
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Equity Index Fund 2
---------
One Group Market Expansion Index Fund 6
---------
One Group International Equity Index Fund 10
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 14
---------
Investment Risks 15
---------
Investment Policies 16
---------
Portfolio Quality 17
---------
Temporary Defensive Positions 18
---------
Portfolio Turnover 18
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 19
---------
Exchanging Fund Shares 21
---------
Redeeming Fund Shares 22
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 24
---------
Dividend Policies 24
---------
Tax Treatment of Shareholders 25
---------
Shareholder Inquires 26
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 27
---------
Year 2000 Readiness Disclosure 28
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 29
---------
APPENDIX A: INVESTMENT PRACTICES 32
---------
</TABLE>
<PAGE> 602
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 603
2
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
WHAT IS THE GOAL OF THE
EQUITY INDEX FUND? The Fund seeks investment results that correspond to the
aggregate price and dividend performance of securities
in the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index"). (1)
WHAT ARE THE EQUITY INDEX
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in stocks included in the S&P
500 Index. The Fund may also invest in stock index
futures. Banc One Investment Advisors attempts to track
the performance of the S&P 500 Index to achieve a
correlation of 0.95 between the performance of the Fund
and that of the S&P 500 Index without taking into
account the Fund's expenses. For more information about
the Equity Index Fund's investment strategies, please
read "More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
EQUITY INDEX FUND? The main risks of investing in the Equity Index Fund and
the circumstances likely to adversely affect your
investment are described below. The share price of the
Equity Index Fund will change every day in response to
market conditions. You may lose money if you invest in
the Equity Index Fund.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 604
3
- ------------------------------------
Equity Index Fund
MAIN RISKS
- --------------------------
Index Investing. The Fund attempts to track the
performance of the S&P 500 Index. Therefore, securities
may be purchased, retained and sold by the Fund at times
when an actively managed fund would not do so. If the
value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss
than would be the case if the Fund were not fully
invested in such securities.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 605
4
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
FUND SUMMARY
Equity Index Fund
HOW HAS THE EQUITY INDEX
FUND PERFORMED? By showing the variability of the Equity Index Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1992 6.86
1993 9.37
1994 0.75
1995 37.07
1996 22.59
1997 33.00
1998 28.24
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
5.15%.
- --------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 7/2/91)
<S> <C> <C> <C>
One Group Equity Index
Fund 28.24% 23.63% 19.61%
-----------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 15.75%
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the U.S. stock market. Investors are
unable to purchase the index directly, although
they can invest in the underlying securities. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these value-added services.
<PAGE> 606
5
- ------------------------------------
Equity Index Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment) (1) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(expenses that are deducted from fund assets) (2) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .30%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
------------------------------------------------------------------------------
Other Expenses .26%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .56%
------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.16%)
------------------------------------------------------------------------------
Net Expenses .40%
------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.40% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
1 Year (1) $ 41
------------------------------------------------------------------------------
3 Years 163
------------------------------------------------------------------------------
5 Years 297
------------------------------------------------------------------------------
10 Years 686
------------------------------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class I Shares would be $57.
<PAGE> 607
6
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Market Expansion Index Fund
WHAT IS THE GOAL OF THE
MARKET EXPANSION INDEX
FUND? The Fund seeks to provide a return which substantially
duplicates the price and yield performance of
domestically traded common stocks in the small and mid
capitalization equity markets, as represented by a
market capitalization weighted combination of the
Standard & Poor's Small Cap 600 Index ("S&P Small Cap
600") and the Standard & Poor's Mid Cap 400 Index ("S&P
Mid Cap 400").(1)
WHAT ARE THE MARKET
EXPANSION INDEX FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests in a representative sampling of stocks
of medium-sized and small U.S. companies that are
included in the S&P Small Cap 600 and S&P Mid Cap 400
and which trade on the New York and American Stock
Exchanges as well as over-the-counter stocks that are
part of the National Market System. (Not all of the
stocks in the indices are included in the Fund). The
Fund uses a sampling methodology to determine which
stocks to purchase or sell in order to closely replicate
the performance of the combined indices. The Fund seeks
to achieve a correlation between its portfolio and that
of the indices of at least 0.95, without taking into
account expenses. For more information about the Market
Expansion Index Fund's investment strategies, please
read "More About the Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MARKET EXPANSION INDEX
FUND? The main risks of investing in the Market Expansion
Index Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the Market Expansion Index Fund and its yield
will change every day in response to economic and other
market conditions. You may lose money if you invest in
the Market Expansion Index Fund.
(1) "S&P Small Cap 600" and "S&P Mid Cap 400" are
registered service marks of Standard & Poor's
corporation, which does not sponsor and is in no
way affiliated with the Fund.
<PAGE> 608
7
- ------------------------------------
Market Expansion Index Fund
MAIN RISKS
- --------------------------
Index Investing. The Fund attempts to track the
performance of the S&P Small Cap 600 Index and the S&P
Mid Cap 400 Index. Therefore, securities may be
purchased, retained and sold by the Fund at times when
an actively managed fund would not do so. If the value
of securities that are heavily weighted in the index
changes, you can expect a greater risk of loss than
would be the case if the Fund were not fully invested in
such securities.
Market Risk. The Fund invests in equity securities (such
as stocks) which are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
small cap and mid cap stock prices in particular) may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. The Fund's investments in smaller,
newer companies may be riskier than investments in
larger, more established companies. Securities of
smaller companies tend to be less liquid than securities
of larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 609
8
- ------------------------------------
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Market Expansion Index Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
This Section would normally include a bar chart and
average annual total return table. The Market Expansion
Index Fund began operations on July 30, 1998 and did not
have a full calendar year of investment returns as of
the date of this prospectus.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------
(fees paid directly from your investment) (1) CLASS I
-----------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
-----------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
-----------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
-----------------------------------------------------------------------------
Exchange Fee NONE
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------------------------
(expenses that are deducted from fund assets) (2) CLASS I
-----------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35%
-----------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-----------------------------------------------------------------------------
Other Expenses .73%
-----------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.08%
-----------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.51%)
-----------------------------------------------------------------------------
Net Expenses .57%
-----------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.57% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<PAGE> 610
9
- ------------------------------------
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
Market Expansion Index Fund
<TABLE>
<CAPTION>
CLASS I
--------------------------------
<S> <C> <C>
1 Year (1) $ 58
--------------------------------
3 Years 293
--------------------------------
5 Years 546
--------------------------------
10 Years 1,271
--------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Class I Shares would be $110.
<PAGE> 611
10
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
International
Equity Index Fund
WHAT IS THE GOAL OF THE
INTERNATIONAL EQUITY
INDEX FUND? The Fund seeks to provide investment results that
correspond to the aggregate price and dividend
performance of the securities in the MSCI EAFE GDP
Index.(1)
WHAT ARE THE
INTERNATIONAL EQUITY
INDEX FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests mainly in foreign stocks included in
the MSCI EAFE GDP Index. The Fund may also invest in
stock index futures. Banc One Investment Advisors
attempts to track the performance of the MSCI EAFE GDP
Index to achieve a correlation of 0.90 between the
performance of the Fund and that of the MSCI EAFE GDP
Index, without taking into account the Fund's expenses.
As part of its investment strategy, the Fund may invest
in securities of emerging international markets such as
Mexico, Chile and Brazil. The Sub-Advisor selects
securities of emerging markets that are included in the
Morgan Stanley Emerging Market Free Index based on size,
risk and the ease of investing in the country's market
(e.g., reasonable settlement procedures). Most of the
Fund's assets will be denominated in foreign currencies.
For more information about the International Equity
Index Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
INTERNATIONAL EQUITY
INDEX FUND? The main risks of investing in the International Equity
Index Fund and the circumstances likely to adversely
affect your investment are described below. The share
price of the International Equity Index Fund will change
every day in response to market conditions. You may lose
money if you invest in the International Equity Index
Fund.
(1) Gross Domestic Product Weighted Morgan Stanley
Capital International Europe, Australasia and Far
East Index. MSCI EAFE GDP Index is a registered
service mark of Morgan Stanley Capital
International, which does not sponsor and is in
no way affiliated with the Fund.
<PAGE> 612
11
- ------------------------------------
International Equity Index Fund
MAIN RISKS
- --------------------------
Index Investing. The Fund attempts to track the
performance of the MSCI EAFE GDP Index. Therefore,
securities may be purchased, retained and sold by the
Fund at times when an actively managed fund would not do
so. If the value of securities that are heavily weighted
in the index changes, you can expect a greater risk of
loss than would be the case if the Fund were not fully
invested in such securities.
Foreign Securities. Investments in foreign securities
involve risks in addition to those of U.S. investments.
These risks include political and economic risks,
currency fluctuations, higher transaction costs, delayed
settlement, and less stringent investor protection and
disclosure standards of some foreign markets. These
risks can make foreign investments more volatile and
potentially less liquid than U.S. investments.
Emerging Market Risk. The Fund may invest up to 10% of
its net assets in securities of emerging international
markets. The risks associated with foreign securities
are magnified in countries in "emerging markets." These
countries may have relatively unstable governments and
less established market economies than developed
countries. Emerging markets may face greater social,
economic, regulatory, and political uncertainties. These
risks make emerging market securities more volatile and
less liquid than securities issued in more developed
countries.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
stocks comprising the MSCI EAFE GDP Index in particular)
may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 613
12
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
FUND SUMMARY
International Equity Index Fund
HOW HAS THE INTERNATIONAL
EQUITY INDEX FUND
PERFORMED? By showing the variability of the International Equity
Index Fund's performance from year to year, the chart
and table below help show the risk of investing in the
Fund. PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
INTERNATIONAL EQUITY INDEX FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1993 29.60
1994 3.90
1995 10.20
1996 6.61
1997 5.68
1998 21.57
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
12.70%.
- --------------------------------------------------------------------------------
Best Quarter: 20.46% 4Q1998; Worst Quarter: -14.47% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 10/28/92)
<S> <C> <C> <C>
One Group International
Equity Index Fund 21.57% 9.41% 12.28%
-----------------------------------------------------------------------
Morgan Stanley EAFE/ GDP
Index (1) 26.71% 11.57% 14.62%
</TABLE>
(1) The Morgan Stanley Capital International EAFE/GDP
Index is an unmanaged index generally
representative of the performance of
international stock markets. The performance of
the index does not reflect the deduction of
expenses associated with a mutual fund, such as
investment management. By contrast, the
performance of the Fund reflects the deduction of
these services.
<PAGE> 614
13
- ------------------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. the examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
International Equity Index Fund
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment) (1) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge Load NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(expenses that are deducted from fund assets) (2) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .55%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
------------------------------------------------------------------------------
Other Expenses .40%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .95%
------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect
current fees.
<TABLE>
<CAPTION>
CLASS I
---------------------------------
<S> <C> <C>
1 Year $ 97
---------------------------------
3 Years 303
---------------------------------
5 Years 525
---------------------------------
10 Years 1,166
---------------------------------
</TABLE>
<PAGE> 615
14
ONE GROUP(R)
- ------------------------------------
More About The Funds
Each of the three funds described in this Prospectus is
a series of One Group Mutual Funds and is managed by
Banc One Investment Advisors Corporation. The Funds also
offer Class A, Class B, and Class C shares through a
separate prospectus. For more information on these share
classes, please contact your Shareholder Servicing Agent
or call The One Group Services Company at
1-800-480-4111. For more information about One Group and
Banc One Investment Advisors, please read "Management of
One Group Mutual Funds" and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES This Prospectus describes three mutual funds that
attempt to track the performance of a specified index or
indices. Unlike an actively managed fund, these Funds
purchase and sell securities based on changes in the
applicable index or indices. The principal investment
strategies that are used to meet each Fund's investment
objective are described in the Fund Summaries:
Investments, Risk, & Performance. They are also
described below. There can be no assurance that the
Funds will achieve their investment objectives. Please
note that each Fund may also use strategies that are not
described below, but which are described in the
Statement of Additional Information.
- -----
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks
included in the S&P 500 Index. (The Fund also invests in
stock index futures.) Banc One Investment Advisors seeks
to achieve a correlation of 0.95% between the
performance of the Fund and that of the S&P 500 Index.
The Fund may hold up to 10% of its net assets in cash or
cash equivalents.
- The percentage of stock that the Fund holds will be
approximately the same percentage that the stock
represents in the S&P 500 Index.
- Banc One Investment Advisors generally picks stock in
the order of their weightings in the S&P 500 Index,
starting with the heaviest weighted stock.
- The Fund attempts to achieve a correlation between the
performance of its Fund and that of the S&P 500 Index
of at least 0.95, without taking into account Fund
expenses. Perfect correlation would be 1.00.
- -----
ONE GROUP MARKET EXPANSION INDEX FUND. The Fund invests
in stocks included in the S&P Small Cap 600 Index and
S&P Mid Cap 400 Index.
- The Fund may also invest up to 25% of its total assets
in foreign securities through Depository Receipts.
- Up to 5% of the Fund's total assets may be held in
cash and cash equivalents.
- Up to 5% of the Fund's total assets may be invested in
futures contracts and related options.
<PAGE> 616
15
- -----
ONE GROUP INTERNATIONAL EQUITY INDEX FUND. The Fund
invests in stocks included in the MSCI EAFE GDP Index.
(The Fund also invests in stock index futures.) Banc One
Investment Advisors seeks to achieve a correlation
between the performance of the Fund and that of the MSCI
EAFE GDP Index of at least 0.90, without taking into
account expenses. Perfect correlation would be 1.00.
- At least 65% of the Fund's total assets will be
invested in foreign equity securities, consisting of
common stocks (including American Depository Receipts)
and preferred stocks, securities convertible to common
stock (provided they are traded on an exchange or
over-the-counter), warrants and receipts.
- No more than 10% of the Fund's assets will be held in
cash or cash equivalents.
- Up to 10% of the Fund's net assets may be invested in
securities of emerging international markets such as
Mexico, Chile and Brazil included in the Morgan
Stanley Market Free Index. These investments may made
directly or through local exchanges, through publicly
traded closed-end country funds, or through "passive
foreign investment companies."
- Up to 20% of the Fund's total assets may be invested
in debt securities issued or guaranteed by foreign
governments or any of their political subdivisions
agencies, or instrumentalities, or by supranational
issuers rated in one of the three highest rating
categories.
- A substantial portion of the Fund's assets will be
denominated in foreign currencies.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in the Index Funds
are described below and in Fund Summaries: Investments,
Risk, & Performance at the front of this prospectus.
- -----
DERIVATIVES. The Funds may invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks. A Fund's use of
derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use
such instruments.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities
- -----
SMALL CAPITALIZATION COMPANIES. Investments in smaller,
younger companies may be riskier and more volatile than
investments in larger, more established companies. These
companies may be more vulnerable to changes in economic
conditions, specific industry conditions, market
fluctuations, and other factors effecting the
profitability of other companies. Because economic
events may have a greater impact on smaller companies,
there may be a greater and more frequent fluctuation in
their stock price. This may cause frequent and
unexpected increases or decreases in the value of your
investment.
<PAGE> 617
16
- -----
FOREIGN SECURITIES. Investments in foreign securities
involve risks different from investments in U.S.
securities. These risks include the 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
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.
Because of these risk factors, the share price of the
International Equity Index Fund is expected to be
volatile, and you should be able to sustain sudden, and
sometimes substantial, fluctuations in the value of your
investment.
- -----
EUROPE. Europe includes countries with highly developed
markets as well as countries with emerging markets. Many
developed countries in Western Europe are members of the
European Union and the EMU which requires compliance
with stringent fiscal and monetary controls. The markets
of Eastern European countries continue to remain
relatively undeveloped and are sensitive to political
and economic developments.
- -----
ASIA. Asia includes countries in all stages of economic
development from the highly developed market economy of
Japan to the emerging market economy of the People's
Republic of China. Generally, Asian economies face
over-extension of credit, currency devaluation, rising
unemployment, decreased exports, and economic
recessions. Currency devaluation in any one country may
have a negative affect on the entire region. Recently,
the markets in each Asian country suffered significant
downturns and volatility. Although the Asian market
appears to be recovering, continued volatility may
persist.
- -----
LATIN AMERICA. Latin America countries are considered to
be emerging market economies that are marked by high
interest rates, inflation, and unemployment. Currency
devaluation in any one country may have an adverse
affect on the entire region. Recently, the markets in
many Latin American countries have experienced
significant downturns as well as significant volatility.
Although the Latin American market appears to be
recovering, continued volatility may persist. A small
number of companies and industries, including the
telecommunications sector, represent a large portion of
the market in many Latin America countries.
For more information about risks associated with the
types of investments that the Index Funds purchase,
please read Fund Summaries: Investments, Risk, &
Performance, Appendix A and the Statement of Additional
Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
<PAGE> 618
17
- -----
Each Fund may not:
1. Purchase an issuer's securities if as a result more
than 5% of its total assets would be invested in the
securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of that
issuer. This does not include securities issued or
guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements
involving these securities. This restriction applies
with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one
or more issuers conducting their principal business
in a particular industry or group of industries. This
does not include obligations issued or guaranteed by
the U.S. government or its agencies and
instrumentalities and repurchase agreements involving
such securities.
3. Make loans, except that a Fund may (i) purchase or
hold debt instruments in accordance with its
investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities
lending.
- -----
One Group Equity Index Fund may not:
1.Invest more than 10% of its total assets in securities
issued or guaranteed by the United States, its
agencies or instrumentalities.
Additional investment policies can be found in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to securities. Equity securities, which will make up the
bulk of the Funds' investments, are not rated by rating
organizations. Generally, ratings are divided into two
main categories: "Investment Grade Securities" and
"Non-Investment Grade Securities." Although there is
always a risk of default, rating agencies believe that
issuers of Investment Grade Securities have a high
probability of making payments on such securities.
Non-Investment Grade Securities include securities that,
in the opinion of the rating agencies, are more likely
to default than Investment Grade Securities. The Funds
only purchase securities that meet the rating criteria
described below. Banc One Investment Advisors will look
at a security's rating at the time of investment. If the
securities are unrated, Banc One Investment Advisors
must determine that they are of comparable quality to
rated securities.
<PAGE> 619
18
- -----
RATINGS OF THE INDEX FUNDS' SECURITIES
- Short-term corporate obligations, such as commercial
paper, notes and variable rate demand obligations,
must be rated in one of the two highest investment
grade categories at the time of investment.
- Corporate bonds generally will be rated in one of the
three highest investment grade categories. Banc One
Investment Advisors reserves the right to invest in
corporate bonds that present attractive opportunities
and are rated in the lowest investment grade category.
These corporate bonds may be riskier than higher rated
bonds.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE
POSITIONS To respond to unusual market conditions, the Equity
Index Fund and the International Equity Index Fund may
invest up to 10% of their total assets in cash and CASH
EQUIVALENTS (see below) for temporary defensive
purposes. The Market Expansion Index Fund may invest up
to 5% of its total assets in cash and cash equivalents.
These investments may result in a lower yield than
lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER The Funds may engage in active and frequent trading of
portfolio securities to achieve their principal
investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds and may result in
additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights. To
the extent portfolio turn over results in short-term
capital gains, such gains will generally be taxed at
ordinary income tax rates.
<PAGE> 620
19
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND SHARES
WHERE CAN I
BUY SHARES? You may purchase Fund shares from Wingspan Investment
Services, Inc., a Shareholder Servicing Agent. Your
shares will be held for you by Wingspan Investment
Services, Inc.
WHEN CAN I
BUY SHARES? You may purchase Fund shares on any day that the Funds
are open for business. As your Shareholder Servicing
Agent, Wingspan Investment Services, Inc. is responsible
for sending your purchase order to the Funds. While the
following information describes the Funds' purchase
requirements, Wingspan Investment Services, Inc. may
have an earlier cut-off time for purchase orders.
- Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, Christmas
Eve, and Christmas.
- Purchase requests received by The One Group Services
Company before 4 p.m. Eastern Time ("ET") will be
effective that day. On occasion, the NYSE will close
before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the
following business day.
- Purchase orders for Class I shares may be cancelled by
the Fund's Custodian, State Street Bank and Trust
Company, if it does not receive "federal funds" by
4:00 p.m. ET on the business day after the order is
placed.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
HOW MUCH DO
SHARES COST? - Shares are sold at net asset value ("NAV").
- Each class of shares in each Fund has a different
NAV. This is primarily because each class has
different distribution expenses.
- NAV per share is calculated by dividing the total
market value of a Fund's investments and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each
business day following the close of the NYSE at 4:00
p.m. ET. On occasion, the NYSE will close before 4
p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
<PAGE> 621
20
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund
($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an
IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per
Fund.
- The One Group Services Company may waive these
minimums.
3. Execute a purchase order through your Wingspan
Investment Account.
4. Send a personal check (unless you choose to pay by
wire or bank transfer) payable to "Wingspan
Investment Services, Inc." to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
If you choose to pay by wire, please call The One
Group Services Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. Wingspan
Investment Services will accept third party checks
only if accompanied by an AMA deposit slip.
6. If you redeem shares purchased under the Systematic
Investment Plan (see below) or that were purchased by
check, One Group will delay forwarding your
redemption proceeds until payment has been collected
from your bank. One Group generally receives payment
within ten (10) calendar days of purchase.
7. If you have any questions, contact Wingspan
Investment Services at 1-800-977-WING.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Wingspan
Investment Account Application Form and then:
- Contact Wingspan Investment Services, Inc. at
1-800-977-WING to relay your purchase instructions.
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
CHASE MANHATTAN BANK
ABA 021000021
DLJ PERSHING DIVISION
ACCOUNT 930-1-032992
FOR FURTHER CREDIT TO:
YOUR NAME
YOUR WINGSPAN INVESTMENT
ACCOUNT NUMBER (EX: 123456789)
- You may revoke your right to make purchases over the
telephone by sending a letter to:
WINGSPAN INVESTMENT SERVICES
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
<PAGE> 622
21
CAN I AUTOMATICALLY
INVEST ON A SYSTEMATIC
BASIS? Yes. After your Wingspan Investment Account is
established, you may purchase additional Class I shares
by making automatic monthly investments from your bank
account. The minimum initial investment is still $1,000
per Fund, but minimum automatic additions are only $25
per Fund. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on your
Wingspan Investment Account Form.
- Provide the necessary information about the bank
account from which your investments will be made.
- Shares purchased under a Systematic Investment Plan
may not be redeemed for five (5) calendar days.
- One Group currently does not charge for this service,
but may impose a charge in the future.
- You may revoke your right to make systematic
investments by calling Wingspan Investment Services,
Inc. at 1-800-977-WING or by sending a letter to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
- --------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A
shares of that Fund or for Class A or Class I shares
of another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege
which allows you to automatically exchange shares of one
fund to another on a monthly or quarterly basis. This
privilege is useful in Dollar Cost Averaging. To learn
more about it, please call Wingspan Investment Services
at 1-800-977-WING.
One Group does not charge a fee for this privilege. In
addition, One Group may change the terms and conditions
of your exchange privileges upon 60 days written notice.
WHEN ARE EXCHANGES
PROCESSED? Exchanges are processed the same business day they are
received, provided:
- State Street Bank and Trust Company receives the
request by 4:00 p.m., ET.
- One Group has all of the information necessary to
process the exchange.
- You have received a current prospectus of the Fund or
Funds in which you wish to invest.
- You have contacted Wingspan Investment Services, Inc..
DO I PAY A SALES CHARGE
ON AN EXCHANGE? Generally, you will not pay a sales charge on an
exchange. However:
- You will pay a sales charge if you own Class I shares
of a Fund and you want to exchange those shares for
Class A shares, unless you qualify for a sales charge
waiver (see above).
<PAGE> 623
22
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.
- As your Shareholder Servicing Agent, Wingspan
Investment Services, Inc. is responsible for sending
your redemption order to the Funds. Wingspan
Investment Services may have a different cut-off time
than do the Funds.
HOW DO I
REDEEM SHARES? Unless you have selected the telephone option on your
Wingspan Investment Account Form, you must send a
written redemption request to Wingspan Investment
Services, Inc. at the following address:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
- All requests for redemptions from IRA accounts must be
in writing.
- You may request redemption forms by calling Wingspan
Investment Services, Inc. at 1-800-977-WING.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. Wingspan Investment Services, Inc.
- Your redemption proceeds will be paid within seven
days after receipt of the redemption request.
<PAGE> 624
23
WHAT WILL MY SHARES BE
WORTH?
- If the Fund receives your redemption request by 4:00
p.m. ET (or when the NYSE closes), you will receive
that day's NAV.
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Wingspan
Investment Account Form.
- Call Wingspan Investment Services, Inc. at
1-800-977-WING to relay your redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Wingspan Investment Account Form.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000, you
may elect to receive monthly, quarterly or annual
payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on your
Wingspan Investment Account Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. If you are age 70 1/2, you may elect to receive
payments to the extent that the payment represents
a minimum required distribution from your One Group
IRA or other One Group qualifying retirement plan.
2. If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
<PAGE> 625
24
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more of a
Fund's assets, the Fund reserves the right to pay part
or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is
made in securities, the Fund will value the securities
selected in the same manner in which it computes its
NAV. This process minimizes the effect of large
redemptions on the Fund.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds for 10 or more days until payment has been
collected from your bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $800 that are not participating in
a Systematic Investment Plan will be assessed an
annual fee of $10.00 per Fund. The sub-minimum account
fee will not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is
restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. Except for the International Equity Index
Fund, the Funds generally declare dividends on the last
business day of each quarter. The International Equity
Index Fund generally declares dividends on the last
business day of each year. Dividends for the Funds are
distributed on the first business day of the next month
after they are declared. Capital gains, if any, for all
Funds are distributed at least annually.
<PAGE> 626
25
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.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may call Wingspan Investment Sercices, Inc. at
1-800-977-WING to make this change.
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares generally will produce
either a taxable gain or a loss. You are responsible for
any tax liabilities generated by your transactions.
TAXATION OF
DISTRIBUTIONS
- -------------------------
Each Fund will distribute substantially all of its net
investment income (including, for this purpose, the
excess of net short-term capital gains over net
long-term capital losses and net capital gains (i.e.,
the excess of net long-term capital gains over net
short-term capital losses) on at least an annual basis.
Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from
a Fund's net investment income will be taxable as
ordinary income and distributions from a Fund's
long-term capital gains will be taxable to you as such,
regardless of how long you have held the shares.
Distributions are taxable to you even if they are paid
from income or gains earned by a Fund prior to your
investment (and thus were included in the price you
paid).
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
<PAGE> 627
26
TAXATION OF
RETIREMENT PLANS
- -------------------------
Distributions by the Funds to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual as described
in "Taxation of Distributions." If you are considering
purchasing shares with qualified retirement plan assets,
you should consult your tax advisor for a more complete
explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an
investment.
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write Wingspan Investment Services,
Inc. at 300 S. Riverside Plaza, Suite 0860, Chicago, IL
60670 or 1-800-977-WING.
REPORTING
- -------------------------
In March and September you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 628
27
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R)
Equity Index
Fund .14%
------------------------------------------------
One Group(R)
International
Equity Index
Fund(1) .55%
------------------------------------------------
</TABLE>
(1) Includes fees paid by Banc One Investment
Advisors to Independence International, the
former sub-advisor to the International Equity
Index Fund.
The Market Expansion Index Fund began operations on July
31, 1998 and does not have a full fiscal year of
advisory fees. Under the investment advisory agreement
with the Fund, Banc One Investment Advisors is entitled
to a fee, which is calculated daily and paid monthly, of
.35% of the average daily net assets of the Market
Expansion Index Fund.
<PAGE> 629
28
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 630
29
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is incorporated by the in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.31 0.33 0.35 0.33 0.32
Net realized and unrealized gains (losses) from
investments 5.54 5.98 5.27 3.16 2.59
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.85 6.31 5.62 3.49 2.91
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.32) (0.33) (0.33) (0.29)
In excess of net investment income - - - (0.01) (0.02)
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
Total Distributions (1.22) (0.95) (0.48) (0.86) (0.47)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 22.50% 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,855,947 $671,422 $480,819 $321,058 $234,895
Ratio of expenses to average net assets 0.35% 0.35% 0.30% 0.30% 0.33%
Ratio of net investment income to average net assets 1.14% 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to average net assets* 0.57% 0.62% 0.61% 0.59% 0.66%
Ratio of net investment income to average net assets* 0.92% 1.10% 1.56% 1.89% 2.24%
Portfolio turnover(A) 5.37% 4.32% 5.81% 9.08% 2.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 631
30
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Market Expansion Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCoopers' 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>
SIX MONTHS JULY 31, 1998
ENDED TO DECEMBER 31,
CLASS I JUNE 30, 1999(E) 1998(A)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.52 $ 10.00
- ----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.03 0.03
Net realized and unrealized gains (losses) from
investments 0.40 0.93
- ----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.43 0.96
- ----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.03) (0.03)
Net realized gain (0.29) (0.41)
Total Distributions (0.32) (0.44)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.63 $ 10.52
- ----------------------------------------------------------------------------------------------------------
Total Return 4.54%(B) 9.91%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $28,871 $27,483
Ratio of expenses to average net assets 0.57%(C) 0.56%(C)
Ratio of net investment income to average net assets* 0.68%(C) 0.75%(C)
Ratio of expenses to average net assets* 0.97%(C) 1.12%(C)
Ratio of net investment income to average net assets* 0.28%(C) 0.19%(C)
Portfolio turnover(D) 36.50% 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)
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. (E) Upon
reorganizing as a fund of One Group, the Pegasus Market Expansion Index Fund
became One Group Market Expansion Index Fund. Financial highlights for periods
prior to March 22, 1999 represent the Pegasus Market Expansion Index Fund.
<PAGE> 632
31
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
International Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is incorporated by the in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
CLASS I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93 $ 13.46
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.19 0.21 0.15 0.11 0.13
Net realized and unrealized gains (losses) from
investments 1.71 1.32 2.02 1.43 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.90 1.53 2.17 1.54 0.59
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.39) (0.02) (0.17) (0.16) (0.08)
In excess of net investment income - - (0.13) (0.02) -
Net realized gains (0.85) (0.43) (0.15) (0.12) (0.04)
Total Distributions (1.24) (0.45) (0.45) (0.30) (0.12)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 18.63 $ 17.97 $ 16.89 $ 15.17 $ 13.93
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 11.27% 9.54% 14.64% 11.22% 4.20%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $657,902 $586,741 $449,949 $347,790 $218,299
Ratio of expenses to average net assets 0.85% 0.88% 0.86% 0.97% 1.04%
Ratio of net investment income to average net assets 1.03% 1.29% 1.00% 1.04% 1.25%
Ratio of expenses to average net assets* 0.85% 0.88% 0.86% 1.00% 1.04%
Ratio of net investment income to average net assets* 1.03% 1.29% 1.00% 1.01% 1.25%
Portfolio turnover(A) 33.99% 9.90% 9.61% 6.28% 4.67%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 633
32
ONE GROUP(R)
- ------------------------------------
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Equity
securities are subject mainly to market risk. Fixed
income securities are primarily influenced by market,
credit and prepayment risks, although certain securities
may be subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Equity Index Fund 1
------------------------------------------------------
One Group(R) Market Expansion Index Fund 2
------------------------------------------------------
One Group(R) International Equity Index
Fund 3
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, 1-3 Market
bonds, STRIPS, and CUBES.
---------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. 1-3 Market
---------------------------------------------------------------------------------
U.S. Government Agency Securities: 1-3 Market
Securities issued by agencies and Credit
instrumentalities of the U.S. Government.
These include Ginnie Mae, Fannie Mae, and
Freddie Mac.
---------------------------------------------------------------------------------
Certificates of Deposit: Negotiable 1-3 Market
instruments with a stated maturity. Credit
Liquidity
---------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts 1-3 Liquidity
issued by a bank in exchange for the deposit Credit
of funds. Market
---------------------------------------------------------------------------------
Common Stock: Shares of ownership of a 1-3 Market
company.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 634
33
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreements: The purchase of a 1-3 Credit
security and the simultaneous commitment to Market
return the security to the seller at an Liquidity
agreed upon price on an agreed upon date.
This is treated as a loan.
---------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1-3 Market
security and the simultaneous commitment to Leverage
buy the security back at an agreed upon
price on an agreed upon date. This is
treated as a borrowing by a Fund.
---------------------------------------------------------------------------------
Securities Lending: The lending of up to 1-3 Credit
33 1/3% of the Fund's total assets. In Market
return the Fund will receive cash, other Leverage
securities, and/or letters of credit as
collateral.
---------------------------------------------------------------------------------
When-Issued Securities and Forward 1-3 Market
Commitments: Purchase or contract to Leverage
purchase securities at a fixed price for Liquidity
delivery at a future date. Credit
---------------------------------------------------------------------------------
Investment Company Securities: Shares of 1-3 Market
other mutual funds, including One Group
money market funds and shares of other money
market funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors
will waive certain fees when investing in
funds for which it serves as investment
advisor.
---------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred 1-3 Market
stock that convert to common stock. Credit
---------------------------------------------------------------------------------
Call and Put Options: A call option gives 1-3 Management
the buyer the right to buy, and obligates Liquidity
the seller of the option to sell, a security Credit
at a specified price. A put option gives the Market
buyer the right to sell, and obligates the Leverage
seller of the option to buy, a security at a
specified price. The Funds will sell only
covered call and secured put options.
---------------------------------------------------------------------------------
Futures and Related Options: A contract 1-3 Management
providing for the future sale and purchase Market
of a specified amount of a specified Credit
security, class of securities, or an index Liquidity
at a specified time in the future and at a Leverage
specified price.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 635
34
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Investment Trusts ("REITS"): 1-3 Liquidity
Pooled investment vehicles which invest Management
primarily in income producing real estate or Market
real estate related loans or interest. Regulatory
Tax
Pre-payment
---------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or 1-3 Credit
time drafts drawn on and accepted by a Liquidity
commercial bank. Maturities are generally Market
six months or less.
---------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured 1-3 Credit
short-term promissory notes issued by Liquidity
corporations and other entities. Maturities Market
generally vary from a few days to nine
months.
---------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign 1-3 Market
companies, as well as commercial paper of Political
foreign issuers and obligations of foreign Liquidity
banks, overseas branches of U.S. banks and Foreign Investment
supranational entities. Includes American
Depository Receipts and Global Depository
Receipts, and American Depository
Securities.
---------------------------------------------------------------------------------
Restricted Securities: Securities not 1-3 Liquidity
registered under the Securities Act of 1933, Market
such as privately placed commercial paper
and Rule 144A securities.
---------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-3 Credit
Obligations with interest rates which are Liquidity
reset daily, weekly, quarterly or some other Market
period and which may be payable to the Fund
on demand.
---------------------------------------------------------------------------------
Warrants: Securities, typically issued with 1-3 Market
preferred stock or bonds, that give the Credit
holder >the right to buy a proportionate
amount of common stock at a specified price.
---------------------------------------------------------------------------------
Preferred Stock: A class of stock that 1-3 Market
generally pays a dividend at a specified
rate and has preference over common stock in
the payment of dividends and in liquidation.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 636
35
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Swaps, Caps and Floors: A Fund may enter 1-3 Management
into these transactions to manage its Credit
exposure to changing interest rates and Liquidity
other factors. Swaps involve an exchange of Market
obligations by two parties. Caps and floors
entitle a purchaser to a principal amount
from the seller of the cap or floor to the
extent that a specified index exceeds or
falls below a predetermined interest rate or
amount.
---------------------------------------------------------------------------------
New Financial Products: New options and 1-3 Management
futures contracts and other financial Credit
products continue to be developed and the Market
Funds may invest in such options, contracts Liquidity
and products.
---------------------------------------------------------------------------------
Structured Instruments: Debt securities 2, 3 Market
issued by agencies and instrumentalities of Liquidity
the U.S. government, banks, municipalities, Management
corporations and other businesses whose Credit
interest and/or principal payments are Foreign Investment
indexed to foreign currency exchange rates,
interest rates, or one or more other
referenced indices.
---------------------------------------------------------------------------------
Obligations of Supranational Agencies: 3 Credit
Obligations of supranational agencies who Foreign Investment
are chartered to promote economic
development and are supported by various
governments and governmental agencies.
---------------------------------------------------------------------------------
Currency Futures and Related Options: The 3 Management
Funds may engage in transactions in Liquidity
financial futures and related options, which Credit
are generally described above. The Funds Market
will enter into these transactions in Political
foreign currencies for hedging purposes Leverage
only. Foreign Investment
---------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: 3 Management
Contractual agreement to purchase or sell Liquidity
one specified currency for another currency Credit
at a specified future date and price. The Market
Funds will enter into forward foreign Political
exchange transactions for hedging purposes Leverage
only. Foreign Investment
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 637
36
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Index Shares: Ownership interests in unit 1, 2 Market
investment trusts and other pooled
investment vehicles that hold a portfolio of
securities or stocks designed to track the
price performance and dividend yield of a
particular index such as Standard & Poor's
Depository Receipts ("SPDRs") and Nasdaq
100's. The Equity Index Fund invests only in
SPDRs.
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price of a
security can be adversely affected prior to actual
default as its credit status deteriorates and the
probability of default rises.
- 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.
<PAGE> 638
37
- 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 may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing
credit risk.
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws which may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
- Zero Coupon Risk. The market prices of securities
structured as zero coupon or pay-in-kind securities
are generally affected to a greater extent by interest
rate changes. These securities tend to be more
volatile than securities which pay interest
periodically.
<PAGE> 639
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by calling 1 800-480-4111 or by writing the Funds
at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-230 [LOGO]
<PAGE> 640
MONEY MARKET FUNDS
SERVICE CLASS SHARES
PROSPECTUS
November 1, 1999
[ONE GROUP LOGO]
One Group(R) Prime Money Market Fund
One Group(R) U.S. Treasury Securities Money Market Fund
One Group(R) Municipal Money Market Fund
The Securities and Exchange Commission has not approved or disapproved the
shares of any of the Funds as an investment or determined whether this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.
For Use by Wingspan Investment Services, Inc.
<PAGE> 641
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
One Group Prime Money Market Fund 2
---------
One Group U.S. Treasury Securities Money Market Fund 6
---------
One Group Municipal Money Market Fund 10
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 14
---------
Investment Risks 16
---------
Investment Policies 16
---------
Portfolio Quality and Maturity 17
---------
Temporary Defensive Positions 18
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 19
---------
Sales Charges 21
---------
Exchanging Fund Shares 21
---------
Redeeming Fund Shares 22
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 24
---------
Dividend Policies 24
---------
Tax Treatment of Shareholders 24
---------
Shareholder Inquiries 26
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 27
---------
Advisory Fees 27
---------
Year 2000 Readiness Disclosure 28
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 29
---------
APPENDIX A: INVESTMENT PRACTICES 32
---------
</TABLE>
<PAGE> 642
FUND SUMMARIES
Investments, Risk & Performance
<PAGE> 643
2
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money Market Fund
WHAT IS THE GOAL OF THE
PRIME MONEY MARKET
FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE PRIME MONEY
MARKET FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests exclusively in high quality, short-term
money market instruments. These instruments include
corporate notes, commercial paper, funding agreements,
certificates of deposit, bank obligations and deposit
notes. The Fund will concentrate in the financial
services industry, including asset-backed commercial
paper programs. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the Prime Money Market Fund's
investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
PRIME MONEY MARKET
FUND? The main risks of investing in the Prime Money Market
Fund and the circumstances likely to adversely affect
your investment are described below. Before you invest,
please read "More About the Funds" and "Investment
Risks."
<PAGE> 644
3
- ------------------------------------
Prime Money Market Fund
MAIN RISKS
- ------------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund could also decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Concentration. The Fund will invest a significant
portion of its assets in the securities of companies in
the financial services industry. Because of the Fund's
greater exposure to that industry, economic, political
and regulatory developments affecting the financial
services industry will have a disproportionate impact on
the Fund. These developments include changes in interest
rates, earlier than expected repayments by borrowers, an
inability to achieve the same yield on the reinvestment
of prepaid obligations, and Federal and state laws which
may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 645
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Prime Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year- by-year results.
HOW HAS THE PRIME MONEY
MARKET FUND PERFORMED?By showing the variability of the Prime Money Market
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE PRIME
MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN CLASS I
--------------------
<S> <C>
1989 9.05
1990 7.90
1991 5.88
1992 3.58
1993 2.97
1994 4.09
1995 5.83
1996 5.20
1997 5.32
1998 5.30
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.56%. Service Class shares commenced operations
on April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
- --------------------------------------------------------------------------------
Best Quarter: 2.34% 2Q1989 Worst Quarter: .72% 2Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 8/1/85)
<S> <C> <C> <C> <C>
One Group Prime Money Market Fund 5.30% 5.15% 5.50% 5.73%
</TABLE>
(1) Service Class shares commenced operations on
April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 646
5
- ------------------------------------
Prime Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or continued to hold
them at the end of the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35%
------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
------------------------------------------------------------------------------------
Other Expenses .19%
------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.29%
------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.22%)
------------------------------------------------------------------------------------
Net Expenses 1.07%
------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.07% for Service Class shares for the period
beginning November 1, 1999 and ending on October
31, 2000.
<TABLE>
<CAPTION>
SERVICE CLASS (2)
----------------------------------------
<S> <C> <C>
1 Year (1) $ 109
----------------------------------------
3 Years 387
----------------------------------------
5 Years 686
----------------------------------------
10 Years 1,537
----------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Service Shares would be $131.
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 647
6
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK &
PERFORMANCE
U.S. Treasury Securities
Money Market Fund
WHAT IS THE GOAL OF THE
U.S. TREASURY
SECURITIES MONEY
MARKET FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE U.S.
TREASURY SECURITIES
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests exclusively in short-term U.S. Treasury
obligations including repurchase agreements
collateralized by such Treasury obligations and
when-issued securities, U.S. Treasury bills, notes and
other securities issued or backed by the U.S.
Government. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the U.S. Treasury Securities Money
Market Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
U.S. TREASURY
SECURITIES MONEY
MARKET FUND? The main risks of investing in the U.S. Treasury
Securities Money Market Fund and the circumstances
likely to adversely affect your investment are described
below. Before you invest, please read "More About the
Funds" and "Investment Risks."
<PAGE> 648
7
- ------------------------------------
U.S. Treasury Securities
Money Market Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 649
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
U.S. Treasury Securities
Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year- by-year
results.
HOW HAS THE U.S. TREASURY
SECURITIES MONEY MARKET
FUND PERFORMED? By showing the variability of the U.S. Treasury
Securities Money Market Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE U.S. TREASURY SECURITIES MONEY MARKET
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN CLASS I
--------------------
<S> <C>
1989 8.80
1990 7.55
1991 5.51
1992 3.32
1993 2.81
1994 3.85
1995 5.62
1996 5.08
1997 5.13
1998 5.03
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.33%. Service Class shares commenced operations
on April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
- --------------------------------------------------------------------------------
Best Quarter: 2.28% 2Q1989
Worst Quarter: .69% 2Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 9/9/85)
<S> <C> <C> <C> <C>
One Group U.S. Treasury Securities Money Market Fund 5.03% 4.94% 5.26% 5.46%
</TABLE>
(1) Service Class shares commenced operations on
April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 650
9
- ------------------------------------
U.S. Treasury Securities
Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or continued to hold
them at the end of the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
fund's operating expenses
remain the same. Your actual
costs may be higher or lower,
than those shown below. There
is no sales charge (load) on
reinvested dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35%
------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
------------------------------------------------------------------------------------
Other Expenses .19%
------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.29%
------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.22%)
------------------------------------------------------------------------------------
Net Expenses 1.07%
------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.07% for Service Class shares for the period
beginning November 1, 1999 and ending on October
31, 2000.
<TABLE>
<CAPTION>
SERVICE CLASS (2)
----------------------------------------------
<S> <C> <C>
1 Year (1) $ 109
----------------------------------------------
3 Years 387
----------------------------------------------
5 Years 686
----------------------------------------------
10 Years 1,537
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Service Shares would be $131.
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 651
10
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Municipal Money
Market Fund
WHAT IS THE GOAL OF THE
MUNICIPAL MONEY MARKET
FUND? The Fund seeks as high a level of current interest
income exempt from Federal income tax as is consistent
with liquidity and stability of principal.
WHAT ARE THE MUNICIPAL
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests in high quality, short-term money
market instruments. These instruments include short-term
municipal securities, which provide tax-exempt income.
The Fund will comply with SEC rules applicable to all
money market funds, including Rule 2a-7 under the
Investment Company Act of 1940. For more information
about the Municipal Money Market Fund's investment
strategies, please read "More About the Funds" and
"Principal Investment Strategies."
WHAT ARE MUNICIPAL
SECURITIES? Municipal securities are bonds and notes issued by
states, territories and possessions of the United
States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies
and instrumentalities, the interest on which is exempt
from Federal income tax. The securities are issued to
raise funds for various public and private purposes.
HOW WILL MY INVESTMENT
BE TAXED? Up to 100% of the Fund's assets may be invested in
municipal securities, the interest on which may be
subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of
their income from the Fund subject to Federal income
tax. In addition, corporate shareholders will be
required to take the interest on municipal securities
into account in determining their alternative minimum
taxable income.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
MUNICIPAL MONEY
MARKET FUND? The main risks of investing in the Municipal Money
Market Fund and the circumstances likely to adversely
affect your investment are described below. Before you
invest, please read "More About the Funds" and
"Investment Risks."
<PAGE> 652
11
- ------------------------------------
Municipal Money Market Fund
MAIN RISKS
- --------------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal, the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 653
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Municipal Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year- by-year results.
HOW HAS THE MUNICIPAL
MONEY MARKET FUND
PERFORMED? By showing the variability of the Municipal Money Market
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
MUNICIPAL MONEY MARKET FUND IS NOT NECESSARILY AN
INDICATION OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN CLASS I
--------------------
<S> <C>
1989 6.11
1990 5.77
1991 4.37
1992 2.49
1993 2.10
1994 2.54
1995 3.60
1996 3.13
1997 3.31
1998 3.10
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.07%. Service Class shares commenced operations
on April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
- --------------------------------------------------------------------------------
Best Quarter: 1.58% 2Q1989
Worst Quarter: .49% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (1) through December 31,
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 6/4/87)
<S> <C> <C> <C> <C>
One Group Municipal Money Market Fund 3.10% 3.13% 3.64% 3.80%
</TABLE>
(1) Service Class shares commenced operations on
April 16, 1999 and do not have a full calendar
year of investment returns as of the date of this
Prospectus. The returns are for Class I shares
which are not offered in this prospectus. Class I
shares would have substantially similar annual
returns because the shares are invested in the
same portfolio of securities and the annual
returns would differ only to the extent that the
classes do not have the same expenses.
TO OBTAIN CURRENT YIELD INFORMATION, CALL TOLL-FREE
1-800-480-4111 OR VISIT WWW.ONEGROUP.COM.
<PAGE> 654
13
- ------------------------------------
Municipal Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (2) SERVICE CLASS
------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35%
------------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees .75%
------------------------------------------------------------------------------------
Other Expenses .20%
------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.30%
------------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.28%)
------------------------------------------------------------------------------------
Net Expenses 1.02%
------------------------------------------------------------------------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder
Servicing Agent, you may be charged separate
transaction fees by the Shareholder Servicing
Agent. In addition, an annual $10.00 sub-minimum
account fee may be applicable and a $7.00 charge
may be deducted from redemption amounts paid by
wire.
(2) Expense Information has been restated to reflect
current fees.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
1.02% for Service Class shares for the period
beginning November 1, 1999 and ending on October
31, 2000.
<TABLE>
<CAPTION>
SERVICE CLASS (2)
----------------------------------------------
<S> <C> <C>
1 Year (1) $ 104
----------------------------------------------
3 Years 384
----------------------------------------------
5 Years 686
----------------------------------------------
10 Years 1,543
----------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
for Service Shares would be $132.
(2) Because of the nature of the shares, investors
are not expected to remain in Service Class
shares for more than a very limited period of
time.
<PAGE> 655
14
ONE GROUP(R)
- ------------------------------------
More About One Group Mutual Funds
Each of the three funds described in this Prospectus is
a series of One Group Mutual Funds ("One Group") and is
managed by Banc One Investment Advisors Corporation
("Banc One Investment Advisors"). For more information
about One Group and Banc One Investment Advisors, please
read "Management of One Group Mutual Funds" and the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES The three mutual funds described in this Prospectus are
designed to produce high current income consistent with
liquidity or capital preservation and stability of
principal. The principal investment strategies that are
used to meet each Fund's investment objective are
described in Fund Summaries: Investments, Risk &
Performance in the front of this Prospectus. They are
also described below.
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve
"fundamental policies". A policy is
fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
may also use strategies that are not described below,
but which are described in the Statement of Additional
Information.
- -----
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only
in U.S. denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund invests exclusively in money market
instruments. These include:
1. corporate notes.
2. commercial paper.
3. funding agreements.
4. certificates of deposit.
5. bank obligations and deposit notes.
<PAGE> 656
15
- The Fund will invest at least 25% of its total assets
in securities issued by companies in the financial
services industry, although the Fund may invest less
than 25% of its total assets in that industry if
warranted due to adverse economic conditions and if
investing less than that amount would be in the best
interests of shareholders. The financial services
industry includes banks, broker-dealers, finance
companies and other issuers of asset-backed
securities.
- The Fund may lend its portfolio's securities.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average weighted maturity,
the more fluctuation in share price you
can expect.
- -----
ONE GROUP U. S. TREASURY SECURITIES MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- -----
ONE GROUP MUNICIPAL MONEY MARKET FUND.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- As a matter of fundamental policy, the Fund will
invest at least 80% of its total assets in municipal
securities.
- The Fund will purchase municipal securities only if
the issuer receives assurances from its legal counsel
that the interest payable on the securities is exempt
from Federal personal income tax.
- The Fund may invest as much as 100% of its assets in
municipal securities that produce income that is
subject to the Federal alternative minimum tax. If you
are subject to the Federal alternative minimum tax,
please read the section of this prospectus entitled
"Tax Treatment of Shareholders" before you invest.
- The Fund also may invest up to 20% of its total assets
in other types of securities, such as taxable money
market instruments, including repurchase agreements.
For a list of all the securities in which the Fund may
invest, please read "Investment Practices" in Appendix
A.
<PAGE> 657
16
- --------------------------------------------------------------------------------
INVESTMENT RISKS The main risks associated with investing in the Money
Market Funds are described in Fund Summaries:
Investments, Risk & Performance in the front of this
Prospectus. Additional risks are described below.
- -----
NET ASSET VALUE. There is no assurance that the Funds
will meet their investment objectives or be able to
maintain a net asset value of $1.00 per share on a
continuous basis.
- -----
FIXED INCOME SECURITIES. Investments in fixed income
securities (for example, bonds) will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of the securities in the Fund, and the value of
your investment in a Fund, will increase and decrease as
the value of a Fund's investments increase and decrease.
- -----
DERIVATIVES. The Prime Money Market Fund and Municipal
Money Market Fund invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
For more information about risks associated with the
types of investments that the Money Market Funds
purchase, please read the Fund Summaries: Investments,
Risk, & Performance, Appendix A and the Statement of
Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
- -----
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.
<PAGE> 658
17
3. Will not purchase an issuer's securities if as a
result more than 5% of a Fund's total assets would be
invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting
securities of that issuer. This does not include
securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase
agreements involving these securities. This
restriction applies with respect to 75% of a Fund's
total assets. The Funds may invest the remaining 25%
of their total assets without regard to this
restriction as permitted by applicable law.
- -----
The Prime Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries (except that the Fund may concentrate
its investments in securities issued by companies in
the financial services industry). This does not
include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities,
domestic bank certificates of deposit or bankers'
acceptances, and repurchase agreements involving such
securities, municipal securities or governmental
guarantees of municipal securities. In addition,
private activity bonds backed only by the revenues
and assets of a non-governmental user will not be
deemed to be municipal securities.
- -----
The U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and
repurchase agreements collateralized by such
obligations.
- -----
The Municipal Money Market Fund:
1. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries. This does not include municipal
securities or governmental guarantees of municipal
securities. In addition, private activity bonds
backed only by the revenues and assets of a
non-governmental user will not be deemed to be
municipal securities.
Additional investment policies can be found in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY AND
MATURITY The quality and maturity of money market funds are
subject to SEC rules. Quality is generally restricted to
the two highest short term ratings or their equivalent.
Maturity is limited both as to total portfolio average
and as to each individual security. With respect to
portfolio average, the rules limit the Fund's average
weighted maturity to 90 days. With respect to each
individual security, the remaining maturity is
restricted to 397 days at acquisition. Moreover, the SEC
rules limit exposure to a single issuer to 5% of a money
market fund's assets (although there is no limit on
government securities).
<PAGE> 659
18
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE
POSITIONS To respond to unusual market conditions, the Municipal
Money Market Fund may (i) invest all or most of its
assets in CASH EQUIVALENTS (i.e., securities that are
not municipal securities) and (ii) hold uninvested cash
pending investment, for temporary defensive purposes.
These investments may result in a lower yield than
lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
<PAGE> 660
19
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from Wingspan Investment
Services, Inc., a Shareholder Servicing Agent. Your
shares will be held for you by Wingspan Investment
Services, Inc.
WHEN CAN I BUY SHARES? You may purchase Fund shares on any day that the Funds
are open for business. As your Shareholder Servicing
Agent, Wingspan is responsible for sending your purchase
order to the Funds. While the following information
describes the Funds' purchase requirements, Wingspan may
have a cut-off time for purchase orders.
- Purchases may be made on any business day. This
includes any day that the Funds are open for business,
other than weekends, days on which the New York Stock
Exchange ("NYSE") is closed, and the following
holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving, Christmas Eve, and Christmas.
- Purchase requests will be effective on the day
received by The One Group Services Company and you
will be eligible to receive dividends declared the
same day, if such purchase orders are received by The
One Group Services Company:
- before 12:00 noon, Eastern Time ("ET"), for the
Municipal Money Market Fund;
- before 4:00 p.m., ET, for the Prime Money Market
Fund and the U.S. Treasury Securities Money Market
Fund.
- In addition, the Fund's custodian, State Street Bank
and Trust Company, must receive "federal funds" before
the times listed above on such day. If State Street
Bank and Trust Company does not receive federal funds
by the cut-off time, the purchase order will not be
effective until the next business day on which federal
funds are timely received by State Street Bank and
Trust Company.
- On occasion, the NYSE will close before 4 p.m. ET.
When the NYSE closes before the times listed above,
purchase requests received after the NYSE closes will
be effective the following business day.
- The One Group Services Company can reject a purchase
order if it does not think that it is in the best
interests of a Fund and/or its shareholders to accept
the order.
- Shares are electronically recorded. Therefore,
certificates will not be issued.
<PAGE> 661
20
HOW MUCH DO SHARES
COST? - Shares are sold at net asset value ("NAV").
- NAV per share is calculated by dividing the total
market value of a Fund's investment and other assets
allocable to a class (minus class expenses) by the
number of outstanding shares in that class. The Funds
use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able
to do so.
- NAV is calculated each business day as of 12:00 noon
and 4:00 p.m., ET, for the Municipal Money Market
Fund; and 4:00 p.m., ET, for the Prime Money Market
Fund and the U.S. Treasury Securities Money Market
Fund. On occasion, the NYSE will close before 4:00
p.m. ET. When the NYSE closes before the times listed
above, NAV will be calculated as of the time the NYSE
closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or
Funds most appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund
($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for an
IRA is $250.
- Subsequent investments must be at least $25 per
Fund.
- The One Group Services Company may waive these
minimums.
3. Execute a purchase order through your
Wingspan Investment Account.
4. Send a personal check (unless you choose to pay by
wire or bank transfer) payable to "Wingspan
Investment Services, Inc." to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
5. All checks must be in U.S. dollars. Wingspan
Investment Services will accept third party checks
only if accompanied by an AMA deposit slip.
6. If you redeem shares purchased under the systematic
investment plan (see below) or that were purchased by
check, One Group will delay forwarding your
redemption proceeds until payment has been collected
from your bank. One Group generally receives payment
within ten (10) calendar days of purchase.
7. If you have any questions, contact Wingspan
Investment Services, Inc. at 1-800-977-WING.
CAN I PURCHASE SHARES
OVER THE TELEPHONE? Yes. Simply select this option on your Wingspan
Investment Account Application Form and then:
- Contact Wingspan Investment Services, Inc. at
1-800-977-WING to relay your purchase instructions.
<PAGE> 662
21
- Authorize a bank transfer or initiate a wire transfer
to the following wire address:
CHASE MANHATTAN BANK
ABA 021 000 021
DLJ PERSHING DIVISION
ACCOUNT 930-1-032992
FOR FURTHER CREDIT TO:
YOUR NAME
YOUR WINGSPAN INVESTMENT ACCOUNT NUMBER (EX:
123456789)
- You may revoke your right to make purchases over the
telephone by sending a letter to:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
- --------------------------------------------------------------------------------
SALES CHARGES The One Group Services Company compensates Shareholder
Servicing Agents who sell shares of One Group Mutual
Funds. Compensation comes from 12b-1 fees and payments
by The One Group Services Company from its own
resources.
12B-1 FEES
- ----------------------
Each One Group Fund has adopted a plan under Rule 12b-1
that allows it to pay distribution and shareholder
servicing fees for the sale and distribution of shares
of the Funds. These fees are called 12b-1 fees. 12b-1
fees are paid by One Group Mutual Funds to The One Group
Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays
all or part of the 12b-1 fee to brokers and other
Shareholder Servicing Agents that sell shares of One
Group.
- Service Class shares pay a 12b-1 fee of .75% of the
average daily net assets of the Fund, which is
currently being waived to .55% for each Fund.
- The One Group Services Company may use up to .25% of
the fees for shareholder servicing and the remainder
for distribution. During the last fiscal year, The One
Group Services Company received 12b-1 fees.
- The One Group Services Company may pay 12b-1 fees to
its affiliates and to Banc One Investment Advisors and
its affiliates (or any sub-advisor) for brokerage and
other agency transactions.
- Because 12b-1 fees are paid out of Fund assets on an
on-going basis, over time these fees will increase the
cost of your investment and may cost you more than
paying other types of sales charges.
- --------------------------------------------------------------------------------
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE
PRIVILEGES? Service Class shares do not have exchange privileges.
<PAGE> 663
22
- --------------------------------------------------------------------------------
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day
that the Funds are open for business.
- Redemption requests received by The One Group Services
Company before:
(i) 12:00 noon ET, for the Municipal Money Market
Fund, and
(ii) 4:00 p.m. ET, for the Prime Money Market Fund and
the U.S. Treasury Securities Money Market Fund
will be effective that day. On occasion, the NYSE
will close before 4:00 p.m. ET. When the NYSE
closes before the times listed above, redemption
requests received after the NYSE closes will be
effective the following business day.
- As your Shareholder Servicing Agent, Wingspan
Investment Services, Inc. is responsible for sending
your redemption order to the Funds. Wingspan
Investment Services, Inc. may have a different cut-off
time than do the Funds.
HOW DO I
REDEEM SHARES?
- Unless you have selected the telephone option on your
Wingspan Investment Account Application Form, you must
send a written redemption request to Wingspan
Investment Services, Inc. at the following address:
WINGSPAN INVESTMENT SERVICES, INC.
300 S. RIVERSIDE PLAZA, SUITE 0860
CHICAGO, IL 60670
- All requests for redemptions from IRA accounts must be
in writing.
- You may request redemption forms by calling Wingspan
Investment Services, Inc. at 1-800-977-WING.
- On the Account Application Form you may elect to have
the redemption proceeds mailed or wired to:
1. a designated commercial bank; or
2. Wingspan Investment Services, Inc.
- Your redemption proceeds will ordinarily be paid
within seven days after receipt of the redemption
request. If you have wire instructions on file, the
Funds will attempt to honor requests for same day
payment if the request is received before the times
listed in WHEN CAN I RECEIVE SHARES?.
If redemption requests are received after these times,
the Funds will attempt to wire payment the next
business day.
- The Funds also will attempt to honor requests for
payments in two business days, if the redemption
request is received after the times listed above.
WHAT WILL MY SHARES BE
WORTH? - The NAV of shares of the Funds is expected to remain
constant at $1.00 per share, although there is no
assurance that this will always be the case.
- You will receive the NAV calculated after your
redemption request is received. Please read "HOW MUCH
DO SHARES COST?"
<PAGE> 664
23
CAN I REDEEM BY
TELEPHONE? Yes, if you selected this option on your Wingspan
Investment Account Application Form.
- Call Wingspan Investment Services, Inc. at
1-800-977-WING to relay your redemption request.
- Your redemption proceeds will be mailed or wired to
the commercial bank account you designated on your
Account Application Form.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY
TELEPHONE.
CAN I REDEEM ON A
SYSTEMATIC BASIS? If you have an account value of at least $10,000 you may
elect to receive monthly, quarterly or annual payments
of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on your
Wingspan Investment Account Application Form.
- Specify the amount you wish to receive and the
frequency of the payments.
- You may designate a person other than yourself as the
payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. If you are age 70 1/2, you may elect to receive
payments to the extent that the payment represents
a minimum required distribution from an IRA or
other qualifying retirement plan. You also may
elect to receive payments of less than $100 each.
2. If the amount of the systematic payment exceeds the
income earned by your account since the previous
payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your
shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION
REGARDING REDEMPTIONS
- -------------------------
- Generally, all redemptions will be for cash. However,
if you redeem shares worth $500,000 or more, the Fund
reserves the right to pay part or all of your
redemption proceeds in readily marketable securities
instead of cash. If payment is made in securities, the
Fund will value the securities selected in the same
manner in which it computes its NAV. This process
minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and
One Group has not yet received payment on the check,
One Group will delay forwarding your redemption
proceeds until payment has been collected from your
bank.
- Because of the high cost of handling small
investments, One Group charges a sub-minimum account
fee. Accounts under $1,000 that are not participating
in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will
not apply to IRA accounts and the accounts of
employees of Bank One Corporation and its affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted;
2. the NYSE is closed (other than weekend and holiday
closings);
3. the SEC has permitted a suspension; or
4. an emergency exists.
<PAGE> 665
24
The Statement of Additional Information offers more
details about this process.
- You generally will recognize a gain or loss on a
redemption for Federal income tax purposes. You should
talk to your tax advisor before making a redemption.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
- -------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share
that you own. Each Fund, and each class of shares within
each Fund, vote separately on matters relating solely to
that Fund or class, or which affect that Fund or class
differently. However, all shareholders will have equal
voting rights on matters that affect all shareholders
equally.
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. The Funds generally declare dividends on each
business day. Dividends are distributed on the first
business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
Dividends payable on Class I shares will be more than
those payable on other classes of shares. This is
because Class A, Class B, Class C and Service Class
shares have higher distribution expenses.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class, unless you
have elected to take such payment in cash. The price of
the shares is the NAV determined immediately following
the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as
dividends and distributions paid in cash.
If you want to change the way in which you receive
dividends and distributions, you must write to State
Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution.
The change is effective upon receipt by State Street.
You also may change the way you receive dividends and
distributions by calling Wingspan Investment Services,
Inc. at 1-800-977-WING.
TAX TREATMENT
OF SHAREHOLDERS
- -------------------------
TAXATION OF SHAREHOLDER TRANSACTIONS. A sale, exchange,
or redemption of Fund shares may produce either a
taxable gain or a loss. You are responsible for any tax
liabilities generated by your transactions.
<PAGE> 666
25
TAXATION OF
DISTRIBUTIONS -- PRIME
MONEY MARKET FUND AND
U.S. TREASURY SECURITIES
MONEY MARKET FUND
- -------------------------
Each Fund will distribute substantially all of its net
investment income. Dividends you receive from a Fund,
whether reinvested or received in cash, will be taxable
to you. Dividends from a Fund's net investment income
(generally, all of the Fund's net investment income)
will be taxable as ordinary income.
Dividends paid in January, but declared in October,
November or December of the previous year, will be
considered to have been paid in the previous year.
TAXATION OF
DIVIDENDS -- MUNICIPAL
MONEY MARKET FUND
- -------------------------
The Fund will distribute substantially all of its net
investment income. The Fund may pay "exempt-interest
dividends" if at least 50% of the value of Fund assets
at the end of each quarter of the Fund's taxable year
consists of obligations the interest on which is
excludable from gross income. Exempt-interest dividends
are generally excludable from an investor's gross income
for regular Federal income tax purposes. However, the
receipt of exempt-interest dividends may cause
recipients of Social Security or Railroad Retirement
benefits to be taxed on a portion of such benefits. In
addition, the receipt of exempt-interest dividends may
result in liability for Federal alternative minimum tax
and for federal state and local taxes, both for
individuals and corporate shareholders. Corporate
shareholders will be required to take the interest on
municipal securities into account in determining their
alternative minimum taxable income.
TAXATION OF
RETIREMENT PLANS
- -------------------------
Distributions by the Funds to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual as described
in "Taxation of Distributions." If you are considering
purchasing shares of the money market funds,
particularly the Municipal Money Market Fund, with
qualified retirement plan assets, you should consult
your tax advisor for a more complete explanation of the
Federal, state, local and (if applicable) foreign tax
consequences of making such an investment.
TAX INFORMATION
- -------------------------
The Form 1099 that is mailed to you every January
details your dividends and their federal tax category.
Even though the Funds provide you with this information,
you are responsible for verifying your tax liability
with your tax professional. For additional tax
information see the Statement of Additional Information.
Please note that this tax discussion is general in
nature; no attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax
treatment of the Funds or their shareholders.
<PAGE> 667
26
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please write Wingspan Investment Services,
Inc. at 1-800-977-WING.
REPORTING
- -------------------------
In September and March you will receive a financial
report from One Group. In addition, One Group will
periodically send you proxy statements and other
reports.
<PAGE> 668
27
ONE GROUP(R)
- ------------------------------------
Management of One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rate:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND NAME AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Prime
Money Market Fund .32%
------------------------------------------------
One Group(R) U.S.
Treasury Securities
Money Market Fund .32%
------------------------------------------------
One Group(R) Municipal
Money Market Fund .26%
------------------------------------------------
</TABLE>
<PAGE> 669
28
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 670
29
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 16, 1999
TO
SERVICE CLASS SHARES JUNE 30, 1999(A)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000
- ----------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.008
- ----------------------------------------------------------------------------------------
Distributions:
Net investment income (0.008)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000
- ----------------------------------------------------------------------------------------
Total Return 0.84%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 73
Ratio of expenses to average net assets 1.05%(C)
Ratio of net investment income to average net assets 4.02%(C)
Ratio of expenses to average net assets* 1.28%(C)
Ratio of net investment income to average net assets* 3.79%(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> 671
30
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
U.S. Treasury Securities Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 16,
1999 TO
JUNE 30,
SERVICE CLASS SHARES 1999(A)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.008
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.008)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000
- -------------------------------------------------------------------------------
Total Return 0.77%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 5
Ratio of expenses to average net assets 1.06%(C)
Ratio of net investment income to average net assets 3.71%(C)
Ratio of expenses to average net assets* 1.27%(C)
Ratio of net investment income to average net assets* 3.50%(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> 672
31
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Municipal Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate than an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 16,
1999 TO
JUNE 30,
SERVICE CLASS SHARES 1999(A)
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.000
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.005
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.005)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.000
- -------------------------------------------------------------------------------
Total Return 0.50%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 36
Ratio of expenses to average net assets 1.00%(C)
Ratio of net investment income to average net assets 2.45%(C)
Ratio of expenses to average net assets* 1.29%(C)
Ratio of net investment income to average net assets* 2.16%(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> 673
32
ONE GROUP(R)
- ------------------------------------
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT
PRACTICES The Funds invest in a variety of securities and employ a
number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Funds,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Prime Money Market Fund 1
------------------------------------------------------
One Group(R) U.S. Treasury Securities
Money Market Fund 2
------------------------------------------------------
One Group(R) Municipal Money Market Fund 3
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, 1-3 Market
STRIPS, and CUBES. The U.S. Treasury Securities
Money Market Fund does not buy STRIPS and CUBES.
-------------------------------------------------------------------------------
Treasury Receipts: TRs, TIGRS, and CATS. 1, 3 Market
-------------------------------------------------------------------------------
U.S. Government Agency Securities: Securities 1, 3 Market
issued by agencies and instrumentalities of the Credit
U.S. Government. These include Ginnie Mae, Fannie
Mae, and Freddie Mac.
-------------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments 1, 3 Market
with a stated maturity. Credit
Liquidity
-------------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a 1, 3 Liquidity
bank in exchange for the deposit of funds. Credit
Market
-------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security 1-3 Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price on Liquidity
an agreed upon date. This is treated as a loan.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 674
33
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reverse Repurchase Agreements: The sale of a 1, 2 Market
security and the simultaneous commitment to buy Leverage
the security back at an agreed upon price on an
agreed upon date. This is treated as a borrowing
by a Fund.
-------------------------------------------------------------------------------
Securities Lending: The lending of up to 33 1/3% 1 Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities and/or letters Leverage
of credit as collateral.
-------------------------------------------------------------------------------
When-Issued Securities and Forward Commitments: 1-3 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
Credit
-------------------------------------------------------------------------------
Investment Company Securities: Shares of other 1, 3 Market
money market mutual funds, including One Group
money market funds and shares of other money
market funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for
which it serves as investment advisor.
-------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate notes 1, 3 Market
which normally mature within a short period of Credit
time (e.g., 1 month) but which may be extended by Liquidity
the issuer for a maximum maturity of thirteen
months.
-------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time 1, 3 Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
-------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term 1, 3 Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
-------------------------------------------------------------------------------
Foreign Securities: Commercial paper of foreign 1, 3 Market
issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Liquidity
Foreign
Investment
-------------------------------------------------------------------------------
Restricted Securities: Securities not registered 1, 3 Liquidity
under the Securities Act of 1933, such as Market
privately placed commercial paper and Rule 144A
securities.
-------------------------------------------------------------------------------
</TABLE>
<PAGE> 675
34
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable and Floating Rate Instruments: 1, 3 Market
Obligations with interest rates which are reset Credit
daily, weekly, quarterly or some other period and Liquidity
which may be payable to the Fund on demand.
-------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1, 3 Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs") and Real Estate Mortgage Investment Regulatory
Conduits ("REMICs").
-------------------------------------------------------------------------------
Demand Features: Securities that are subject to 1, 3 Market
puts and standby commitments to purchase the Liquidity
securities at a fixed price (usually with accrued Management
interest) within a fixed period of time following
demand by a Fund.
-------------------------------------------------------------------------------
Municipal Securities: Securities issued by a state 1, 3 Market
or political subdivision to obtain funds for Credit
various public purposes. Municipal securities Political
include private activity bonds and industrial Tax
development bonds, as well as General Obligation Regulatory
Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, other
short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
-------------------------------------------------------------------------------
Short-Term Funding Agreements: Agreements issued 1 Market
by banks and highly rated insurance companies such Credit
as Guaranteed Investment Contracts ("GICs") and Liquidity
Bank Investment Contracts ("BICs").
-------------------------------------------------------------------------------
Participation Interests: Interests in municipal 1, 3 Credit Tax
securities, including municipal leases, from Market
financial institutions such as commercial and
investment banks, savings and loan associations
and insurance companies. These interests may take
the form of participations, beneficial interests
in a trust, partnership interests or any other
form of indirect ownership that allows the Funds
to treat the income from the investment as exempt
from Federal Income Tax.
-------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by 1, 3 Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
</TABLE>
<PAGE> 676
35
- --------------------------------------------------------------------------------
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.
<PAGE> 677
36
- 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.
<PAGE> 678
(Intentionally Left Blank)
<PAGE> 679
- --------------------------------------------------------------------------------
If you want more information about the Funds, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/annual reports or the SAI, request
other information or discuss your questions about the
Fund by calling 1 800-480-4111 or by writing the Funds
at:
ONE GROUP(R) MUTUAL FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-231 [ONE GROUP LOGO]
<PAGE> 680
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) REAL ESTATE FUND PROSPECTUS
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 681
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Real Estate Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 682
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP REAL ESTATE FUND
WHAT IS THE GOAL OF THE REAL ESTATE FUND?
The Fund seeks to provide current income and long-term growth of capital.
WHAT ARE THE REAL ESTATE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in equity securities of companies operating in the real
estate industry. "Real estate companies" are companies that earn at least 50% of
their revenues from owning, constructing, financing, managing, or selling
different types of real estate (i.e., commercial, residential, or industrial).
It also includes companies that have at least 50% of their assets in real
estate. These companies include real estate investment trusts or REITs. For more
information about the Real Estate Fund's investment strategies, please read
"More About the Funds" and "Principal Investment Strategies."
WHAT IS A REIT?
A REIT or a real estate investment trust is a pooled investment vehicle which
invests in income producing real estate or real estate loans. REITs are
classified as equity REITs, mortgage REITs, or a combination of equity and
mortgage REITs. Equity REITs mainly invest directly in real estate and obtain
income from the collecting rent. Mortgage REITS invest in mortgages and obtain
income from collecting interest payments on the mortgages. REITs are not taxed
on income distributed to shareholders if they comply with several requirements
of the Internal Revenue Code.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE REAL ESTATE FUND?
The main risks of investing in the Real Estate Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Real Estate Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Real Estate Fund.
Real Estate Securities: The Real Estate Fund's investments in real
estate securities are subject to the same risks as direct investments
in real estate. Real estate values rise and fall in response to many
factors, including local, regional and national economic conditions,
the demand for rental property, and interest rates. When economic
growth is slowing, demand for property decreases and prices may fall.
Rising interest rates, which drive up mortgage and financing costs,
can inhibit construction, purchases, and sales of property. Property
values could decrease because of overbuilding, extended vacancies,
increase in property taxes and operating expenses, zoning laws,
environmental regulations, clean-up of and liability for environmental
hazards, uninsured casualty or condemnation losses, or a general
decline in neighborhood values. The Fund's investments and your
investment may decline in response to declines in property values or
other adverse changes to the real estate market.
REIT Risk. In addition to the risks facing real estate securities, the
Real Estate Fund's investments in REITs involve unique risks. REITs
may have limited financial resources, may trade less frequently and in
limited volume and may be more volatile than other securities.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact on
smaller companies, there may be
3
<PAGE> 683
greater and more frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your investment in
the Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because of
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or real estate industry stock
prices in particular) may decline over short or extended periods of
time. When the value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities is dependent
upon the performance of underlying assets or securities. If the
underlying assets do not perform as expected, the value of the
derivative security and your investment in the Fund declines.
Derivatives are more volatile and are riskier in terms of both
liquidity and value than traditional investments.
Prepayment and Call Risk. As part of its main investment strategy, the
Fund invests in mortgage REITS. The issuers of these securities and
other callable securities may be able to repay principal in advance,
especially when interest rates fall. Changes in pre-payment rates can
affect return on investment and yield of mortgage REITs. When mortgage
and other obligations are pre-paid and when securities are called, the
Fund may have to reinvest in securities with a lower yield. The Fund
may also fail to recover premiums paid for the securities, resulting
in an unexpected capital loss.
Not Diversified. The Fund is considered non-diversified and can invest
more of its assets in securities of a single issuer than a
"diversified" fund. In addition, the Fund's investments are
concentrated in the real estate industry. This concentration increases
the risk of loss to the Fund by increasing its exposure to economic,
business, political or regulatory development that may be adverse to
the real estate industry.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The Fund began operations on ______________________and does not have a full
calendar year of investment returns at the date of this Prospectus.
4
<PAGE> 684
FEES AND EXPENSES OF THE REAL ESTATE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
Distribution [and/or .35% 1.00% 1.00% none
Service] (12b-1) Fees
Other Expenses .50% .50% .50% .50%
Total Annual Fund Operating 1.59% 2.24% 2.24% 1.24%
Expenses
Fee Waiver and/or Expense (.24%) (.14%) (.14%) (.14%)
Reimbursement(4)
Net Expenses 1.35% 2.10% 2.10% 1.10%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1. If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
2. Except for purchases of $1 million or more. Please see "Sales Charges."
3. Expense Information has been restated to reflect current fees.
4. Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.35% for Class A shares, 2.10% for Class B shares, 2.10%
for Class C shares, and 1.10% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 685
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the end of the end of
each period each period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $655 $213 $713 $213 $313 $112
3 Years $978 $687 $987 $687 $687 $380
5 Years $1,324 $1,187 $1,387 $1,187 $1,187 $668
10 Years $2,296 $2,400 $2,400 $2,564 $2,564 $1,488
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1. Without contractual fee waivers, 1 Year expenses would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Class A $678
Class B (no redemption) $227
Class B (with redemption) $727
Class C (no redemption) $227
Class C (with redemption) $327
Class I $126
</TABLE>
2. Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the number in the "10 years" example for Class B Shares represents a
combination of Class A and Class B operating expenses.
6
<PAGE> 686
MORE ABOUT THE FUND
The Fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that seeks to provide current income and
long-term growth of capital. The principal investment strategies that are used
to meet the Fund's investment objective are described in Fund Summary:
Investments, Risk, & Performance in the front of this prospectus. They are also
described below.
- The Fund normally invests at least 65% of its total assets in
equity securities of companies operating in the real estate
industry. These securities include common stocks and debt
securities and preferred stocks that are convertible to common
stocks.
- Up to 35% of the Fund's total assets may be invested in U.S.
government securities, other investment grade fixed income
securities, cash and cash equivalents, and equity securities of
companies outside the real estate industry.
- The Fund may also invest up to 25% of its net assets in the
securities of foreign issuers.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information. There can be
no assurance that the Fund will achieve its investment objectives.
INVESTMENT RISKS. The risks associated with investing in the Real Estate Fund
are described below and in Fund Summary: Investments, Risk, & Performance at the
front of this prospectus.
REAL ESTATE SECURITIES: The Fund generally is subject to the same risks that
affect direct investments in real estate and its performance is closely tied to
conditions affecting the real estate industry. Real estate values rise and fall
in response to a variety of factors, including local, regional and national
economic conditions, the strength of specific industries renting properties, and
other factors affecting supply and demand for properties. When economic growth
is slowing, demand for property decreases and prices may decline. Rising
interest rates, which drive up mortgage and financing costs, can restrain
construction and buying and selling activity and make other investments more
attractive. Property values could decrease because of overbuilding, extended
vacancies, increase in property taxes and operating expenses, changes in zoning
laws, environmental regulations, clean-up of and liability for environmental
hazards, uninsured casualty or condemnation losses, or a general decline in
neighborhood values. The value of securities of companies that service the real
estate industry will also be affected by changes affecting the real estate
market.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
7
<PAGE> 687
----------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
----------------------------------------------------------
For more information about risks associated with the types of investments that
the Real Estate Fund purchases, please read Fund Summary: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 25% of its total
assets would be invested in the securities of that issuer. This restriction
applies with respect to 50% of the Fund's total assets. With respect to the
remaining 50% of the Fund's total assets, it may not purchase an issuer's
securities if as a result more than 5% of its total assets would be
invested in the securities of that issuer. This does not include securities
issued or guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements involving these securities.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries (except the real estate industry). This does not include
obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities and repurchase agreements involving such securities.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE FUND'S SECURITIES
- - Corporate bonds generally will be rated in one of the three highest
investment grade categories.
- - Banc One Investment Advisors reserves the right to invest in corporate
bonds which present attractive opportunities and are rated in the lowest
investment grade category. These corporate bonds may be riskier than higher
rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
8
<PAGE> 688
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest all or most of its assets in cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Fund from
meeting its investment objectives.
-----------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are
purchased. They include securities issued by the U.S. Government,
its agencies and instrumentalities, repurchase agreements (other
than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two
highest rating categories), variable rate master demand notes,
and bank money market deposit accounts.
-----------------------------------------------------------------
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year. Higher portfolio
turnover rates will likely result in higher transaction costs to the Fund and
may result in additional tax consequences to you. To the extent portfolio
turnover results in short-term capital gains, such gains will generally be taxed
at ordinary income tax rates.
9
<PAGE> 689
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving, Christmas Eve, and
Christmas.
- - Purchase requests received by The One Group Services Company before 4 p.m.
Eastern Time ("ET") will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET
(i) on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. If you
intend to hold your shares for six or more years, Class B shares may be
more appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allow participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
10
<PAGE> 690
- NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each business
day following the close of the NYSE at 4:00 p.m. ET. On occasion,
the NYSE will close before 4 p.m. ET. When that happens, NAV will
be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides
information that can help you choose the appropriate share class.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State Street
Bank and Trust Company for the Benefit of (your name)."
If you choose to pay by wire, please call The One Group Services Company at
1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third party
checks." Checks made payable to any individual and endorsed to One Group
Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. Redemptions from a Fund will not be permitted for ten (10) calendar days if
purchases are made by check or under the Systematic Investment Plan (see
below).
7. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
11
<PAGE> 691
8. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- Authorize a bank transferor initiate a wire transfer to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Real Estate--A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible for
any loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25 per Fund. The One Group Services Company may
waive these minimums. To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the Account
Application Form.
- Provide the necessary information about the bank account from which
your investments will be made.
- Shares purchased under a Systematic Investment Plan may not be
redeemed for five (5) calendar days.
- One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for
debiting your bank account.
- You may revoke your right to make systematic investments by calling
The One Group Services Company at 1-800-480-4111 or by sending a
letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- After conversion, your shares will be subject to the lower
distribution and shareholder servicing fees charged on Class A shares.
12
<PAGE> 692
- You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
- Because the share price of the Class A shares may be higher than that
of the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources. The
tables below show the charges for each class of shares and the percentage of
your investment that is paid as a commission to a Shareholder Servicing Agent.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase and 0.50% of the purchase price if you redeem
within two years of purchase, unless The One Group Services Company
receives notice before you invest indicating that your Shareholder
Servicing Agent is waiving its commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
13
<PAGE> 693
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given month were made on
the first day of the month.
- The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
- No CDSC is imposed on share appreciation, nor is a CDSC assessed on
shares acquired through reinvestment of dividends or capital gains
distributions.
- To keep your CDSC as low as possible, the Fund first will redeem
the shares you have held for the longest time and thus have the
lowest CDSC.
- If you exchange Class B or Class C shares of an unrelated mutual
fund for Class B or Class C shares of One Group in connection
with a fund reorganization, the CDSC applicable to your original
shares (including the period of time you have held those shares)
will be applied to One Group shares you receive in the
reorganization.
12B-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
One Group to The One Group Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays all or part of the 12b-1
fee to Shareholder Servicing Agents that sell shares of One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net
assets of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to be
lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other expenses
paid to Shareholder Servicing Agents.
- The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the
last fiscal year, The One Group Services Company received 12b-1
fees totaling .25% and 1.00% of the average daily net assets of
Class A and Class B shares, respectively.
- The One Group Services Company may pay 12b-1 fees to its
affiliates and to Banc One Investment Advisors and its affiliates
(or any sub-advisor) for brokerage and other agency transactions.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
14
<PAGE> 694
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A, Class B
or Class C shares of a Fund (except a money market fund) that you (and your
spouse and minor children) already own to the amount of your next Class A
purchase for purposes of calculating the sales charge. An Intermediary also
may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased at
once. A percentage of your investment will be held in escrow until the full
amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
contact The One Group Services Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge has
been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- One Group.
- Bank One Corporation and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain accounts (other than
IRA Accounts) for which an Intermediary acts in a fiduciary, advisory,
agency, custodial or Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and
subsidiaries.
- Accounts as to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an agreement
with The One Group Services Company.
- Certain retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in
sections 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi
trusts."
- Shareholder Servicing Agents who have a dealer arrangement with The
One Group Services Company, who place trades for their own accounts or
for the accounts of their clients and who charge a management,
consulting or other fee for their services, as well as clients of such
Shareholder Servicing Agents who place trades for their own accounts
if the accounts are linked to the master account of such Shareholder
Servicing Agent.
15
<PAGE> 695
5. Bought with proceeds from the sale of Class I shares of a One Group Fund or
acquired in an exchange of Class I shares of a Fund for Class A shares of
the same Fund, but only if the purchase is made within 60 days of the sale
or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including a
One Group Fund, for which a sales charge was paid, but only if the purchase
is made within 60 days of the sale or distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the sale
or distribution and, at the time of the distribution, the employee benefit
plan had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12 month
period. Shares received from dividend and capital gains reinvestment are
included in calculating amounts eligible for this waiver. You need to
participate in the Systematic Withdrawal Plan to take advantage of this
waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one
year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
6. Exchanged for Class B shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need to participate in
the Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such as
401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled (as
defined by the Tax Code), but only if the redemption is made within one
year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or other
qualifying retirement plan, but only if you are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a party.
16
<PAGE> 696
6. Exchanged for Class C shares of other One Group Funds. However, you may pay
a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another One Group Fund, but
only if you are eligible to purchase those shares. Class B shares of a
Fund may be exchanged for Class B shares of another One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of
another One Group Fund.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
- You have provided One Group with all of the information necessary to
process the exchange.
- You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- You will pay a sales charge if you own Class I shares of a Fund and
you want to exchange those shares for Class A shares, unless you
qualify for a sales charge waiver (see above).
- You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales charge
applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that Fund's
sales charge and all other sales charges you have already paid.
- If you exchange Class B or Class C shares of a Fund, you will not pay
a sales charge at the time of the exchange, however:
17
<PAGE> 697
1. Your new Class B or Class C shares will be subject to the higher CDSC of
either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares is
carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- An exchange between Funds is considered a sale and generally results
in a capital gain or loss for Federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group
limits excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Funds are open for
business.
- Redemption requests received by The One Group Services Company
before 4:00 p.m. ET (or when the NYSE closes) will be effective
that day.
HOW DO I REDEEM SHARES?
- Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank
and Trust Company at the following address:
One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- All requests for redemptions from IRA accounts must be in writing.
- You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member
of a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
18
<PAGE> 698
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
- If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- Call your Shareholder Servicing Agent or The One Group Service Company
at 1-800-480-4111 to relay your redemption request.
- Your redemption proceeds will be mailed or wired to the commercial
bank account you designated on your Account Application Form.
- State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, One Group will not be responsible for
any loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- Specify the amount you wish to receive and the frequency of the
payments.
- You may designate a person other than yourself as the payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan. This
is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments are
limited to no more than 10% of your account value annually,
measured from the date you begin participating in the Plan.
Shares received from dividend and capital gains reinvestment are
included in calculating the 10%. The applicable Class B or Class
C sales charge is waived provided your withdrawals do not exceed
10% annually. Withdrawals in excess of 10% will subject the
entire annual withdrawal to the applicable sales load.
19
<PAGE> 699
3. If you are age 70 1/2, you may elect to receive payments to the extent that
the payment represents a minimum required distribution from an IRA or other
qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned by your
account since the previous payment under the Systematic Withdrawal Plan,
payments will be made by redeeming some of your shares. This will reduce
the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of the Fund's assets, the Fund reserves the right to
pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund will
value the securities selected in the same manner in which it computes NAV.
This process minimizes the effect of large redemptions on the Fund and its
remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not yet
received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - Because of the high cost of handling small investments, One Group charges a
sub-minimum account fee. Accounts under $1,000 that are not participating
in a Systematic Investment Plan will be assessed an annual fee of $10.00
per Fund. The sub-minimum account fee will not apply to IRA accounts and
the accounts of employees of Bank One Corporation and its affiliates.
- - One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
20
<PAGE> 700
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Fund generally declares dividends on the last business day of each quarter.
Dividends for the Fund are distributed on the first business day of the next
month after they are declared. Capital gains, if any, for the Fund are
distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street. You also may call The One Group Services
Company at 1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
21
<PAGE> 701
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for
tax-exempt treatment or by an individual who has received shares as a
distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Fund provides you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Fund or its shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
22
<PAGE> 702
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of the Fund. The Fund began operations on ______, 1999
and does not have a full fiscal year of advisory fees. Under the investment
advisory agreement with the Fund, Banc One Investment Advisors is entitled to a
fee, which is calculated daily and paid monthly. As the assets in the Fund
increase, the investment advisory fees for the Fund are reduced as follows:
First $1.5 billion .74%
Next $500 million .70%
Thereafter .65%
THE FUND MANAGERS
The Fund is managed by a team of Fund managers, research analysts, and other
investment management professionals. Each team member makes recommendations
about the securities in the Fund. The research analysts provide in-depth
industry analysis and recommendations, while the portfolio managers determine
strategy, industry weightings, Fund holdings, and cash positions.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
23
<PAGE> 703
This section normally would include Financial Highlights for the Fund. Because
the Fund has not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 704
APPENDIX A
----------
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
INSTRUMENT RISK TYPE
- ---------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
25
<PAGE> 705
INSTRUMENT RISK TYPE
- ---------- ---------
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of money market funds for which
Banc One Investment Advisors serves as investment
advisor or administrator. Banc One Investment Advisors
will waive certain fees when investing in funds for
which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
26
<PAGE> 706
INSTRUMENT RISK TYPE
- ---------- ---------
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and Market
non-convertible debt securities. Credit
ASSET-BACKED SECURITIES: Securities secured by Pre-payment
company receivables, home equity loans, truck and Market
auto loans, leases, credit card receivables and Credit
other securities backed by other types of Regulatory
receivables or other assets.
MORTGAGE DOLLAR ROLLS: A transaction in which Pre-payment
a Fund sells securities for delivery in a current Market
month and simultaneously contracts with the same Regulatory
party to repurchase similar but not identical
securities on a specified future date.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans Pre-payment
in a mortgage pool which provide for a fixed Market
initial mortgage interest rate for a Credit
specified period of time, after which the rate Regulatory
may be subject to periodic adjustments.
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the
cap or floor to the extent that a specified
index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - Credit Risk. The risk that the issuer of a security, or the counterparty
to a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
27
<PAGE> 707
- - Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also may
be embedded directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an opposite
position that the Fund also holds, any loss generated by the
derivative should be substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce or eliminate
losses, it can also reduce or eliminate gains. Hedges are sometimes
subject to imperfect matching between the derivative and underlying
security, and there can be no assurance that a Fund's hedging
transactions will be effective.
- Speculative. To the extent that a derivative is not used as a hedge,
the Fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivative's original cost.
- - Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
- - Management Risk. The risk that a strategy used by a Fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
- - Market Risk. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable. This is particularly
relevant to investments in foreign securities.
- - Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes in
tax or trade statutes, and governmental collapse and war.
- - Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the exchange
rates between the U.S. dollar and foreign currencies may negatively affect
an investment. Adverse changes in exchange rates may erode or reverse any
gains produced by foreign currency denominated investments and may widen
any losses. Exchange rate volatility also my affect the ability of an
issuer to repay U.S. dollar denominated debt, thereby increasing credit
risk.
- - Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when interest
rates decline. When mortgage and other obligations are pre-paid, a Fund may
have to reinvest in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium paid, resulting in an
unexpected capital loss.
- - Tax Risk. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
- Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption rights
after foreclosure, Federal and state bankruptcy and debtor relief laws,
restrictions on "due on sale" clauses, and state usury laws.
- - Zero Coupon Risk. The market prices of securities structured as zero
coupon or pay-in-kind securities are generally affected to a greater extent
by interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically.
28
<PAGE> 708
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Fund from the SEC's web site at
http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
29
<PAGE> 709
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TECHNOLOGY FUND PROSPECTUS
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 710
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Technology Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality
Temporary Defensive Positions
Portfolio Turnover
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Sales Charges
Sales Charge Reductions and Waivers
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Voting Rights
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquiries
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Advisory Fees
The Fund Managers
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
<PAGE> 711
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TECHNOLOGY FUND
WHAT IS THE GOAL OF THE TECHNOLOGY FUND?
The Fund is designed to provide long-term capital growth.
WHAT ARE THE TECHNOLOGY FUND'S MAIN INVESTMENT STRATEGIES?
The Fund mainly invests in equity securities of companies that have developed,
or are expected to develop, products, processes, or services that will provide
significant technological advances and improvements, as well as companies whose
processes or services will benefit from such advances and improvements. These
companies may include, for example, companies that develop, produce or
distribute products in the computer, electronics, communications, healthcare,
and biotechnology sectors. In selecting investments, Banc One Investment
Advisors searches for companies (regardless of size) whose stocks appear to be
trading below their true value. The Fund also will invest in companies that are
positioned for accelerated growth or higher earnings. For more information about
the Technology Fund's investment strategies, please read "More About the Fund"
and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TECHNOLOGY FUND?
The main risks of investing in the Technology Fund and the circumstances likely
to adversely affect your investment are described below. The share price of the
Technology Fund will change every day in response to interest rates and other
market conditions. You may lose money if you invest in the Technology Fund.
Securities Of Technology Companies: The Fund's performance is closely
tied to and affected by the technology sector. The stock price of
technology companies tends to be more volatile than the stock price of
companies in other industries. Competitive pressures also may have a
significant effect on the financial condition of technology-sensitive
companies. In addition, because of the rapid pace of technological
development, products and services produced by companies in which the
Fund invests may become obsolete or have relatively short product
cycles. As a result the Fund's returns may be considerably more
volatile than the returns of other mutual funds that do not invest in
companies in the technology sector.
Smaller Companies. The Fund's investments in smaller, newer companies
may be riskier than investments in larger, more established companies.
Small companies may be more vulnerable to economic, market, and
industry changes. Because economic events have a greater impact on
smaller companies, there may be greater and more frequent changes in
their stock price. This may cause unexpected and frequent decreases in
the value of your investment in the Fund.
Market Risk. The Fund invests in equity securities (such as stocks)
which are more volatile and carry more risks than some other forms of
investment. The price of equity securities may rise or fall because
economic or political changes or changes in a company's financial
condition. Equity securities are also subject to "stock market risk"
meaning that stock prices in general (or technology stock prices in
particular) may decline over short or extended periods of time. When
the value of the Fund's securities goes down, your investment in the
Fund decreases in value.
Derivative Risk. The Fund invests in securities that may be considered
to be DERIVATIVES. The value of derivative securities (like
mortgage-backed securities) is dependent upon the performance of
underlying assets or securities. If the underlying assets do not
perform as expected, the value of the derivative
3
<PAGE> 712
security and your investment in the Fund declines. Derivatives are more
volatile and are riskier in terms of both liquidity and value than
traditional investments.
Not Diversified. The Fund is considered non-diversified and can invest
more of its assets in securities of a single issuer than a
"diversified" fund. In addition, the Fund's investments are
concentrated in the technology sector. This concentration increases the
risk of loss to the Fund by increasing its exposure to economic,
business, political or regulatory developments that may be adverse to
the technology sector of the economy.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The Fund began operations on __, 1999 and does not have a full calendar year of
investment returns at the date of this Prospectus.
4
<PAGE> 713
FEES AND EXPENSES OF THE TECHNOLOGY FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>
- --------------------------------------------------- --------------- ------------- --------------- -----------------
SHAREHOLDER FEES (fees paid directly from your CLASS A CLASS B CLASS C CLASS I
investment)(1)
<S> <C> <C> <C> <C>
Maximum Sales Charge 5.25% none none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none(2) 5.00% 1.00% none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none none none
Exchange Fee none none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3)
Investment Advisory Fees 1.00% 1.00% 1.00% 1.00%
Distribution [and/or
Service] (12b-1) Fees .35% 1.00% 1.00% none
Other Expenses .50% .50% .50% .50%
Total Annual Fund Operating 1.85% 2.50% 2.50% 1.50%
Expenses
Fee Waiver and/or Expense (.30%) (.20%) (.20%) (.20%)
Reimbursement(4)
Net Expenses 1.55% 2.30% 2.30% 1.30%
- ----------------------------- --------------------- --------------- ------------- ------------- -------------------
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense Information has been restated to reflect current fees.
(4) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to 1.55% for Class A shares, 2.30% for Class B shares, 2.30%
for Class C shares, and 1.30% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 714
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR IF YOU CONTINUE
TO HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
<TABLE>
<CAPTION>
- ----------------- ---------------- -------------------------------- -------------------------------- ----------------
CLASS A CLASS B(2) CLASS C CLASS I
Assuming no Assuming Assuming no Assuming
redemption redemption at redemption redemption at
the the end of
end of each each period
period
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) $674 $233 $733 $233 $333 $132
3 Years $1,049 $760 $1,060 $760 $760 $454
5 Years $1,447 $1,313 $1,513 $1,313 $1,313 $800
10 Years $2,557 $2,661 $2,661 $2,821 $2,821 $1,773
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses would be as follows:
Class A $703
Class B (no redemption) $253
Class B (with redemption) $753
Class C (no redemption) $253
Class C (with redemption) $353
Class I $153
(2) Class B shares automatically convert to Class A shares after eight (8)
years. Therefore, the number in the "10 years" example for Class B Shares
represents a combination of Class A and Class B operating expenses.
6
<PAGE> 715
MORE ABOUT THE FUND
The Fund described in this Prospectus is a series of One Group Mutual Funds and
is managed by Banc One Investment Advisors Corporation. For more information
about One Group and Banc One Investment Advisors, please read "Management of One
Group Mutual Funds" and the Statement of Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
This Prospectus describes a mutual fund that is designed to provide long-term
growth of capital. The principal investment strategies that are used to meet the
Fund's investment objective are described in Fund Summary: Investments, Risk, &
Performance in the front of this prospectus. They are also described below.
- - The Fund normally invests at least 65% of its total assets in common and
preferred stocks, rights, warrants, convertible securities, and other
equity securities that develop or benefit from significant technological
advancements or improvements.
- - Up to 35% of the Fund's total assets may be invested in U.S. government
securities, other investment grade fixed income securities, cash and cash
equivalents, and equity securities of companies outside the technology
industry.
- - The Fund may also invest up to 25% of its net assets in the securities of
foreign issuers.
- - The Fund also may engage in securities lending.
- - Not all the securities purchased by the Fund will pay dividends.
There can be no assurance that the Fund will achieve its investment objectives.
Please note that the Fund may also use strategies that are not described below,
but which are described in the Statement of Additional Information..
INVESTMENT RISKS. The risks associated with investing in the Technology Fund are
described below and in Fund Summary: Investments, Risk, & Performance at the
front of this prospectus.
SECURITIES OF TECHNOLOGY COMPANIES: The Fund invests a significant portion of
its assets in the securities of companies in the technology sector. Because of
this focus, the Fund's performance is closely tied to and affected by this
sector. The stock price of technology companies tends to be more volatile than
the stock price of companies in other industries. Competitive pressures also may
have a significant effect on the financial condition of technology-sensitive
companies. For example, if technology continues to advance at an accelerated
rate, and the number of companies and product offerings continues to expand,
increasingly aggressive pricing may affect the profitability of companies in
which the Fund invests. In addition, because of the rapid pace of technological
development, products and services produced by companies in which the Fund
invests may become obsolete or have relatively short product cycles. As a result
the Fund's returns may be considerably more volatile than the returns of other
mutual funds that do not invest in securities of technology companies.
DERIVATIVES. The Funds may invest in securities that are considered to be
DERIVATIVES. These securities may be more volatile than other investments.
Derivatives present, to varying degrees, market, credit, leverage, liquidity,
and management risks. A Fund's use of derivatives may cause the Fund to
recognize higher amounts of short-term capital gains (generally taxed at
ordinary income tax rates) than if the Fund did not use such instruments.
------------------------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and options) that
derive their value from the performance of underlying assets or
securities.
------------------------------------------------------------------------
<PAGE> 716
For more information about risks associated with the types of investments that
the Technology Fund purchases, please read Fund Summary: Investments, Risk, &
Performance, Appendix A and the Statement of Additional Information.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 25% of its
total assets would be invested in the securities of that issuer. This
restriction applies with respect to 50% of the Fund's total assets.
With respect to the remaining 50% of the Fund's total assets, it may
not purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer. This
does not include securities issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase agreements involving
these securities.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries (except the technology sector). This does not include
obligations issued or guaranteed by the U.S. government or its agencies
and instrumentalities and repurchase agreements involving such
securities.
3. Make loans, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies;
(ii) enter into repurchase agreements; and (iii) engage in securities
lending.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO QUALITY. Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings to securities. Equity
securities, which will make up the bulk of the Fund's investments, are not rated
by rating organizations. Generally, ratings are divided into two main
categories: "Investment Grade Securities" and "Non-Investment Grade Securities."
Although there is always a risk of default, rating agencies believe that issuers
of Investment Grade Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include securities that, in the
opinion of the rating agencies, are more likely to default than Investment Grade
Securities. The Fund only purchases securities that meet the rating criteria
described below. Banc One Investment Advisors will look at a security's rating
at the time of investment. If the securities are unrated, Banc One Investment
Advisors must determine that they are of comparable quality to rated securities.
RATINGS OF THE FUND'S SECURITIES
- - Corporate bonds generally will be rated in one of the three highest
investment grade categories.
- - Banc One Investment Advisors reserves the right to invest in corporate
bonds which present attractive opportunities and are rated in the lowest
investment grade category. These corporate bonds may be riskier than higher
rated bonds.
For more information about ratings, please see "Description of Ratings" in the
Statement of Additional Information.
TEMPORARY DEFENSIVE POSITIONS To respond to unusual market conditions, the Fund
may invest all or most of its assets in Cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. These investments may result in a lower yield
than lower-quality or longer term investments and may prevent the Fund from
meeting its investment objectives.
8
<PAGE> 717
-----------------------------------------------------------------------
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high quality instruments with
maturities of three months or less on the date they are purchased.
They include securities issued by the U.S. Government, its agencies
and instrumentalities, repurchase agreements (other than equity
repurchase agreements), certificates of deposit, bankers' acceptances,
commercial paper (rated in one of the two highest rating categories),
variable rate master demand notes, and bank money market deposit
accounts.
-----------------------------------------------------------------------
PORTFOLIO TURNOVER.
The Fund may engage in active and frequent trading of portfolio securities to
achieve their principal investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a particular year. Higher portfolio
turnover rates will likely result in higher transaction costs to the Fund and
may result in additional tax consequences to you. To the extent portfolio
turnover results in short-term capital gains, such gains will generally be taxed
at ordinary income tax rates.
9
<PAGE> 718
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving, Christmas Eve, and
Christmas.
- - Purchase requests received by The One Group Services Company before 4 p.m.
Eastern Time ("ET") will be effective that day. On occasion, the NYSE will
close before 4 p.m. ET. When that happens, purchase requests received after
the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00 p.m.
ET (i) on the business day after the order is placed if you are buying
Class I shares, and (ii) on the third business day if you are purchasing
Class A, Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - When deciding what class of shares to buy, you should consider the amount
of your investment, the length of time you intend to hold the shares, and
the sales charges and expenses applicable to each class of shares. If you
intend to hold your shares for six or more years, Class B shares may be
more appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares. Sales
charges are discussed in the section of this prospectus entitled SALES
CHARGES.
One Group Fund Direct IRA and 403(b). One Group offers retirement plans. These
plans allows participants to defer taxes while their retirement savings grow.
Call The One Group Services Company at 1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
10
<PAGE> 719
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- A Fund's NAV changes every day. NAV is calculated each business
day following the close of the NYSE at 4:00 p.m. ET. On occasion,
the NYSE will close before 4 p.m. ET. When that happens, NAV will
be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 per Fund ($100 for employees
of Bank One Corporation and its affiliates). The minimum initial
investment for an IRA and 403(b) is $250.
- Subsequent investments must be at least $25 per Fund.
- You may purchase no more than $249,999 of Class B shares. This is
because Class A shares offer a reduced sales charge on purchases of
$250,000 or more and have lower expenses. The section of this
prospectus entitled WHAT KIND OF SHARES CAN I BUY? provides information
that can help you choose the appropriate share class.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire) payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
If you choose to pay by wire, please call The One Group Services
Company at 1-800-480-4111.
5. All checks must be in U.S. dollars. One Group does not accept "third
party checks." Checks made payable to any individual and endorsed to
One Group Mutual Funds are considered third party checks.
All checks must be payable to one of the following:
- One Group Mutual Funds;
- State Street Bank and Trust Company; or
- the specific Fund in which you are investing.
Checks made payable to any party other than those listed above will be
returned to the address provided on the account application.
6. Redemptions from a Fund will not be permitted for ten (10) calendar
days if purchases are made by check or under the Systematic Investment
Plan (see below).
11
<PAGE> 720
7. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
8. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- Authorize a bank transfer or initiate a wire transfer to the following
wire address:
State Street Bank and Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Technology --A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these
procedures are followed, One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000 per Fund, but
minimum automatic additions are only $25 per Fund. The One Group Services
Company may waive these minimums.
To establish a Systematic Investment Plan:
- Select the "Systematic Investment Plan" option on the Account
Application Form.
- Provide the necessary information about the bank account from which
your investments will be made.
- Shares purchased under a Systematic Investment Plan may not be redeemed
for five (5) calendar days.
- One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for
debiting your bank account.
- You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-4111 or by sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
12
<PAGE> 721
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
- You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
- Because the share price of the Class A shares may be higher than that
of the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
- If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of One Group Mutual Funds. Compensation comes from sales charges, 12b-1
fees and payments by The One Group Services Company from its own resources.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE COMMISSION
AS A % OF THE AS A % AS A %
AMOUNT OF PURCHASES OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------- -------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 4.75%
$50,000-$99,999 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged
the equivalent of 1% of the purchase price if you redeem any or all of
the Class A shares within one year of purchase and 0.50% of the
purchase price if you redeem within two years of purchase, unless The
One Group Services Company receives notice before you invest indicating
that your Shareholder Servicing Agent is waiving its commission.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
13
<PAGE> 722
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- No CDSC is not imposed on share appreciation, nor is a CDSC assessed on
shares acquired through reinvestment of dividends or capital gains
distributions.
- To keep your CDSC as low as possible, the Fund first will redeem the
shares you have held for the longest time and thus have the lowest CDSC.
- If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of One Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to One
Group shares you receive in the reorganization.
12b-1 FEES
Each One Group Fund has adopted a plan under Rule 12b-1 that allows it to pay
distribution and shareholder servicing fees for the sale and distribution of
shares of the Funds. These fees are called 12B-1 FEES. 12b-1 fees are paid by
One Group to The One Group Services Company as compensation for its services and
expenses. The One Group Services Company in turn pays all or part of the 12b-1
fee to Shareholder Servicing Agents that sell shares of One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets
of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the average
daily net assets of the Fund. This will cause expenses for Class B and
Class C shares to be higher and dividends to be lower than for Class A
shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company sell
Class B and Class C shares without an "up-front" sales charge by defraying
the costs of advancing brokerage commissions and other expenses paid to
Shareholder Servicing Agents.
- The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the
last fiscal year, The One Group Services Company received 12b-1 fees
totaling .25% and 1.00% of the average daily net assets of Class A
and Class B shares, respectively.
- The One Group Services Company may pay 12b-1 fees to its affiliates
and to Banc One Investment Advisors and its affiliates (or any
sub-advisor) for brokerage and other agency transactions.
- - Because 12b-1 fees are paid out of Fund assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
14
<PAGE> 723
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
your next Class A purchase for purposes of calculating the sales
charge. An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held in
escrow until the full amount covered by the Letter of Intent has been
invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
contact The One Group Services Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- One Group.
- Bank One Corporation and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with One Group
and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of One Group and such sub-advisor's
subsidiaries and affiliates.
4. Bought by:
- Affiliates of Bank One Corporation and certain accounts (other than IRA
Accounts) for which an Intermediary acts in a fiduciary, advisory,
agency, custodial or Accounts which participate in select affinity
programs with Bank One Corporation and its affiliates and subsidiaries.
- Accounts as to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an agreement
with The One Group Services Company.
- Certain retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in
sections 401(a), 403(b) or 457 of the Internal Revenue Code and "rabbi
trusts."
- Shareholder Servicing Agents who have a dealer arrangement with The One
Group Services Company, who place trades for their own accounts or for
the accounts of their clients and who charge a management, consulting
or other fee for their services, as well as clients of such Shareholder
Servicing Agents who place trades for their own accounts if the
accounts are linked to the master account of such Shareholder Servicing
Agent.
15
<PAGE> 724
5. Bought with proceeds from the sale of Class I shares of a One Group
Fund or acquired in an exchange of Class I shares of a Fund for Class A
shares of the same Fund, but only if the purchase is made within 60
days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund,
including a One Group Fund, for which a sales charge was paid, but only
if the purchase is made within 60 days of the sale or distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a One Group Fund.
8. Bought with assets of One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. If you withdraw no more than 10% of the value of your account in a 12
month period. Shares received from dividend and capital gains
reinvestment are included in calculating amounts eligible for this
waiver. You need to participate in the Systematic Withdrawal Plan to
take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Exchanged for Class B shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. If you withdraw no more than 10% of the value of your account. Shares
received from dividend and capital gains reinvestment are included in
calculating amounts eligible for this waiver. You need to participate
in the Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
16
<PAGE> 725
6. Exchanged for Class C shares of other One Group Funds. However, you may
pay a sales charge when you redeem the Fund shares you received in the
exchange. Please read Do I pay a Sales Charge on an Exchange?.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent. These waivers
will not continue indefinitely and may be discontinued at any time without
notice.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another One Group Fund.
- Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another One Group Fund, but
only if you are eligible to purchase those shares.
- Class B shares of a Fund may be exchanged for Class B shares of another
One Group Fund.
- Class C shares of a Fund may be exchanged for Class C shares of another
One Group Fund.
One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in the
Systematic Exchange Privilege, please select it on your account application. To
learn more about it, please call The One Group Services Company at
1-800-480-4111.
One Group does not charge a fee for this privilege. In addition, One Group may
change the terms and conditions of your exchange privileges upon 60 days written
notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
- You have provided One Group with all of the information necessary to
process the exchange.
- You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify
for a sales charge waiver (see above).
- You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them for
shares of a Fund that does, in which case you would pay the sales
charge applicable to the Fund into which you are exchanging.
2. That charged a lower sales charge than the Fund into which you are
exchanging, in which case you would pay the difference between that
Fund's sales charge and all other sales charges you have already paid.
- If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
17
<PAGE> 726
1. Your new Class B or Class C shares will be subject to the higher CDSC
of either the Fund from which you exchanged, the Fund into which you
exchanged, or any Fund from which you previously exchanged.
2. The current holding period for your exchanged Class B or Class C shares
is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity.
- Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Funds are open for
business.
- Redemption requests received by The One Group Services Company
before 4:00 p.m. ET (or when the NYSE closes) will be effective that
day.
HOW DO I REDEEM SHARES?
- Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- All requests for redemptions from IRA accounts must be in writing.
- You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in the
Securities Transfer Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
18
<PAGE> 727
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption proceeds
mailed or wired to:
1. a designated commercial bank; or
2. your Shareholder Servicing Agent.
- State Street Bank and Trust Company may charge you a wire redemption fee.
The current charge is $7.00.
- Your redemption proceeds will be paid within seven days after receipt of
the redemption request.
WHAT WILL MY SHARES BE WORTH?
- If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- Call your Shareholder Servicing Agent or The One Group Service Company at
1-800-480-4111 to relay your redemption request.
- Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- State Street Bank and Trust Company may charge you a wire redemption fee.
The current charge is $7.00.
- One Group uses reasonable procedures to confirm that instructions given by
telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, One Group will not be responsible for any loss, liability,
cost or expense of acting upon unauthorized or fraudulent instructions;
you bear the risk of loss.
- REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- Select the "Systematic Withdrawal Plan" option on the Account Application
Form.
- Specify the amount you wish to receive and the frequency of the payments.
- You may designate a person other than yourself as the payee.
- There is no charge for this service.
- If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10%of your account value annually,
measured from the date you begin participating in the Plan.
Shares received from dividend and capital gains reinvestment
are included in calculating the 10%. The applicable Class B or
Class C sales charge is waived provided your withdrawals do
not exceed 10% annually. Withdrawals in excess of 10% will
subject the entire annual withdrawal to the applicable sales
load.
19
<PAGE> 728
3. If you are age 70 1/2, you may elect to receive payments to
the extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by redeeming
some of your shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- Generally, all redemptions will be for cash. However, if you redeem shares
worth $500,000 or more of the Fund's assets, the Fund reserves the right
to pay part or all of your redemption proceeds in readily marketable
securities instead of cash. If payment is made in securities, the Fund
will value the securities selected in the same manner in which it computes
NAV. This process minimizes the effect of large redemptions on the Fund
and its remaining shareholders.
- If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds for 10 or more days until payment has been collected
from your bank.
- Because of the high cost of handling small investments, One Group charges
a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an annual
fee of $10.00 per Fund. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of Bank One Corporation and its
affiliates.
- One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- You generally will recognize a gain or loss on a redemption for
Federal income tax purposes. You should talk to your tax advisor
before making a redemption.
20
<PAGE> 729
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
The Fund generally declares dividends on the last business day of each quarter.
Dividends for the Fund are distributed on the first business day of the next
month after they are declared. Capital gains, if any, for the Fund are
distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You also may call The One Group Services Company
at 1-800-480-4111 to make this change.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, the excess of net short-term capital gains over
net long-term capital losses and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and distributions from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares. Distributions are taxable to you even if they are paid from
income or gains earned by a Fund prior to your investment (and thus were
included in the price you paid).
21
<PAGE> 730
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid in the previous year.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans generally will not be
taxable. However, if shares are held by a plan that ceases to qualify for
tax-exempt treatment or by an individual who has received shares as a
distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Fund provides you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Fund or its shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219, call
1-800-480-4111 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
22
<PAGE> 731
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group
Mutual Funds. Banc One Investment Advisors has served as investment advisor
to the Trust since its inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and individual corporate,
charitable, and retirement accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank One Corporation, managed
over $126 billion in assets.
ADVISORY FEES
Banc One Investment Advisors is paid a fee based on an annual percentage of the
average daily net assets of the Fund. The Fund began operations on ,
1999 and does not have a full fiscal year of advisory fees. Under the investment
advisory agreement with the Fund, Banc One Investment Advisors is entitled to a
fee, which is calculated daily and paid monthly, equal to 1.00% of the assets of
the Fund.
THE FUND MANAGERS
The Fund is managed by a team of Fund managers, research analysts, and other
investment management professionals. Each team member makes recommendations
about the securities in the Fund. The research analysts provide in-depth
industry analysis and recommendations, while the portfolio managers determine
strategy, industry weightings, Fund holdings, and cash positions.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
23
<PAGE> 732
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1999, there are no Financial
Highlights for the Fund.
24
<PAGE> 733
APPENDIX A
----------
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information.
Following the table is a more complete discussion of risk.
INSTRUMENT RISK TYPE
- ---------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments Market
with a stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by Liquidity
a bank in exchange for the deposit of funds. Credit
Market
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security Credit
and the simultaneous commitment to return the Market
security to the seller at an agreed upon price Liquidity
on an agreed upon date. This is treated as a loan.
REVERSE REPURCHASE AGREEMENTS: The sale of a security Market
and the simultaneous commitment to buy the security Leverage
back at an agreed upon price on an agreed upon
date. This is treated as a borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% Credit
of the Fund's total assets. In return the Fund Market
will receive cash, other securities, and/or Leverage
letters of credit as collateral.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Market
Purchase or contract to purchase securities Leverage
at a fixed price for delivery at a future date. Liquidity
Credit
INVESTMENT COMPANY SECURITIES: Shares of other Market
mutual funds, including One Group money market
funds and shares of other money market funds
for which Banc One Investment Advisors serves as
25
<PAGE> 734
INSTRUMENT RISK TYPE
- ---------- ---------
investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as
investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock Market
that convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer Management
the right to buy, and obligates the seller of the Liquidity
option to sell, a security at a specified price. A Credit
put option gives the buyer the right to sell, and Market
obligates the seller of the option to buy, a security Leverage
at a specified price. The Funds will sell only
covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing Management
for the future sale and purchase of a specified Market
amount of a specified security, class of securities, Credit
or an index at a specified time in the future and Liquidity
at a specified price. Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled Liquidity
investment vehicles which invest primarily in Management
income producing real estate or real estate Market
related loans or interest. Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time Credit
drafts drawn on and accepted by a commercial bank. Liquidity
Maturities are generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other Liquidity
entities. Maturities generally vary from a few Market
days to nine months.
FOREIGN SECURITIES: Stocks issued by foreign companies, Market
as well as commercial paper of foreign issuers Political
and obligations of foreign banks, overseas branches Liquidity
of U.S. banks and supranational entities. Includes Foreign Investment
American Depository Receipts.
RESTRICTED SECURITIES: Securities not registered Liquidity
under the Securities Act of 1933, such as privately Market
placed commercial paper and Rule 144A securities.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations Credit
with interest rates which are reset daily, weekly, Liquidity
quarterly or some other period and which may be Market
payable to the Fund on demand.
WARRANTS: Securities, typically issued with Market
preferred stock or bonds, that give the holder Credit
the right to buy a proportionate amount of
common stock at a specified price.
PREFERRED STOCK: A class of stock that Market
generally pays a dividend at a specified rate
and has preference over common stock in
26
<PAGE> 735
INSTRUMENT RISK TYPE
- ---------- ---------
the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations Pre-payment
secured by real estate loans and pools of loans. Market
These include collateralized mortgage obligations Credit
("CMOs"), Real Estate Mortgage Investment Conduits Regulatory
("REMICs") and Stripped Mortgage-Backed Securities
("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and Market
non-convertible debt securities. Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into Management
these transactions to manage its exposure to Credit
changing interest rates and other factors. Swaps Liquidity
involve an exchange of obligations by two Market
parties. Caps and floors entitle a purchaser
to a principal amount from the seller of the
cap or floor to the extent that a specified
index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures Management
contracts and other financial products continue Credit
to be developed and the Funds may invest in such Market
options, contracts and products. Liquidity
INDEX SHARES: Ownership interest in unit investment trusts Market
and other pooled investment vehicles that hold a portfolio
of securities or stocks designed to track the price performance
and dividend yield of a particular index including Standard
& Poor's Depository Receipts ("SPDRs") and Nasdaq-100s.
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
- - Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the Fund also holds, any loss generated
by the derivative should be substantially offset by gains on
the hedged investment, and vice versa. While hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
Hedges are sometimes subject to imperfect matching between the
derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a
hedge, the Fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
- - Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities
<PAGE> 736
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the
risk of missing out on an investment opportunity because the assets
necessary to take advantage of it are tied up in less advantageous
investments.
- - Management Risk. The risk that a strategy used by a Fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
- - Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
- - Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
- - Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also my
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- - Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- - Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor
relief laws, restrictions on "due on sale" clauses, and state usury
laws.
- - Zero Coupon Risk. The market prices of securities structured as zero
coupon or pay-in-kind securities are generally affected to a greater
extent by interest rate changes. These securities tend to be more
volatile than securities which pay interest periodically.
28
<PAGE> 737
If you want more information about the Fund, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1 800-480-4111 or by writing the Fund at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Fund's reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Fund from the SEC's web site at
http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
29
<PAGE> 738
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP(R) TAX-EXEMPT MONEY MARKET FUND
NOVEMBER 1, 1999
The Securities and Exchange
Commission has not approved or
disapproved the shares of any of the Funds
as an investment or determined whether
this prospectus is accurate or
complete. Anyone who tells
you otherwise is committing
a crime.
<PAGE> 739
TABLE OF CONTENTS
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
One Group Tax-Exempt Money Market Fund
MORE ABOUT THE FUND
Principal Investment Strategies
Investment Risks
Investment Policies
Portfolio Quality and Maturity
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares
Exchanging Fund Shares
Redeeming Fund Shares
SHAREHOLDER INFORMATION
Shareholder Information
Dividend Policies
Tax Treatment of Shareholders
Shareholder Inquires
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor
Year 2000 Readiness Disclosure
FINANCIAL HIGHLIGHTS
APPENDIX A: INVESTMENT PRACTICES
2
<PAGE> 740
FUND SUMMARIES: INVESTMENTS, RISK & PERFORMANCE
ONE GROUP TAX-EXEMPT MONEY MARKET FUND
WHAT IS THE GOAL OF THE TAX-EXEMPT MONEY MARKET FUND?
The Fund seeks as high a level of current interest income free of Federal income
tax as is consistent with the preservation of capital, maintenance of liquidity
and relative stability of principal.
WHAT ARE THE TAX-EXEMPT MONEY MARKET FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests exclusively in high quality, short-term money market
instruments. These instruments consist primarily of municipal securities,
certificates of deposit and commercial paper. The Fund will comply with
Securities and Exchange ("SEC") rules applicable to all money market funds,
including Rule 2a-7 under the Investment Company Act of 1940. The Fund will
concentrate its investments in the financial services industry. For more
information about the Tax-Exempt Money Market Fund's investment strategies,
please read "More About the Funds" and "Principal Investment Strategies."
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds and notes issued by states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from Federal income tax. The securities are
issued to raise funds for various public and private purposes.
HOW WILL MY INVESTMENT BE TAXED?
Up to 20% of the Fund's assets may be invested in municipal securities, the
interest on which may be subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal alternative minimum tax
may have all or a portion of their income from the Fund subject to Federal
income tax. In addition, corporate shareholders will be required to take the
interest on municipal securities into account in determining their alternative
minimum taxable income.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE TAX-EXEMPT MONEY MARKET FUND?
The main risks of investing in the Tax-Exempt Money Market Fund and the
circumstances likely to adversely affect your investment are described below.
Before you invest, please read "More About One Group Mutual Funds" and
"Investment Risks."
Credit Risk. Because the Fund only invests in high quality obligations
and limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, if an issuer fails to pay interest or
principal, the value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed by "credit
enhancements" such as letters of credit, the value of your investment
in the Fund also could decrease if the value of the securities in the
portfolio decreases in response to the declining credit quality of a
credit enhancement provider.
Interest Rate Risk. The yield paid by the Fund will increase or
decrease with changes in short-term interest rates.
Net Asset Value. There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per
share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a deposit of Bank
One Corporation or any of its subsidiaries and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
3
<PAGE> 741
governmental agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
HOW HAS THE TAX-EXEMPT MONEY MARKET FUND PERFORMED?
The Tax-Exempt Money Market Fund was not in operation as of June 30, 1998.
Therefore, the performance that normally would be provided in this section is
unavailable. However, to obtain the Fund's current yield information, please
call toll-free 1-877-691-1118.
4
<PAGE> 742
FEES AND EXPENSES OF THE TAX-EXEMPT MONEY MARKET FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
- --------------------------------------------------------------------------------
Shareholder Fees (fees paid directly from your CLASS I CLASS S
investment)(1) ------- -------
Maximum Sales Charge none none
(Load) Imposed on Purchases
(as a percentage of
offering price)
Maximum Deferred Sales none none
Charge (Load)(as a
percentage of original
purchase price of
redemption proceeds, as
applicable)
Redemption Fee none none
Exchange Fee none none
ANNUAL FUND OPERATING EXPENSES (expenses .10% .10%
that are deducted from Fund assets)
Investment Advisory Fees
Distribution [and/or none none
Service] (12b-1) Fees
Other Expenses .18% .40%
Total Annual fund Operating .25% .50%
Expenses
Fee Waiver and/or Expense (.07%) (.15%)
Reimbursement(2)
.18% .35%
Net Expenses
- ----------------------------- --------------------- ------------- --------------
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may be
charged separate transaction fees by the Shareholder Servicing Agent. In
addition, an annual $10.00 sub-minimum account fee may be applicable and a $7.00
charge may be deducted from redemption amounts paid by wire.
(2) Banc One Investment Advisors Corporation and The One Group Services Company
have agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses to .18% for Class I shares and .35% for Class S shares for
the period beginning November 1, 1999 and ending on October 31, 2000.
5
<PAGE> 743
EXAMPLE: THE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN
THE FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLES ASSUME
THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND REFLECT
WHAT YOU WOULD PAY IF YOU EITHER REDEEMED ALL OF YOUR SHARES OR CONTINUED TO
HOLD THEM AT THE END OF THE PERIODS SHOWN. THE EXAMPLES ALSO ASSUME THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN
BELOW. THERE IS NO SALES CHARGE (LOAD) ON REINVESTED DIVIDENDS.
- -------------------- ------------------ -------------------
CLASS I CLASS S
- -------------------- ------------------ -------------------
1 Year(1) $ 18 $ 36
3 Years $ 73 $145
5 Years $134 $264
10 Years $311 $613
- ----------------------------- -----------------------------
1 Without contractual fee waivers, 1 Year expenses for Class I shares would be
$26 and for Class S shares would be $51.
6
<PAGE> 744
MORE ABOUT THE FUND
The fund described in this Prospectus is a series of One Group Mutual Funds
("One Group") and is managed by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors"). For more information about One Group and Banc One
Investment Advisors, please read "Management of the Funds" and the Statement of
Additional Information.
PRINCIPAL INVESTMENT STRATEGIES
The mutual fund described in this Prospectus are designed to produce high
current interest income free of Federal tax consistent with the preservation of
capital, maintenance of liquidity and stability of principal. The principal
investment strategies that are used to meet the Fund's investment objective are
described in Fund Summaries: Investments, Risk & Performance in the front of
this Prospectus. They are also described below.
There can be no assurance that the Fund will achieve its investment objective.
Please note that the Fund also may use strategies that are not described below,
but which are described in the Statement of Additional Information.
ONE GROUP TAX-EXEMPT MONEY MARKET FUND. The Fund invests only in U.S.
dollar denominated securities.
- The average maturity on a dollar-weighted basis of the securities
held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days or less.
- The Fund will acquire only those securities that present minimal
credit risks.
- The Fund invests exclusively in money market instruments. These
include, but are not limited to:
1. U.S. Treasury obligations and obligations issued or
guaranteed by U.S. agencies or instrumentalities.
2. mortgage backed securities.
3. commercial paper.
4. bank obligations and deposit notes.
5. notes/bonds.
6. medium term notes.
7. funding agreements.
8. domestic or Yankee or Euro certificates of deposit.
- The Fund will purchase municipal securities only if the issuer
receives assurances from its legal counsel that the interest
payable on the securities is exempt from Federal personal income
tax.
- The Fund invests at least 80% of its net assets in municipal
securities.
----------------------------------------------------------------------
What is Average Weighted Maturity?
Average weighted maturity is the average of all the current maturities
(that is, the term of the securities) of the individual securities in
a fund. Average weighted maturity is important to investors as an
indication of a fund's sensitivity to changes in interest rates. The
longer the average weighted maturity, the more fluctuation in yield
you can expect.
----------------------------------------------------------------------
INVESTMENT RISKS
The main risks associated with investing in the Tax-Exempt Money Market Fund are
described in the Fund Summaries: Investments, Risk & Performance in the front of
this Prospectus. Additional risks are described below.
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
7
<PAGE> 745
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
PREPAYMENT AND CALL RISK: As part of its investment strategy, the Tax-Exempt
Money Market Fund invests in mortgage-backed and asset-backed securities. These
securities are subject to prepayment and all risks. The issuers of these
securities may be able to repay principal early, especially when interest rates
fall. Changes in prepayment rates can affect the return on investment and yield
of mortgage-backed and asset-backed securities volatile. When obligations are
prepaid, the Fund may have to reinvest in securities with lower yields. The Fund
may fail to recover premiums paid for the securities, resulting in an unexpected
capital loss.
DERIVATIVES. The Tax-Exempt Money Market Fund may invest in securities that are
considered to be DERIVATIVES. These securities may be more volatile than other
investments. Derivatives present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
---------------------------------------------------------
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts (like futures and
options) that derive their value from the performance of
underlying assets or securities.
---------------------------------------------------------
For more information about risks associated with the types of investments that
the Institutional Money Market Funds purchase, please read the Fund Summaries:
Investments, Risk & Performance, Appendix A and the Statement of Additional
Information.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund:
1. Will use its best efforts to maintain a constant net asset value of
$1.00 per share, although there is no guarantee that the Funds will be
able to do so.
2. Will not purchase the securities of an issuer if as a result more than
5% of its total assets would be invested in the securities of that
issuer or the Fund would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities, and
repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets. The Funds may
invest the remaining 25% of their total assets without regard to this
restriction as permitted by applicable law.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net assets.
4. Will not borrow money or issue senior securities, except that the Funds
may borrow from banks for temporary purposes in amounts not exceeding
10% of their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in
connection with borrowing specified in 4 above and in amounts not in
excess of the lesser of the dollar amount borrowed or 10% of the value
of the respective Fund's total assets at the time of its borrowing.
8
<PAGE> 746
6. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include obligations issued or
guaranteed by the U. S. government or its agencies or
instrumentalities, domestic bank certificates of deposit or banker's
acceptances, and repurchase agreements involving such securities,
municipal securities or governmental guarantees of municipal
securities. In addition, private activity bonds backed only by the
revenues and assets of a non-governmental user will not be deemed to be
municipal securities
Additional investment policies can be found in the Statement of Additional
Information.
ILLIQUID INVESTMENTS. The Fund may invest up to 10% of its net assets in
illiquid investments. A security is illiquid if it cannot be sold at
approximately the value assessed by the Fund within seven (7) days. Banc One
Investment Advisors will follow guidelines adopted by the Board of Trustees of
One Group Mutual Funds in determining whether an investment is illiquid.
PORTFOLIO QUALITY AND MATURITY. The quality and maturity of money market funds
are subject to SEC rules. Quality is generally restricted to the two highest
short term ratings or their equivalent. Maturity is limited both as to total
portfolio average and as to each individual security. With respect to portfolio
average, the rules limit the Fund's average weighted maturity to 90 days. With
respect to each individual security, remaining maturity is restricted to 397
days at acquisition. Moreover, the SEC rules limit exposure to a single issuer
to 5% of a money market fund's assets (although there is no limit on government
securities).
9
<PAGE> 747
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHO MAY PURCHASE FUND SHARES?
Fund shares may be purchased by:
- - Institutional investors and other accredited investors, including
affiliates of BANK ONE CORPORATION, that have opened accounts with the
Fund's transfer agent, State Street Bank and Trust Company, either
directly or through a Shareholder Servicing Agent.
- - If you have questions about eligibility, please call The One Group
Services Company at 1-877-691-1118.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving, Christmas Eve and Christmas.
- - Purchase requests will be effective on the day received by The One
Group Services Company and you will be eligible to receive dividends
declared the same day, if such purchase orders are received by The One
Group Services Company before 5:00 p.m. ET.
- - In addition, the Fund's custodian, State Street Bank and Trust Company,
must receive "federal funds" before 4:00 p.m. ET, on such day. If State
Street Bank and Trust Company does not receive federal funds by the
cut-off time, the purchase order will not be effective until the next
business day on which federal funds are timely received by State Street
Bank and Trust Company.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or
shareholders to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
10
<PAGE> 748
WHAT KIND OF SHARES CAN I BUY?
One Group offers the following classes of shares:
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We refer to these entities as "Intermediaries".
- - Class S shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional services.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
- - NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets (minus expenses) by the number of
outstanding shares. The Fund uses its best efforts to maintain its NAV
at $1.00, although there is no guarantee that it will be able to do so.
- - NAV is calculated each business day as of 5:00 p.m. ET.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000. You also must
maintain a minimum account balance of $1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and authorize a bank transfer or
initiate a wire transfer payable to "One Group" to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
5. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
6. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-877-691-1118.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-877-691-1118 to relay your purchase instructions.
11
<PAGE> 749
- - Authorize a bank transfer or initiate a wire transfer payable to "One
Group" to State Street Bank and Trust Company to the following wire
address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO One Group Fund (ex: One Group Institutional Prime Money Market
Fund)
Your Account Number (ex: 123456789)
Your Account Registration (ex: ABC Corporation)
- - One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these
procedures are followed, One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may exchange your shares for shares of any other One Group Institutional
Money Market Fund.
- - One Group may change the terms and conditions of your exchange
privileges upon 60 days written notice.
- - One Group Funds offers a Systematic Exchange Privilege which allows you
to automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in Dollar Cost Averaging. To
participate in the Systematic Exchange Privilege, please select it on
your account application. To learn more about it, please call The One
Group Services Company at 1-877-691-1118.
- - One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 3:00 p.m.
ET.
- - You have provided One Group with all of the information necessary to
process the exchange.
- - You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between Funds is considered a sale and may result in a
capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
12
<PAGE> 750
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, One Group limits
excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- - In addition, One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Fund is open for
business.
- - Redemption requests received by The One Group Services Company before
5:00 p.m. ET will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
State Street Bank and Trust Company
c/o One Group
P.O. Box 8528
Boston, MA 02266-8528
- - You may request redemption forms by calling The One Group Services
Company at 1-877-691-1118
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a participant in the
Securities Transfer Association Medallion Program or the Stock Exchange
Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. A designated commercial bank; or
2. Your Shareholder Servicing Agent.
13
<PAGE> 751
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. If you have wire instructions
on file, the Fund will attempt to honor requests for same day payment
if the request is received before 5:00 p.m. ET. If redemption requests
are received after those times, the Fund will attempt to wire payment
the next business day.
WHAT WILL MY SHARES BE WORTH?
- - The NAV of shares of the Fund is expected to remain constant at $1.00
per share, although there is no assurance that this will always be the
case.
- - You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or The One Group Services Company
at 1-877-691-1118 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- - One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these
procedures are followed, One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - Generally, all redemptions will be for cash. However, if you redeem
shares worth 3% or more of the Fund's assets, the Fund reserves the
right to pay part or all of your redemption proceeds in readily
marketable securities instead of cash. If payment is made in
securities, the Fund will value the securities selected in the same
manner in which it computes its NAV. This process minimizes the effect
of large redemptions on the Fund and its remaining shareholders.
- - If you redeem shares for which you paid by check, and One Group has not
yet received payment on the check, One Group will delay forwarding your
redemption proceeds until payment has been collected from your bank.
- - One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this process.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax adviser before making
a redemption.
14
<PAGE> 752
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS
Dividends payable on Class I shares will be more than those payable on Class S
shares. This is because Class S shares have higher expenses.
The Fund generally declares dividends each business day. Dividends are
distributed on the first business day of the next month after they are declared.
Capital gains, if any, for the Fund are distributed at least annually.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street. You may change the way you receive dividends and
distributions by calling The One Group Services Company at 1-877-691-1118.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions. Reinvested dividends and distributions receive the same tax
treatment as dividends and distributions paid in cash.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income. The
Fund may pay "exempt-interest dividends" if at least 50% of the value of Fund
assets at the end of each quarter of the Fund's taxable year consists of
obligations the interest on which is excludable from gross income.
Exempt-interest dividends are generally excludable from an investor's gross
income for regular Federal income tax purposes. However, the receipt of
exempt-interest dividends may cause recipients of Social Security or Railroad
Retirement benefits to be taxed on a portion of such benefits. In addition, the
receipt of exempt-interest dividends may result in liability for Federal
alternative minimum tax and for federal state and local taxes, both for
individuals and corporate shareholders. Corporate shareholders will be required
to take the interest on municipal securities into account in determining their
alternative minimum taxable income
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
15
<PAGE> 753
TAX INFORMATION
The Form 1099 that is mailed to eligible taxpayers in January details dividends
and their federal tax category. Even though the Fund provides this information,
you are responsible for verifying your tax liability with your tax professional.
For additional tax information see the Statement of Additional Information.
Please note that this tax discussion is general in nature; no attempt has been
made to present a complete explanation of the Federal, state, local or foreign
tax treatment of the Fund or its shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219, call
1-877-691-1118 or visit www.onegroup.com.
REPORTING
In March and September you will receive a financial report from One Group. In
addition, One Group will periodically send you proxy statements and other
reports.
16
<PAGE> 754
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
THE ADVISOR
Banc One Investment Advisors (1111 Polaris Parkway, P.O. Box 71021, Columbus,
Ohio 43271-0211) makes the day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each Fund's investment program.
Banc One Investment Advisors performs its responsibilities subject to the
supervision of, and policies established by, the Trustees of One Group Mutual
Funds. Banc One Investment Advisors has served as investment advisor to One
Group Mutual Funds since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of June 30, 1999, Banc One
Investment Advisors, an indirect wholly-owned subsidiary of Bank One
Corporation, managed over $126 billion in assets.
YEAR 2000 READINESS DISCLOSURE
The services provided to One Group by Banc One Investment Advisors and other
service providers (including foreign sub-custodians and depositories) are
dependent on those service providers' computer systems. Many computer software
and hardware systems in use today cannot distinguish between the year 2000 and
the year 1900 because of the way dates are encoded and calculated (the "Year
2000 Issue"). The failure to make this distinction could have a negative
implication on handling securities, trades, pricing and account services. Banc
One Investment Advisors and One Group's other service providers are taking steps
that each believes are reasonably designed to address the Year 2000 Issue with
respect to the computer systems they use. The Funds have no reason to believe
these steps will not be sufficient to avoid any material adverse impact on One
Group, although there can be no assurances. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to Banc One
Investment Advisors and One Group's other service providers at this time but
could have a material adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and One Group's other
service providers.
In addition, companies in which the Fund invests may experience Year 2000
problems. Foreign issuers, especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These problems could negatively
affect the value of the issuer's securities, which in turn could impact the
Fund's performance.
17
<PAGE> 755
APPENDIX A
----------
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, please see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ---------- ---------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. Market
TREASURY RECEIPTS: TRs, TIGRS, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and Market
instrumentalities of the U.S. Government. These include Ginnie Mae, Credit
Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange Liquidity
for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous Credit
commitment to return the security to the seller at an agreed upon price Market
on an agreed upon date. This is treated as a loan. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other money market mutual funds, Market
including One Group money market funds and shares of other money market
mutual funds for which Banc One Investment Advisors serves as investment advisor
or administrator. Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
EXTENDABLE COMMERCIAL NOTES: Variable rate notes which normally mature Market
within a short period of time (e.g., 1 month) but which may be extended Credit
by the issuer for a maximum maturity of thirteen months. Liquidity
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted Credit
by a commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes Credit
issued by corporations and other entities. Maturities generally vary Liquidity
from a few days to nine months. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and obligations Market
of foreign banks, overseas branches of U.S. banks and Political
supranational entities. Liquidity
Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act Liquidity
of 1933, such as privately placed commercial paper and Rule 144A securities. Market
</TABLE>
19
<PAGE> 756
<TABLE>
<S> <C>
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with interest rates Market
which are reset daily, weekly, quarterly or some other period and Credit
which may be payable to the Fund on demand. Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans Pre-Payment
and pools of loans. These include collateralized mortgage obligations ("CMOs") Market
and Real Estate Mortgage Investment Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments Market
to purchase the securities at a fixed price (usually with accrued interest) Liquidity
within a fixed period of time following demand by a Fund. Management
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain Market
funds for various public purposes. Municipal securities include private Credit
activity bonds and industrial development bonds, as well as General Obligation Political
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Tax
Notes, other short-term tax-exempt obligations, municipal leases, and Regulatory
obligations of municipal housing authorities and single family revenue bonds.
PARTICIPATION INTERESTS: Interests in municipal securities, including municipal Credit
leases, from financial institutions such as commercial and investment Tax
banks, savings and loan associations and insurance companies. These Market
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that allows
the Funds to treat the income from the investment as exempt from Federal Income
Tax.
ASSET-BACKED SECURITIES: Securities secured by company receivables, Pre-payment
home equity loans, truck and auto loans, leases, credit card receivables Market
and other securities backed by other types of receivables Credit
or other assets. Regulatory
</TABLE>
20
<PAGE> 757
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these risks
than others.
- - CREDIT RISK. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price and liquidity of a security
can be adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - FOREIGN INVESTMENT RISK. Risks associated with higher transaction
costs, delayed settlements, currency controls, and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also may
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
- - LEVERAGE RISK. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
- - MARKET RISK. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There also is the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable.
- - POLITICAL RISK. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early repayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- - REGULATORY RISK. The risk associated with Federal and state laws which
may restrict the remedies that a lender has when a borrower defaults on
loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor
relief laws, restrictions on "due on sale" clauses, and state usury
laws.
21
<PAGE> 758
- - TAX RISK. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
22
<PAGE> 759
If you want more information about the Funds, the following documents are free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
each Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI provides more detailed
information about the Funds and is incorporated into this prospectus by
reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy of the semiannual/annual
reports or the SAI, request other information or discuss your questions about
the Fund by calling 1-800-480-4111 or by writing the Funds at:
One Group(R) Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
You can also review and copy the Funds' reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission ("SEC"). (For
information about the SEC's Public Reference Room call 1-800-SEC-0330). You can
also get reports and other information about the Funds from the SEC's web site
at http://www.sec.gov or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
23
<PAGE> 760
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
One Group(R) Prime Money Market Fund
One Group(R) Bond Fund
One Group(R) Mid Cap Growth Fund
One Group(R) Large Cap Growth Fund
One Group(R) Diversified Equity Fund
One Group(R) Equity Index Fund
One Group(R) Investor Growth & Income Fund
One Group(R) Investor Conservative Growth Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SHARES OF ANY OF THE FUNDS AS AN INVESTMENT
OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIME.
FOR USE BY BANK ONE CORPORATION SAVINGS AND INVESTMENT PLAN
<PAGE> 761
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARIES: INVESTMENTS, RISKS & PERFORMANCE
One Group Prime Money Market Fund 2
---------
One Group Bond Fund 6
---------
One Group Mid Cap Growth Fund 10
---------
One Group Large Cap Growth Fund 14
---------
One Group Diversified Equity Fund 18
---------
One Group Equity Index Fund 22
---------
One Group Investor Growth & Income Fund 26
---------
One Group Investor Conservative Growth Fund 30
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUNDS
Principal Investment Strategies 34
---------
Investment Risks 38
---------
Investment Policies 40
---------
Portfolio Quality 41
---------
Temporary Defensive Positions 43
---------
Portfolio Turnover 43
---------
</TABLE>
<TABLE>
<C> <S>
HOW TO DO BUSINESS WITH ONE GROUP MUTUAL FUNDS
Purchasing Fund Shares 44
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 44
---------
Dividend Policies 45
---------
Tax Treatment of Shareholders 45
---------
Shareholder Inquiries 45
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 46
---------
The Fund Managers 47
---------
Year 2000 Readiness Disclosure 47
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 48
---------
APPENDIX A: INVESTMENT PRACTICES 56
---------
</TABLE>
<PAGE> 762
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 763
2
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Prime Money
Market Fund
WHAT IS THE GOAL OF THE
PRIME MONEY MARKET
FUND? The Fund seeks current income with liquidity and
stability of principal.
WHAT ARE THE PRIME
MONEY MARKET FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests exclusively in high quality, short-term
money market instruments. These instruments include
corporate notes, commercial paper, funding agreements,
certificates of deposit, bank obligations and deposit
notes. The Fund will concentrate in the financial
services industry, including asset-backed commercial
paper programs. The Fund will comply with SEC rules
applicable to all money market funds, including Rule
2a-7 under the Investment Company Act of 1940. For more
information about the Prime Money Market Fund's
investment strategies, please read "More About the
Funds" and "Principal Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
PRIME MONEY MARKET
FUND? The main risks of investing in the Prime Money Market
Fund and the circumstances likely to adversely affect
your investment are described below. Before you invest,
please read "More About the Funds" and "Investment
Risks."
<PAGE> 764
3
- ------------------------------------
Prime Money Market Fund
MAIN RISKS
- --------------------------
Credit Risk. Because the Fund only invests in high
quality obligations and limits its average maturity to
90 days or less, credit risk is minimized. Nonetheless,
if an issuer fails to pay interest or principal , the
value of your investment in the Fund could decline.
Because the Fund invests in securities that are backed
by "credit enhancements" such as letters of credit, the
value of your investment in the Fund also could decrease
if the value of the securities in the portfolio
decreases in response to the declining credit quality of
a credit enhancement provider.
Concentration. The Fund will invest a significant
portion of its assets in the securities of companies in
the financial services industry. Because of the Fund's
greater exposure to that industry, economic, political
and regulatory developments affecting the financial
services industry will have a disproportionate impact on
the Fund. These developments include changes in interest
rates, earlier than expected repayments by borrowers, an
inability to achieve the same yield on the reinvestment
of prepaid obligations, and Federal and state laws which
may restrict the remedies that a lender has when a
borrower defaults on a loan.
Interest Rate Risk. The yield paid by the Fund will
increase or decrease with changes in short-term interest
rates.
Net Asset Value. There is no assurance that the Fund
will meet its investment objective of maintaining a net
asset value of $1.00 per share on a continuous basis.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its
subsidiaries and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
<PAGE> 765
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Prime Money Market Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows the Fund's average
annual returns for the periods
indicated. Average annual total
returns for more than one year
tend to smooth out variations
in a Fund's total return and
are not the same as actual
year-by-year results.
HOW HAS THE PRIME
MONEY MARKET FUND
PERFORMED? By showing the variability of the Prime Money Market
Fund's performance form year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE PRIME
MONEY MARKET FUND IS NOT NECESSARILY AN INDICATION OF
HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 9.05
1990 7.90
1991 5.88
1992 3.58
1993 2.97
1994 4.09
1995 5.83
1996 5.20
1997 5.32
1998 5.30
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
3.56%.
- --------------------------------------------------------------------------------
Best Quarter: 2.34% 2Q1989 Worst Quarter: 0.72% 2Q1993
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 8/1/85)(1)
<S> <C> <C> <C> <C>
One Group Prime Money Market
Fund 5.30% 5.15% 5.50% 5.73%
</TABLE>
(1) Data for performance purposes begins on 1/1/87.
TO OBTAIN CURRENT YIELD INFORMATION, CALL
TOLL-FREE 1-800-480-4111 OR VISIT
www.onegroup.com.
<PAGE> 766
5
- ------------------------------------
Prime Money Market Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below. There is no sales
charge (load) on reinvested
dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
---------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
---------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE
---------------------------------------------------------------------
Exchange Fee NONE
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(expenses that are deducted from fund assets) (1) CLASS I
--------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .35%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .19%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses .54%
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (2) (.02%)
--------------------------------------------------------------------
Net Expenses .52%
--------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.52% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
----------------------------------------------------------
<S> <C> <C>
1 Year (1) $ 53
----------------------------------------------------------
3 Years 171
----------------------------------------------------------
5 Years 300
----------------------------------------------------------
10 Years 675
----------------------------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 year expenses
would be $55.
<PAGE> 767
6
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Bond Fund
WHAT IS THE GOAL OF THE
BOND FUND? The Fund seeks to maximize total return by investing
primarily in a diversified portfolio of intermediate and
long-term debt securities.
WHAT ARE THE BOND FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in investment grade bonds and
debt securities. These include mortgage-backed and
asset-backed securities. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc
One Investment Advisors looks for market sectors and
individual securities that it believes will perform well
over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT IS A BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
BOND FUND? The main risks of investing in the Bond Fund and the
circumstances likely to adversely affect your investment
are described below. The share price of the Bond Fund
and its yield will change every day in response to
interest rates and other market conditions. You may lose
money if you invest in the Bond Fund. For additional
information on risk, please read "Investment Risks."
<PAGE> 768
7
- ------------------------------------
Bond Fund
MAIN RISKS
- --------------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and
asset-backed securities. The issuers of these securities
and other callable securities may be able to repay
principal in advance, especially when interest rates
fall. Changes in pre-payment rates can affect the return
on investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are
pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The
Fund may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 769
8
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE BOND FUND
PERFORMED? By showing the variability of the Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 13.03
1990 9.25
1991 15.67
1992 6.57
1993 11.33
1994 -6.91
1995 23.68
1996 5.08
1997 9.92
1998 8.19
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-.39%. The above quoted performance data includes
the performance of a common trust fund, the
predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with the One Group Bond Fund on
March 22, 1999. The predecessor to the Pegasus
Bond Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst Quarter: -2.66% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Bond Fund 8.19% 7.55% 9.32% 9.99%
-----------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index (2) 8.69% 7.27% 9.26% 10.31%
-----------------------------------------------------------------------------------------------------
Lipper Intermediate U.S. Government Bond
Funds Index (3) 8.17% 6.12% * *
</TABLE>
(1) The above quoted performance data includes the
performance of a common trust fund, the
predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with the One Group Bond Fund on
March 22, 1999. The predecessor to the Pegasus
Bond Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its
returns would have been lower.
(2) The Lehman Brothers Aggregate Bond Index is an
unmanaged index generally representative of the
bond markets as a whole. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management fees. By contrast, the performance of
the Fund reflects the deduction of these
services.
(3) The Lipper Intermediate U. S. Government Bond
Funds Index consists of the equally weighted
average monthly return of the largest funds
within the universe of all funds in the category.
* Index did not exist.
<PAGE> 770
9
- ------------------------------------
Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The Examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
---------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
---------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
---------------------------------------------------------------------
(as a percentage of original purchase price of
redemption proceeds, as applicable)
Redemption Fee NONE
---------------------------------------------------------------------
Exchange Fee NONE
---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
(expenses that are deducted from fund assets) (1) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .60%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
---------------------------------------------------------------------
Other Expenses .21%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses .81%
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (2) (.21%)
---------------------------------------------------------------------
Net Expenses .60%
---------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
-------------------------------------
<S> <C> <C>
1 Year (1) $ 61
-------------------------------------
3 Years 238
-------------------------------------
5 Years 429
-------------------------------------
10 Years 982
-------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be $83.
<PAGE> 771
10
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Mid Cap Growth Fund
WHAT IS THE GOAL OF THE
MID CAP GROWTH FUND? The Fund seeks growth of capital and secondarily,
current income by investing primarily in equity
securities.
WHAT ARE THE MID CAP
GROWTH FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests in securities that have the potential
to produce above-average earnings growth per share over
a one-to-three year period. The Fund typically invests
in mid-cap companies with market capitalizations of $500
million to $10 billion. Typically, the Fund acquires
shares of established companies with a history of
above-average growth, as well as those companies
expected to enter periods of above-average growth. Not
all the securities purchased by the Fund will pay
dividends. The Fund also invests in smaller companies in
emerging growth industries. For more information about
the Mid Cap Growth Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE MID
CAP GROWTH FUND? The main risks of investing in the Mid Cap Growth Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Mid Cap Growth Fund will change every day in response to
market conditions. You may lose money if you invest in
the Mid Cap Growth Fund.
<PAGE> 772
11
- ------------------------------------
Mid Cap Growth Fund
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
mid cap growth stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Smaller Companies. Investments in smaller, newer
companies may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 773
12
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Mid Cap Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE MID CAP
GROWTH FUND
PERFORMED? By showing the variability of the Mid Cap Growth Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE MID CAP GROWTH
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
[NUMBERS IN PERCENTAGES]
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-------------------
<S> <C>
1990 1.37
1991 42.92
1992 9.54
1993 12.74
1994 -3.72
1995 27.88
1996 20.29
1997 30.07
1998 37.34
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.51%.
- --------------------------------------------------------------------------------
Best Quarter: 39.91% 4Q1998 Worst Quarter: -17.05% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 3/2/89)
<S> <C> <C> <C>
One Group Mid Cap Growth Fund 37.34% 21.48% 19.39%
--------------------------------------------------------------------------------------
Russell Mid Cap Growth Index (1) 17.86% 17.33% 17.04%
--------------------------------------------------------------------------------------
S&P/BARRA Midcap 400 Growth Index (2) 34.86% 19.76% *
</TABLE>
(1) The Russell Mid Cap Growth Index is an unmanaged
index generally representative of the mid-cap
growth market. The performance of the index does
not reflect the deduction of expenses associated
with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services as
well as the deduction of sales charges on Class A
Shares and applicable contingent deferred sales
charges on Class B and Class C Shares.
(2) The S&P/BARRA Midcap 400 Growth Index is an
unmanaged index representing the performance of
the highest price to book securities in the S&P
Midcap 400 Index. The performance of the index
does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management. By contrast, the performance of the
Fund reflects the deduction of these services.
* Index did not exist.
<PAGE> 774
13
- ------------------------------------
Mid Cap Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them for the periods
shown. The examples also assume
that your investment has a 5%
return each year and that the
Fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) (1) CLASS I
----------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE
----------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
----------------------------------------------------------------
(as a percentage of original purchase price
of redemption proceeds, as applicable)
Redemption Fee NONE
----------------------------------------------------------------
Exchange Fee NONE
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
--------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (1) CLASS I
--------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .74%
--------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
--------------------------------------------------------------------
Other Expenses .26%
--------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.00%
--------------------------------------------------------------------
--------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement NONE
--------------------------------------------------------------------
Net Expenses 1.00%
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
<TABLE>
<CAPTION>
CLASS I
---------------------------------------------------------
<S> <C>
1 Year $ 102
---------------------------------------------------------
3 Years 318
---------------------------------------------------------
5 Years 552
---------------------------------------------------------
10 Years 1,225
---------------------------------------------------------
</TABLE>
<PAGE> 775
14
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Large Cap
Growth Fund
WHAT IS THE GOAL OF THE
LARGE CAP GROWTH
FUND? The Fund seeks long-term capital appreciation and growth
of income by investing primarily in equity securities.
WHAT ARE THE LARGE CAP
GROWTH FUND'S MAIN
INVESTMENT
STRATEGIES? The Fund invests mainly in equity securities of large,
well-established companies. The weighted average
capitalization of companies in which the Fund invests
normally will exceed the median market capitalization of
the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index").(1) For more information about the
Large Cap Growth Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
LARGE CAP GROWTH
FUND? The main risks of investing in the Large Cap Growth Fund
and the circumstances likely to adversely affect your
investment are described below. The share price of the
Large Cap Growth Fund will change every day in response
to market conditions. You may lose money if you invest
in the Large Cap Growth Fund.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 776
15
- ------------------------------------
Large Cap Growth Fund
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
large cap growth stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 777
16
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Large Cap Growth Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE LARGE CAP
GROWTH FUND
PERFORMED? By showing the variability of the Large Cap Growth
Fund's performance from year to year, the chart and
table below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE LARGE
CAP GROWTH FUND IS NOT NECESSARILY AN INDICATION OF HOW
THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1993 13.95
1994 5.56
1995 27.04
1996 17.25
1997 32.84
1998 44.71
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
6.82%.
- --------------------------------------------------------------------------------
Best Quarter: 24.51% 4Q1998 Worst Quarter: -6.66% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 2/28/92)
<S> <C> <C> <C>
One Group Large Cap Growth Fund 44.71% 24.76% 20.92%
-----------------------------------------------------------------------------------
S&P/BARRA 500 Growth Index (1) 42.16% 27.94% 21.45%
</TABLE>
(1) The S&P/BARRA 500 Growth Index, is an unmanaged
index representing the performance of the highest
price to book securities in the S&P 500 Index.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services.
<PAGE> 778
17
- ------------------------------------
Large Cap Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I
-----------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
-----------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
-----------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
-----------------------------------------------------------------------------
Exchange Fee NONE
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (1) CLASS I
-------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .69%
-------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
-------------------------------------------------------------------
Other Expenses .25%
-------------------------------------------------------------------
Total Annual Fund Operating Expenses .94%
-------------------------------------------------------------------
-------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement NONE
-------------------------------------------------------------------
Net Expenses .94%
-------------------------------------------------------------------
-------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
<TABLE>
<CAPTION>
CLASS I
-------------------------------------
<S> <C>
1 Year $ 96
-------------------------------------
3 Years 300
-------------------------------------
5 Years 520
-------------------------------------
10 Years 1,155
-------------------------------------
</TABLE>
<PAGE> 779
18
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Diversified Equity Fund
WHAT IS THE GOAL OF THE
DIVERSIFIED EQUITY
FUND? The Fund seeks long term capital growth and growth of
income with a secondary objective of providing a
moderate level of current income.
WHAT ARE THE DIVERSIFIED
EQUITY FUND'S MAIN
INVESTMENT STRATEGIES?The Fund invests mainly in common stocks of overlooked
or undervalued companies that have the potential for
earnings growth over time. The Fund uses a multi-style
approach, meaning that it may invest across different
capitalization levels targeting both value and growth
oriented companies. Because the Fund seeks return over
the long term, Banc One Investment Advisors will not
attempt to time the market. For more information about
the Diversified Equity Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
DIVERSIFIED EQUITY
FUND? The main risks of investing in the Diversified Equity
Fund and the circumstances likely to adversely affect
your investment are described below. The share price of
the Diversified Equity Fund will change every day in
response to market conditions. You may lose money if you
invest in the Diversified Equity Fund.
<PAGE> 780
19
- ------------------------------------
Diversified Equity Fund
MAIN RISKS
- --------------------------------
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general may
decline over short or extended periods of time. When the
value of the Fund's securities goes down, your
investment in the Fund decreases in value.
Smaller Companies. Investments in smaller, newer
companies may be riskier than investments in larger,
more established companies. Securities of smaller
companies tend to be less liquid than securities of
larger companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their stock price. This may cause
unexpected and frequent decreases in the value of your
investment in the Fund.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 781
20
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
Diversified Equity Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE DIVERSIFIED
EQUITY FUND PERFORMED?By showing the variability of the Diversified Equity
Fund performance from year to year, the chart and table
below help show the risk of investing in the Fund.
PLEASE REMEMBER THAT THE PAST PERFORMANCE OF THE
DIVERSIFIED EQUITY FUND IS NOT NECESSARILY AN INDICATION
OF HOW THE FUND WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1997 34.84
1998 28.32
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
2.29%.
- --------------------------------------------------------------------------------
Best Quarter: 21.47% 4Q1998 Worst Quarter: -11.31% 3Q1990
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (2) (since 12/29/89)
<S> <C> <C> <C>
One Group Diversified Equity Fund 28.32% 20.96% 18.06%
---------------------------------------------------------------------------------------
S&P 500 Index (3) 28.58% 24.06% 17.90%
---------------------------------------------------------------------------------------
S&P 1500 Index (4) 26.35% * *
</TABLE>
(1) The above quoted performance data includes the
performance of the Paragon Value Equity Income
Fund for the period before its consolidation with
the One Group Diversified Equity Fund on March
26, 1996.
(2) Prior to March 26, 1996, performance for Class I
shares is based on Class A share performance
adjusted to reflect the absence of sales charges.
(3) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the U.S. stock market. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services.
(4) The S&P 1500 Index is an unmanaged index
generally representative of the performance of
large and small companies in the US stock market.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services.
* Index did not exist.
<PAGE> 782
21
- ------------------------------------
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
Diversified Equity Fund
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I
------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on
Purchases NONE
------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------
(as a percentage of original purchase
price of redemption proceeds, as
applicable)
Redemption Fee NONE
------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (1) CLASS I
---------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .72%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
---------------------------------------------------------------------
Other Expenses .24%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses .96%
---------------------------------------------------------------------
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement NONE
---------------------------------------------------------------------
Net Expenses .96%
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
<TABLE>
<CAPTION>
CLASS I
----------------------------------------------------------
<S> <C>
1 Year $ 98
----------------------------------------------------------
3 Years 306
----------------------------------------------------------
5 Years 531
----------------------------------------------------------
10 Years 1,178
----------------------------------------------------------
</TABLE>
<PAGE> 783
22
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Equity Index Fund
WHAT IS THE GOAL OF THE
EQUITY INDEX FUND? The Fund seeks investment results that correspond to the
aggregate price and dividend performance of securities
in the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index").(1)
WHAT ARE THE EQUITY INDEX
FUND'S MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in stocks included in the S&P
500 Index. The Fund may also invest in stock index
futures. Banc One Investment Advisors attempts to track
the performance of the S&P 500 Index to achieve a
correlation of 0.95 between the performance of the Fund
and that of the S&P 500 Index without taking into
account the Fund's expenses. For more information about
the Equity Index Fund's investment strategies, please
read "More About The Funds" and "Principal Investment
Strategies."
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
EQUITY INDEX FUND? The main risks of investing in the Equity Index Fund and
the circumstances likely to adversely affect your
investment are described below. The share price of the
Equity Index Fund will change every day in response to
market conditions. You may lose money if you invest in
the Equity Index Fund.
(1) "S&P 500" is a registered service mark of
Standard & Poor's Corporation, which does not
sponsor and is in no way affiliated with the
Fund.
<PAGE> 784
23
- ------------------------------------
Equity Index Fund
MAIN RISKS
- --------------------------------
Index Investing. The Fund attempts to track the
performance of the S&P 500 Index. Therefore, securities
may be purchased, retained and sold by the Fund at times
when an actively managed fund would not do so. If the
value of securities that are heavily weighted in the
index changes, you can expect a greater risk of loss
than would be the case if the Fund were not fully
invested in such securities.
Market Risk. The Fund invests in equity securities (such
as stocks) that are more volatile and carry more risks
than some other forms of investment. The price of equity
securities may rise or fall because of economic or
political changes or changes in a company's financial
condition. Equity securities are also subject to "stock
market risk" meaning that stock prices in general (or
S&P 500 Index stock prices in particular) may decline
over short or extended periods of time. When the value
of the Fund's securities goes down, your investment in
the Fund decreases in value.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 785
24
FUND SUMMARY
Equity Index Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE EQUITY INDEX
FUND PERFORMED? By showing the variability of the Equity Index Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE EQUITY INDEX
FUND IS NOT NECESSARILY AN INDICATION OF HOW THE FUND
WILL PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1992 6.86
1993 9.37
1994 0.75
1995 37.07
1996 22.59
1997 33.00
1998 28.24
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
5.15%.
- --------------------------------------------------------------------------------
Best Quarter: 21.26% 4Q1998 Worst Quarter: -9.96% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE
CLASS I (since 7/2/91)
<S> <C> <C> <C>
One Group Equity Index Fund 28.24% 23.63% 19.61%
--------------------------------------------------------------------------------------
S&P 500 Index (1) 28.58% 24.06% 15.75%
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally
representative of the performance of large
companies in the U.S. stock market. The
performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as investment management. By contrast,
the performance of the Fund reflects the
deduction of these services.
<PAGE> 786
25
- ------------------------------------
Equity Index Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
(expenses that are deducted from fund assets) (1) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .30%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
---------------------------------------------------------------------
Other Expenses .26%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses .56%
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (2) (.16%)
---------------------------------------------------------------------
Net Expenses .40%
---------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.40% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
----------------------------------
<S> <C> <C>
1 Year (1) $ 41
----------------------------------
3 Years 163
----------------------------------
5 Years 297
----------------------------------
10 Years 686
----------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be $57.
<PAGE> 787
26
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Growth & Income Fund
WHAT IS THE GOAL OF ONE
GROUP INVESTOR
GROWTH & INCOME FUND? The Fund seeks long-term capital appreciation and growth
by investing primarily in a diversified group of One
Group mutual funds which invest primarily in equity
securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF ONE GROUP INVESTOR
GROWTH & INCOME FUND? One Group Investor Growth & Income Fund is a "Fund of
Funds". The Fund's investment strategy is to invest in a
diversified group of other One Group mutual funds.
Because this is a growth and income fund, the majority
of the Fund's assets will be invested in One Group
equity and bond funds, although a portion of its assets
also will be invested in One Group money market funds.
The Fund's investment return is diversified by its
investment in the underlying mutual funds which invest
in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR
GROWTH & INCOME FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR
GROWTH & INCOME FUND? The main risks of investing in the One Group Investor
Growth & Income Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of One Group Investor Growth & Income
Fund will change every day in response to market
conditions. You may lose money if you invest in One
Group Investor Growth & Income Fund.
<PAGE> 788
27
- ------------------------------------
Investor Growth & Income Fund
MAIN RISKS
- --------------------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses of the underlying funds.
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Growth & Income
Fund will be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor Growth &
Income Fund will change as the value of investments of
the underlying One Group funds increase and decrease.
Index Funds. An index fund's investment objective is to
track the performance of a specified index. Therefore,
securities may be purchased, retained and sold by an
index fund at times when an actively managed fund would
not do so. If the value of securities that are heavily
weighted on an index change, you can expect a greater
risk of loss than may be the case if a fund were not
fully invested in such securities.
Foreign Securities. Funds investing in foreign
securities are subject to special risks in addition to
those of U.S. investments. These risks include political
and economic risks, currency fluctuations, higher
transaction costs, delayed settlement, and less
stringent investor protection and disclosure standards
of some foreign markets. These risks can make foreign
investments more volatile and potentially less liquid
than U.S. investments.
Emerging Markets. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 789
28
FUND SUMMARY
Investor Growth & Income Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results.
HOW HAS THE ONE GROUP
INVESTOR GROWTH &
INCOME FUND
PERFORMED? By showing the variability of the One Group Investor
Growth & Income Fund's performance from year to year,
the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE INVESTOR GROWTH & INCOME FUND IS NOT
NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 20.87
1998 19.10
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
1.21%.
- --------------------------------------------------------------------------------
Best Quarter: 14.92% 4Q1998 Worst Quarter: -6.52% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Growth & Income Fund 19.10% 19.12%
-------------------------------------------------------------------------
S&P 1500 Index (1) 26.35% 29.60%
-------------------------------------------------------------------------
Lipper Mix (2) 12.74% 15.29%
</TABLE>
(1) The S&P 1500 Index is an unmanaged index
generally representative of the performance of
large and small companies in the U.S. stock
market. The performance of the index does not
reflect the deduction of expenses associated with
a mutual fund, such as management fees. By
contrast, the performance of the One Group
Investor Growth & Income Fund reflects the
deduction of these services.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (60%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (35%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 790
29
- ------------------------------------
Investor Growth & Income Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended
to help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continue to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
(expenses that are deducted from fund assets) (1) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .05%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
---------------------------------------------------------------------
Other Expenses .22%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses(2) .27%
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (3) (.07%)
---------------------------------------------------------------------
Net Expenses .20%
---------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
Fund with those of the underlying funds, the
estimated average weighted expense ratio would
1.03% for Class I shares.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.20% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
-------------------------------------
<S> <C> <C>
1 Year (1) $ 20
-------------------------------------
3 Years 80
-------------------------------------
5 Years 145
-------------------------------------
10 Years 336
-------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be $28.
<PAGE> 791
30
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISK & PERFORMANCE
Investor Conservative Growth Fund
WHAT IS THE GOAL OF ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? The Fund seeks income and capital appreciation by
investing primarily in a diversified group of One Group
mutual funds which invest primarily in fixed income and
equity securities.
WHAT ARE THE MAIN
INVESTMENT STRATEGIES
OF ONE GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? One Group Investor Conservative Growth Fund is a "Fund
of Funds". The Fund's investment strategy is to invest
in a diversified group of other One Group mutual funds.
Because this is a conservative growth fund, the majority
of the Fund's assets will be invested in One Group bond
funds, although a portion of its assets also will be
invested in One Group equity and money market funds. The
Fund's investment return is diversified by its
investment in the underlying mutual funds which invest
in growth and income stocks, foreign securities, debt
securities, and cash or cash equivalents. For more
information about the Fund's investment strategies,
please read "More About The Funds" and "Principal
Investment Strategies."
WHO SHOULD INVEST IN ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? Shares are available for long-term investors, including
tax-advantaged retirement accounts; the Funds should not
be used for short-term trading purposes.
WHAT ARE THE MAIN RISKS
OF INVESTING IN ONE
GROUP INVESTOR
CONSERVATIVE GROWTH
FUND? The main risks of investing in the One Group Investor
Conservative Growth Fund and the circumstances likely to
adversely affect your investment are described below.
The share price of One Group Investor Conservative
Growth Fund will change every day in response to market
conditions. You may lose money if you invest in One
Group Investor Conservative Growth Fund.
<PAGE> 792
31
- ------------------------------------
Investor Conservative Growth Fund
MAIN RISKS
- --------------------------------
Investments in Mutual Funds. The Fund's investments are
concentrated in underlying One Group funds, so the
Fund's investment performance is directly related to the
performance of the underlying funds. The Fund's net
asset value will change with changes in the equity and
bond markets and the value of the mutual funds in which
it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the
underlying funds. As a result, the Fund does not have
the same flexibility to invest as a mutual fund without
such constraints. In addition, the Fund indirectly pays
a portion of the expenses of the underlying funds.
Equity Funds. Equity funds invest primarily in equity
securities (such as stocks) that are more volatile and
carry more risks than some other forms of investment.
The price of equity securities may rise or fall because
of economic or political changes or changes in a
company's financial condition. Equity securities also
are subject to "stock market risk", meaning that stock
prices in general may decline over short or extended
periods of time. When the value stocks held by an
underlying One Group equity fund go down, the value of
your investment in One Group Investor Conservative
Growth Fund will be affected.
Fixed Income Funds. Bond funds invest primarily in fixed
income securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. The
value of your investment in One Group Investor
Conservative Growth Fund will change as the value of
investments of the underlying One Group funds increase
and decrease.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 793
32
FUND SUMMARY
Investor Conservative Growth Fund
ONE GROUP(R)
- ------------------------------------
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in a Fund's
total return and are not the
same as actual year-by-year
results.
HOW HAS THE ONE GROUP
INVESTOR CONSERVATIVE
GROWTH FUND
PERFORMED? By showing the variability of the One Group Investor
Conservative Growth Fund's performance from year to
year, the chart and table below help show the risk of
investing in the Fund. PLEASE REMEMBER THAT THE PAST
PERFORMANCE OF THE INVESTOR CONSERVATIVE GROWTH FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
1997 12.50
1998 11.71
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
.59%.
- --------------------------------------------------------------------------------
Best Quarter: 6.21% 2Q1997 Worst Quarter: -0.28% 3Q1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR LIFE
CLASS I (since 12/10/96)
<S> <C> <C>
One Group Investor Conservative Growth Fund 11.71% 11.52%
-----------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond
Index (1) 7.85% 8.16%
-----------------------------------------------------------------------------------
Lipper Mix (2) 9.88% 10.55%
</TABLE>
(1) The Lehman Brothers Intermediate Aggregate Bond
Index is an unmanaged index comprised of U.S.
Government, mortgage, corporate and asset-backed
securities with maturities of one to ten years.
The performance of the index does not reflect the
deduction of expenses associated with a mutual
fund, such as management fees. By contrast, the
performance of the One Group Investor
Conservative Growth Fund reflects the deduction
of these services.
(2) The Lipper Mix consists of the average monthly
returns of the Lipper General Equity Funds
Universe (20%), the Lipper International Funds
Universe (5%), and the Lipper Intermediate U.S.
Government Bond Funds Universe (75%). The Lipper
Universe consists of the equally weighted average
monthly returns for all the funds within the
category.
<PAGE> 794
33
- ------------------------------------
Investor Conservative Growth Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The examples are intended to
help you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The examples
assume that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if you
either redeemed all of your
shares or if you continued to
hold them at the end of the
periods shown. The examples
also assume that your
investment has a 5% return each
year and that the Fund's
operating expenses remain the
same. Your actual costs may be
higher or lower than those
shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(fees paid directly from your investment) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------
(expenses that are deducted from fund assets) (1) CLASS I
---------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .05%
---------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
---------------------------------------------------------------------
Other Expenses .25%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses (2) .30%
---------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (.10%)
---------------------------------------------------------------------
Net Expenses (3) .20%
---------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) The Fund indirectly pays a portion of the
expenses incurred by the underlying funds. After
combining the total operating expenses of the
Fund with those of the underlying funds, the
estimated average weighted expense ratio would be
.92% for Class I shares.
(3) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.20% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
-------------------------------------
<S> <C> <C>
1 Year (1) $ 20
-------------------------------------
3 Years 86
-------------------------------------
5 Years 159
-------------------------------------
10 Years 371
-------------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be $31.
<PAGE> 795
34
ONE GROUP(R)
- ------------------------------------
More About The Funds
Each of the eight funds described in this Prospectus is
a series of One Group Mutual Funds and is managed by
Banc One Investment Advisors Corporation. For more
information about One Group and Banc One Investment
Advisors, please read "Management of One Group Mutual
Funds" and the Statement of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL
INVESTMENT
STRATEGIES This Prospectus describes eight mutual funds with a
variety of investment objectives.
- One Group Prime Money Market Fund is designed to
produce high current income consistent with liquidity
or capital preservation and stability of principal.
- One Group Bond Fund is designed to maximize total
return. Banc One Investment Advisors looks for sectors
and securities that it believes will perform
consistently well over time as measured by total
return. The Portfolios attempt to enhance total return
by selecting market sectors that offer risk/reward
advantages based on structural risks and credit
trends.
- One Group Mid Cap Growth, Large Cap Growth,
Diversified Equity, and Equity Index are designed for
a variety of objectives, including capital
appreciation and current income.
- One Group Investor Growth & Income and Conservative
Growth are designed to provide diversification across
the three major asset classes: stocks, bonds and cash
or cash equivalents. Diversification is achieved by
investing in other One Group mutual funds. A brief
description of these underlying One Group funds can be
found in Appendix A. The Funds attempt to take
advantage of the most attractive types of stocks and
bonds by shifting their asset allocation to favor
mutual funds that focus on the most promising
securities.
The principal investment strategies that are used to
meet each Fund's investment objective are described in
Fund Summaries: Investments, Risk, & Performance in the
front of this prospectus. They are also described below.
There can be no assurance that the Funds will achieve
their investment objectives. Please note that each Fund
may also use strategies that are not described below,
but which are described in the Statement of Additional
Information.
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve
"fundamental policies." A policy is
fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
<PAGE> 796
35
- -----
ONE GROUP PRIME MONEY MARKET FUND. The Fund invests only
in U.S. denominated securities.
- The average maturity on a dollar-weighted basis of the
securities held by the Fund will be 90 days or less.
- Each security held by the Fund will mature in 397 days
or less.
- The Fund will acquire only those securities that
present minimal credit risks.
- The Fund invests exclusively in money market
instruments. These include:
1. corporate notes
2. commercial paper
3. funding agreements
4. certificates of deposit
5. bank obligations and deposit notes
- The Fund will invest at least 25% of its total assets
in securities issued by companies in the financial
services industry, although the Fund may invest less
than 25% of its total assets in that industry if
warranted due to adverse economic conditions and if
investing less than that amount would be in the best
interests of shareholders. The financial services
industry includes banks, broker-dealers, finance
companies and other issuers of asset-backed
securities.
- The Fund may lend its portfolio's securities.
- -----
ONE GROUP BOND FUND. The Fund invests in all types of
debt securities rated as investment grade, as well as
convertible securities, preferred stock, and loan
participations.
- The Fund invests at least 65% of its total assets in
debt securities of all types with intermediate to long
maturities.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds.
- The Fund also may purchase taxable or tax-exempt
municipal securities.
- The Fund may invest in debt securities that are rated
in the lowest investment grade category.
- The Fund's average weighted maturity ordinarily will
normally range between four and twelve years, although
the Fund may shorten its weighted average if deemed
appropriate for temporary defensive purposes.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average weighted maturity,
the more fluctuation in share price you
can expect.
<PAGE> 797
36
- -----
ONE GROUP MID CAP GROWTH FUND. The Fund invests in
securities of companies that have the potential to
produce above-average earnings growth per share over a
one-to-three year period.
- At least 80% of the Fund's total assets will be
invested in equity securities of mid cap companies,
including common stocks and debt securities and
preferred stocks that are convertible to common
stocks. Mid Cap companies are defined as companies
with market capitalizations of $500 million to $10
billion.
- A portion of the Fund's assets will be held in cash
equivalents.
- -----
ONE GROUP LARGE CAP GROWTH FUND. The Fund invests mainly
in equity securities of large, well-established
companies. The weighted average capitalization of
companies in which the Fund invests normally will exceed
the median market capitalization of the Standard &
Poor's 500 Composite Stock Price Index.
- At least 65% of the Fund's total assets will be
invested in the equity securities of large,
well-established companies.
- -----
ONE GROUP DIVERSIFIED EQUITY FUND. The Fund invests
mainly in common stocks of overlooked or undervalued
companies that have the potential for earnings growth
over time.
- At least 65% of the Fund's total assets will be
invested in equity securities.
- Although the Fund may invest up to 35% of the Fund's
total assets in U.S. government securities, other
investment grade fixed income securities, cash, and
cash equivalents, the Fund's main investment strategy
is to invest in equity securities.
- -----
ONE GROUP EQUITY INDEX FUND. The Fund invests in stocks
included in the S&P 500 Index. (The Fund also invests in
stock index futures.) Banc One Investment Advisors seeks
to achieve a correlation of 0.95% between the
performance of the Fund and that of the S&P 500 Index.
The Fund may hold up to 10% of its net assets in cash or
cash equivalents.
HOW DOES INDEX INVESTING WORK IN THE
EQUITY INDEX FUND?
- The percentage of stock that the Fund
holds will be approximately the same
percentage that the stock represents in
the S&P 500 Index.
- Banc One Investment Advisors generally
picks stock in the order of their
weightings in the S&P 500 Index,
starting with the heaviest weighted
stock.
- The Fund attempts to achieve a
correlation between the performance of
its Fund and that of the S&P 500 Index
of at least 0.95, without taking into
account Fund expenses. Perfect
correlation would be 1.00.
<PAGE> 798
37
- -----
ONE GROUP INVESTOR GROWTH & INCOME FUND.
- The Fund is diversified between stocks and bonds, with
an emphasis on stocks.
1. From 60% to 80% of the Fund's total assets are
invested in One Group equity funds.
2. From 20% to 40% of its total assets are invested in
One Group bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
------------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- The Fund also may hold cash and cash equivalents.
<PAGE> 799
38
- -----
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND.
- The Fund is diversified between stocks and bonds, with
an emphasis on bonds.
1. From 20% to 40% of the Fund's total assets are
invested in One Group equity funds.
2. From 60% to 80% of its total assets are invested in
One Group bond funds.
3. Up to 10% of its total assets are invested in a One
Group money market fund.
- The Fund also is diversified across a variety of
mutual funds, which in turn invest in different
industries, economic sectors and geographic regions.
The Fund invests its assets in the underlying mutual
funds within the following ranges:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND TOTAL ASSETS
------------------------------------------------------------
<S> <C> <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) Mid Cap Growth 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) 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>
- Fund also invests in cash and cash equivalents.
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in the Funds are
described below and in Fund Summaries: Investments,
Risk, & Performance at the front of this prospectus.
- -----
NET ASSET VALUE. There is no assurance that the Prime
Money Market Fund will meet its investment objectives or
be able to maintain a net asset value of $1.00 per share
on a continuous basis.
<PAGE> 800
39
- -----
FIXED INCOME SECURITIES. Investments by the Prime Money
Market Fund and the Bond Fund in fixed income securities
(for example, bonds) will increase or decrease in value
based on changes in interest rates. If rates increase,
the value of a Fund's investments generally declines. On
the other hand, if rates fall, the value of the
investments generally increases. The value of the
securities in the One Group Bond Fund, and the value of
your investment in the One Group Bond Fund, will
increase and decrease as the value of the Fund's
investments increase and decrease.
- -----
DERIVATIVES. The Funds invest in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
- -----
LOWER RATED SECURITIES. The Bond Fund may purchase debt
securities rated in the lowest investment grade
category. Securities in this rating category are
considered to have speculative characteristics. Changes
in economic conditions or other circumstances may have a
greater effect on the ability of issuers of these
securities to make principal and interest payments than
they do on issuers of higher grade securities.
The Investor Growth & Income Fund and the Investor
Conservative Growth Fund invest in a variety of other
One Group funds. The funds in which the Investor Funds
invest are referred to in this prospectus as the
"Investor Portfolios." The main risks of investing in
the Investor Funds are described above and in Fund
Summaries: Investments, Risk & Performance. Additional
risks associated with investing in the Investor
Portfolios are described below.
- -----
JUNK BONDS. One Group High Yield Bond and One Group
Income Bond Fund invest in debt securities that are
considered to be speculative. These securities are
issued by companies which are highly leveraged, less
creditworthy or financially distressed. While these
investments generally provide a higher yield than higher
rated debt securities, the high degree of risk involved
in these investments can result in substantial or total
losses. The market price of these securities can change
suddenly and unexpectedly.
- -----
INTERNATIONAL FUNDS. Foreign securities are subject to
special risks. These risks may include future
unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits,
currency controls, higher transaction costs, and delayed
settlements of transactions. Securities of some foreign
companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies.
Additionally, there may be less public information
available about foreign issuers. Since the underlying
funds may invest in securities denominated in foreign
currencies, changes in exchange rates also may affect
the value of investments in the underlying funds.
<PAGE> 801
40
- -----
EMERGING MARKETS. The risks associated with foreign
securities are magnified in countries in "emerging
markets." These countries may have relatively unstable
governments and less established market economies than
developed countries. Emerging markets may face greater
social, economic, regulatory, and political
uncertainties. These risks make emerging market
securities more volatile and less liquid than securities
issued in more developed countries.
- -----
SMALLER COMPANIES. Investments by funds in smaller,
newer companies may be riskier than investments in
larger, more established companies. Securities of
smaller companies tend to be less liquid than securities
of large companies. In addition, small companies may be
more vulnerable to economic, market, and industry
changes. Because economic events have a greater impact
on smaller companies, there may be greater and more
frequent changes in their debt securities and/or stock
price. This may cause unexpected and frequent decreases
in the value of underlying funds investing in small
companies, and may affect your investment in the funds.
For more information about risks associated with the
types of investments that the Funds purchase, please
read Fund Summaries: Investments, Risk, & Performance,
Appendix A and the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT
POLICIES Each Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The
full text of the fundamental policies can be found in
the Statement of Additional Information.
Each Fund, other than the Prime Money Market:
1. Will not 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. 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 and repurchase
agreements involving such securities.
3. 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.
The Equity Index Fund:
1. Will not invest more than 10% of its total assets in
securities issued or guaranteed by the United States,
its agencies or instrumentalities.
<PAGE> 802
41
The Prime Money Market Fund:
1. Will use its best efforts to maintain a constant net
asset value of $1.00 per share, although there is no
guarantee that the Funds will be able to do so.
2. Will not make loans, except that a Fund may (i)
purchase or hold debt instruments in accordance with
its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in
securities lending.
3. Will not concentrate its investments in the
securities of one or more issuers conducting their
principal business in a particular industry or group
of industries (except that the Fund may concentrate
its investments in securities issued by companies in
the financial services industry). This does not
include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities,
domestic bank certificates of deposit or bankers'
acceptances, and repurchase agreements involving such
securities, municipal securities or governmental
guarantees of municipal securities. In addition,
private activity bonds backed only by the revenues
and assets of a non-governmental user will not be
deemed to be municipal securities.
4. 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.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to securities (other than equity securities). Generally,
ratings are divided into two main categories:
"Investment Grade Securities" and "Non-Investment Grade
Securities." Although there is always a risk of default,
rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include
securities that, in the opinion of the rating agencies,
are more likely to default than Investment Grade
Securities. The Funds only purchase securities that meet
the rating criteria described below. Banc One Investment
Advisors will look at a security's rating at the time of
investment. If the securities are unrated, Banc One
Investment Advisors must determine that they are of
comparable quality to rated securities.
- -----
THE PRIME MONEY MARKET FUND
- The quality and maturity of money market funds are
subject to SEC rules. Quality is generally restricted
to the two highest short-term ratings or their
equivalent. Maturity is limited both as to total
portfolio average and as to each individual security.
With respect to portfolio average, the rules limit the
Fund's average weighted maturity to 90 days. With
respect to each individual security, the remaining
maturity is restricted to 397 days at acquisition.
Moreover, the SEC rules limit exposure to a single
issuer to 5% of a money market fund's assets (although
there is no limit on government securities).
<PAGE> 803
42
- -----
THE BOND FUND AND THE INVESTOR PORTFOLIOS
- Debt Securities
1. Two Investor Portfolios, 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.
2. The Bond Fund and three Investor Portfolios, the
Ultra Short-Term Bond Fund, the Intermediate Bond
Fund, and the Short-Term Bond Fund, may invest in
debt securities rated in any of the four investment
grade rating categories.
3. Two Investor Portfolios, the Income Bond Fund and
the High Yield Bond Fund, may purchase securities
in any rating category. Please read Fund Summaries:
Investments, Risk, & Performance and "High
Yield/Junk Bonds" for more information about the
Income Bond Fund and the High Yield Bond Fund.
- Preferred Stock
1. The Bond Fund, and two Investor Portfolios, the
Ultra Short-Term Bond Fund, the Short-Term Bond
Fund, and the Intermediate Bond Fund, may only
invest in preferred stock rated in any of the four
highest rating categories.
2. Two Investor Portfolios, the Income Bond Fund and
the High Yield Bond Fund, may invest in preferred
stock in any rating category.
- Municipal Securities
1. The Bond Fund and three Investor Portfolios, the
Ultra Short-Term Bond Fund, the Short-Term Bond
Fund, and Intermediate Bond Fund, may only invest
in municipal bonds rated in any of the four
investment grade rating categories.
2. The Bond Fund as well as two Investor Portfolios,
the Ultra Short-Term Bond Fund and the Intermediate
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
investment grade rating categories. The Short-Term
Bond Fund may invest in such securities only if
they are rated in the highest investment grade
rating category.
3. Two Investor Portfolios, the Income Bond Fund and
the High Yield Bond Fund, may invest in municipal
securities rated in ANY category.
- Commercial Paper
1. The Bond Fund and three Investor Portfolios, the
Intermediate Bond Fund, the Short-Term Bond Fund,
and the Ultra Short-Term Bond Fund, may invest in
commercial paper rated in the highest or second
highest rating category.
2. Two Investor Portfolios, the High Yield Bond Fund
and the Income Bond Fund, may invest in commercial
paper in any rating category.
- -----
THE MID CAP GROWTH, LARGE CAP GROWTH, DIVERSIFIED
EQUITY, AND EQUITY INDEX FUNDS
- Municipal Securities
1. If a Fund invests in municipal bonds, the bonds
must be rated as investment grade.
<PAGE> 804
43
2. 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.
- Debt Securities
1. Corporate bonds generally will be rated in one of
the three highest investment grade categories.
2. Banc One Investment Advisors reserves the right to
invest in corporate bonds which present attractive
opportunities and are rated in the lowest
investment grade category. These corporate bonds
are usually riskier than higher rated bonds.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
TEMPORARY
DEFENSIVE
POSITIONS To provide liquidity for the Investor Funds and to allow
all of the Funds to respond to unusual market
conditions, the Funds may invest all or a portion of
their assets in cash and CASH EQUIVALENTS (see below)
for temporary defensive purposes. The Investor Funds
only invest in cash equivalents; they will not hold a
significant portion of their assets in cash. The Equity
Index Fund may invest no more than 10% of its total
assets in cash and cash equivalents. Investments in cash
and cash equivalents may result in a lower yield than
lower-quality or longer term investments and may prevent
the Funds from meeting their investment objectives.
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.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
- --------------------------------------------------------------------------------
PORTFOLIO
TURNOVER The Funds may engage in active and frequent trading of
portfolio securities to achieve their principal
investment strategies. Portfolio turnover may vary
greatly from year to year, as well as within a
particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Funds. The portfolio
turnover rate for each Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights.
<PAGE> 805
44
ONE GROUP(R)
- ------------------------------------
How to Do Business with
One Group Mutual Funds
- --------------------------------------------------------------------------------
PURCHASING FUND
SHARES
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
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every business 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.
- It is the responsibility of the Bank One Corporation
Savings and Investment Plan to send your purchase or
redemption order to the Fund(s). Please contact the
Bank One Corporation Savings and Investment Plan at
1-888-506-401K for information regarding cut-off times
for purchase and redemption requests.
- The Funds are open for business every day, other than
weekends, days on which the New York Stock Exchange
("NYSE") is closed, and the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, Christmas Eve, and Christmas.
HOW DO I BUY FUND
SHARES? - Please call 1-888-506-401K for information on
participating in the Bank One Corporation Savings and
Investment Plan.
- --------------------------------------------------------------------------------
SHAREHOLDER
INFORMATION
VOTING RIGHTS
- --------------------------------
The Funds do not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
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.
<PAGE> 806
45
DIVIDEND POLICIES
- --------------------------------
DIVIDENDS. The Funds generally declare dividends
quarterly. The Investor Conservative Growth Fund,
however, generally declares dividends monthly and the
Prime Money Market Fund and the Bond Fund generally
declare dividends on each business day. Dividends are
distributed on the first business day of the next month
after they are declared.
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.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class. The value
of the shares distributed is the NAV determined
immediately following the dividend record date.
TAX TREATMENT
OF SHAREHOLDERS
- --------------------------------
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.
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. 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.
TAXATION OF
ZERO-COUPON SECURITIES
- --------------------------------
The Bond Fund 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
will select which securities to sell.
SHAREHOLDER INQUIRIES
- --------------------------------
If you have any questions or need additional
information, please contact the Bank One Corporation
Savings and Investment Plan at 1-888-506-401K.
<PAGE> 807
46
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Funds and
continuously reviews, supervises and administers each
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Funds
paid advisory fees at the following rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Prime Money Market Fund .32%
-----------------------------------------------------------------------
One Group(R) Bond Fund(1) .40%
-----------------------------------------------------------------------
One Group(R) Mid Cap Growth Fund .74%
-----------------------------------------------------------------------
One Group(R) Large Cap Growth Fund .72%
-----------------------------------------------------------------------
One Group(R)Diversified Equity Fund .73%
-----------------------------------------------------------------------
One Group(R) Equity Index Fund .14%
-----------------------------------------------------------------------
One Group(R) Investor Growth & Income
Fund .05%
-----------------------------------------------------------------------
One Group(R) Investor Balanced Fund .04%
-----------------------------------------------------------------------
One Group(R) Investor Conservative
Growth Fund .03%
-----------------------------------------------------------------------
</TABLE>
(1) In March 1999, the Pegasus Funds and One Group
Mutual Funds consolidated. The investment
advisory fee includes fees paid to First Chicago
NBD Investment Management Company, an affiliate
of Banc One Investment Advisors, as advisor to
the Pegasus Funds.
<PAGE> 808
47
- -----------------------------------------------------------------------------
THE FUND
MANAGERS The Funds are managed by teams of Fund managers,
research analysts, and other investment management
professionals. For all the Funds, except the
International Equity Index Fund, the Equity Index Fund,
and the Market Expansion Index Fund, each team member
makes recommendations about the securities in the Funds.
The research analysts provide in-depth industry analysis
and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings,
and cash positions.
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Funds have no reason to believe these steps
will not be sufficient to avoid any material adverse
impact on One Group, although there can be no
assurances. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Issue are unknown
to Banc One Investment Advisors and One Group's other
service providers at this time but could have a material
adverse impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 809
48
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Prime Money Market Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.049 0.053 0.051 0.054 0.052
- ---------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.049) (0.053) (0.051) (0.054) (0.052)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 4.98% 5.39% 5.20% 5.49% 5.34%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $5,398,206 $2,616,698 $2,563,768 $2,186,562 $1,965,416
Ratio of expenses to average net assets 0.50% 0.51% 0.48% 0.44% 0.41%
Ratio of net investment income to average net
assets 4.79% 5.26% 5.08% 5.34% 5.27%
Ratio of expenses to average net assets* 0.54% 0.58% 0.56% 0.55% 0.57%
Ratio of net investment income average net assets* 4.75% 5.19% 5.00% 5.23% 5.12%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<PAGE> 810
49
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP and other independent
accountants. PricewaterhouseCooper's 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>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------
CLASS I 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35 0.65 0.66 0.68 0.63 0.61
Net realized and unrealized gains
(losses) from investments and
futures (0.44) 0.19 0.32 (0.18) 1.45 (1.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.09) 0.84 0.98 0.50 2.08 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.35) (0.65) (0.66) (0.68) (0.64) (0.59)
From net realized gain - - - - (0.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.65) (0.66) (0.68) (0.64) (0.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (0.87%)(A) 8.17% 9.97% 5.08% 23.75% (6.99%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,330,527 $1,277,246 $1,101,894 $757,627 $485,851 $395,116
Ratio of expenses to average net
assets 0.64%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income to
average net assets 0.75%(B) 6.10% 6.41% 6.71% 6.39% 6.36%
Ratio of expenses to average net
assets* 6.75%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income to
average net assets* 6.54% 6.10% 6.41% 6.71% 6.39% 6.36%
Portfolio turnover(C) 10.89% 34.69% 17.60% 24.92% 41.91% 75.67%
</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) Not
annualized. (B) Annualized. (C) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. (D) Upon reorganizing as a fund of One Group, the Pegasus Bond Fund
became One Group Bond Fund. Financial highlights for the periods prior to
March 22, 1999 represent the Pegasus Bond Fund.
<PAGE> 811
50
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Mid Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.51 $ 19.46 $ 18.81 $ 18.40 $ 15.96
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.07) (0.07) 0.25 0.20 0.06
Net realized and unrealized gains (losses) from
investments 5.58 5.70 3.59 3.83 2.98
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.51 5.63 3.84 4.03 3.04
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - - (0.25) (0.20) (0.06)
In excess of net investment - - (0.02) - -
Net realized gains (2.70) (2.58) (2.92) (3.42) (0.54)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.70) (2.58) (3.19) (3.62) (0.60)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 25.32 $ 22.51 $ 19.46 $ 18.81 $ 18.40
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 28.39% 31.11% 22.75% 24.63% 19.75%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,164,884 $868,901 $623,911 $532,525 $413,518
Ratio of expenses to average net assets 0.99% 1.00% 0.99% 1.00% 0.98%
Ratio of net investment income to average net assets (0.35%) (0.36%) 1.32% 1.15% 0.38%
Ratio of expenses to average net assets* 0.99% 1.00% 0.99% 1.01% 0.98%
Ratio of net investment income to average net assets* (0.35%) (0.36%) 1.32% 1.14% 0.38%
Portfolio turnover(A) 141.46% 158.43% 301.35% 435.30% 132.63%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 812
51
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Large Cap Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.71 $ 19.44 $ 15.44 $ 13.47 $ 11.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) - 0.04 0.12 0.18 0.20
Net realized and unrealized gains (losses) from
investments 5.80 6.13 4.79 2.14 3.04
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.80 6.17 4.91 2.32 3.24
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income - (0.02) (0.11) (0.18) (0.20)
Net realized gains (2.36) (2.88) (0.80) (0.17) (0.89)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.36) (2.90) (0.91) (0.35) (1.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 26.15 $ 22.71 $ 19.44 $ 15.44 $ 13.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 28.78% 35.75% 33.11% 17.36% 21.85%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $3,052,729 $1,510,521 $1,142,864 $745,986 $531,595
Ratio of expenses to average net assets 0.96% 0.99% 0.99% 0.96% 1.00%
Ratio of net investment income to average net
assets 0.07% 0.21% 0.69% 1.20% 1.72%
Ratio of expenses to average net assets* 0.96% 0.99% 0.99% 0.99% 1.00%
Ratio of net investment income to average net
assets* 0.07% 0.21% 0.69% 1.17% 1.72%
Portfolio turnover(A) 86.34% 117.34% 57.17% 35.51% 14.22%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 813
52
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Diversified Equity Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been audited by PricewaterhouseCoopers LLP whose report, along with the
Fund's financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
MARCH 26,
YEAR ENDED JUNE 30, 1996 TO
------------------------------------ JUNE 30,
CLASS I 1999 1998 1997 1996(A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.51 $ 11.51 $ 10.39 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.05 0.08 0.11 0.03
Net realized and unrealized gains (losses) from
investments 2.52 3.36 2.85 0.39
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.57 3.44 2.96 0.42
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.05) (0.08) (0.11) (0.03)
Net realized gains (0.84) (1.36) (1.73) -
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (1.44) (1.84) (0.03)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.19 $ 13.51 $ 11.51 $ 10.39
- ------------------------------------------------------------------------------------------------------------------------
Total Return 20.72% 32.26% 31.97% 10.49%(B)(C)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $2,089,940 $630,340 $430,837 $191,212
Ratio of expenses to average net assets 0.95% 0.98% 0.98% 0.95%(D)
Ratio of net investment income to average net assets 0.42% 0.66% 1.06% 1.13%(D)
Ratio of expenses to average net assets* 0.95% 0.98% 1.00% 1.04%(D)
Ratio of net investment income to average net assets* 0.42% 0.66% 1.04% 1.04%(D)
Portfolio turnover(E) 50.82% 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.
<PAGE> 814
53
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Equity Index Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.31 0.33 0.35 0.33 0.32
Net realized and unrealized gains (losses) from
investments 5.54 5.98 5.27 3.16 2.59
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.85 6.31 5.62 3.49 2.91
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.30) (0.32) (0.33) (0.33) (0.29)
In excess of net investment income - - - (0.01) (0.02)
Net realized gains (0.92) (0.63) (0.15) (0.52) (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.22) (0.95) (0.48) (0.86) (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 31.79 $ 27.16 $ 21.80 $ 16.66 $ 14.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 22.50% 29.73% 34.30% 25.47% 25.79%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $1,855,947 $671,422 $480,819 $321,058 $234,895
Ratio of expenses to average net assets 0.35% 0.35% 0.30% 0.30% 0.33%
Ratio of net investment income to average net assets 1.14% 1.37% 1.87% 2.18% 2.57%
Ratio of expenses to average net assets* 0.57% 0.62% 0.61% 0.59% 0.66%
Ratio of net investment income to average net assets* 0.92% 1.10% 1.56% 1.89% 2.24%
Portfolio turnover(A) 5.37% 4.32% 5.81% 9.08% 2.71%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (A)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
<PAGE> 815
54
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Growth & Income Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.57 $ 10.93 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35 0.25 0.15
Net realized and unrealized gains (losses) from
investments 1.32 1.92 0.93
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.67 2.17 1.08
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.25) (0.15)
Net realized gain (0.47) (0.28) -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.53) (0.15)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.29 $ 12.57 $ 10.93
- -----------------------------------------------------------------------------------------------------------
Total Return 14.11% 20.34% 10.87%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $209,770 $98,060 $43,660
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 3.70% 2.17% 2.78%(C)
Ratio of expenses to average net assets* 0.27% 0.34% 0.66%(C)
Ratio of net investment income to average net assets* 3.63% 2.03% 2.32%(C)
Portfolio turnover(D) 17.87% 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> 816
55
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Investor Conservative Growth Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information for the Fund
has been 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 JUNE 30, THROUGH
-------------------- JUNE 30,
CLASS I 1999 1998 1997(A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.06 $ 10.33 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.46 0.26
Net realized and unrealized gains (losses) from
investments 0.28 0.82 0.33
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.75 1.28 0.59
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.45) (0.26)
Net realized gains (0.13) (0.10) -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.55) (0.26)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.20 $ 11.06 $ 10.33
- -----------------------------------------------------------------------------------------------------------
Total Return 7.01% 12.70% 6.00%(B)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $37,131 $30,352 $15,038
Ratio of expenses to average net assets 0.20% 0.20% 0.20%(C)
Ratio of net investment income to average net assets 4.31% 4.43% 4.92%(C)
Ratio of expenses to average net assets* 0.32% 0.56% 1.46%(C)
Ratio of net investment income to average net assets* 4.19% 4.07% 3.66%(C)
Portfolio turnover(D) 9.73% 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> 817
56
ONE GROUP(R)
- ------------------------------------
Appendix A
--------------------------------------------------------
INVESTMENT
PRACTICES The Funds and Investor Portfolios (as the underlying
investments of the Investor Growth & Income Fund and the
Investor Conservative Growth Fund) 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 and the Investor
Portfolios, as well as the risks inherent in their use.
Equity securities are subject mainly to market risk.
Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain
securities may be subject to additional risks. For a
more complete discussion, see the Statement of
Additional Information. Following the table is a more
complete discussion of risk.
- --------------------------------------------------------------
<TABLE>
<CAPTION>
FUND NAME FUND CODE
------------------------------------------------------
<S> <C> <C>
One Group(R) Prime Money Market Fund 1
------------------------------------------------------
One Group(R) Bond Fund 2
------------------------------------------------------
One Group(R) Mid Cap Growth Fund 3
------------------------------------------------------
One Group(R) Large Cap Growth Fund 4
------------------------------------------------------
One Group(R) Diversified Equity Fund 5
------------------------------------------------------
One Group(R) Equity Index Fund 6
------------------------------------------------------
One Group(R) Investor Growth & Income Fund 7
------------------------------------------------------
One Group(R) Investor Conservative Growth
Fund 8
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Obligations: Bills, notes, 1-8 Market
bonds, STRIPS, and CUBES.
---------------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. 1-8 Market
---------------------------------------------------------------------------------
U.S. Government Agency Securities: 1-8 Market
Securities issued by agencies and Credit
instrumentalities of the U.S. Government.
These include Ginnie Mae, Fannie Mae, and
Freddie Mac.
---------------------------------------------------------------------------------
Certificates of Deposit: Negotiable 1-8 Market
instruments with a stated maturity. Credit
Liquidity
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 818
57
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Time Deposits: Non-negotiable receipts 1-8 Liquidity
issued by a bank in exchange for the deposit Credit
of funds. Market
---------------------------------------------------------------------------------
Common Stock: Shares of ownership of a 3-8 Market
company.
---------------------------------------------------------------------------------
Repurchase Agreements: The purchase of a 1-8 Credit
security and the simultaneous commitment to Market
return the security to the seller at an Liquidity
agreed upon price on an agreed upon date.
This is treated as a loan.
---------------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a 1-8 Market
security and the simultaneous commitment to Leverage
buy the security back at an agreed upon
price on an agreed upon date. This is
treated as a borrowing by a Fund.
---------------------------------------------------------------------------------
Securities Lending: The lending of up to 1-8 Credit
33 1/3% of the Fund's total assets. In Market
return the Fund will receive cash, other Leverage
securities, and/or letters of credit as
collateral.
---------------------------------------------------------------------------------
When-Issued Securities and Forward 1-8 Market
Commitments: Purchase or contract to Leverage
purchase securities at a fixed price for Liquidity
delivery at a future date. Credit
---------------------------------------------------------------------------------
Investment Company Securities: Shares of 1-8 Market
other mutual funds, including One Group
money market funds and shares of other money
market funds for which Banc One Investment
Advisors serves as investment advisor or
administrator. Banc One Investment Advisors
will waive certain fees when investing in
funds for which it serves as investment
advisor.
---------------------------------------------------------------------------------
Convertible Securities: Bonds or preferred 2-8 Market
stock that convert to common stock. Credit
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 819
58
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call and Put Options: A call option gives 2-8 Management
the buyer the right to buy, and obligates Liquidity
the seller of the option to sell, a security Credit
at a specified price. A put option gives the Market
buyer the right to sell, and obligates the Leverage
seller of the option to buy, a security at a
specified price. The Funds will sell only
covered call and secured put options.
---------------------------------------------------------------------------------
Futures and Related Options: A contract 2-8 Management
providing for the future sale and purchase Market
of a specified amount of a specified Credit
security, class of securities, or an index Liquidity
at a specified time in the future and at a Leverage
specified price.
---------------------------------------------------------------------------------
Real Estate Investment Trusts ("REITs"): 2-8 Liquidity
Pooled investment vehicles which invest Management
primarily in income producing real estate or Market
real estate related loans or interest. Regulatory
Tax
Pre-payment
---------------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or 1-8 Credit
time drafts drawn on and accepted by a Liquidity
commercial bank. Maturities are generally Market
six months or less.
---------------------------------------------------------------------------------
Commercial Paper: Secured and unsecured 1-8 Credit
short-term promissory notes issued by Liquidity
corporations and other entities. Maturities Market
generally vary from a few days to nine
months.
---------------------------------------------------------------------------------
Extendable Commercial Notes: Variable rate 1, 7, 8 Market
notes which normally mature within a short Credit
period of time (e.g., 1 month) but which may Liquidity
be extended by the issuer for a maximum
maturity of thirteen months.
---------------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign 1-8 Market
companies, as well as commercial paper of Political
foreign issuers and obligations of foreign Liquidity
banks, overseas branches of U.S. banks and Foreign Investment
supranational entities. Includes American
Depository Receipts and Global Depository
Receipts, and American Depository
Securities.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 820
59
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restricted Securities: Securities not 1-8 Liquidity
registered under the Securities Act of 1933, Market
such as privately placed commercial paper
and Rule 144A securities.
---------------------------------------------------------------------------------
Variable and Floating Rate Instruments: 1-8 Credit
Obligations with interest rates which are Liquidity
reset daily, weekly, quarterly or some other Market
period and which may be payable to the Fund
on demand.
---------------------------------------------------------------------------------
Warrants: Securities, typically issued with 4-8 Market
preferred stock or bonds, that give the Credit
holder the right to buy a proportionate
amount of common stock at a specified price.
---------------------------------------------------------------------------------
Preferred Stock: A class of stock that 2-8 Market
generally pays a dividend at a specified
rate and has preference over common stock in
the payment of dividends and in liquidation.
---------------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations 1, 2, 7, 8 Pre-payment
secured by real estate loans and pools of Market
loans. These include collateralized mortgage Credit
obligations ("CMOs"), Real Estate Mortgage Regulatory
Investment Conduits ("REMICs") and Stripped
Mortgage-Backed Securities ("SMBS").
---------------------------------------------------------------------------------
Corporate Debt Securities: Corporate bonds 2, 4, 7, 8 Market
and non-convertible debt securities. Credit
---------------------------------------------------------------------------------
Demand Features: Securities that are subject 1, 2, 7, 8 Market
to puts and standby commitments to purchase Liquidity
the securities at a fixed price (usually Management
with accrued interest) within a fixed period
of time following demand by a Fund.
---------------------------------------------------------------------------------
Asset-Backed Securities: Securities secured 1, 2, 7, 8 Pre-payment
by company receivables, home equity loans, Market
truck and auto loans, leases, credit card Credit
receivables and other securities backed by Regulatory
other types of receivables or other assets.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 821
60
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Dollar Rolls: A transaction in 2, 7, 8 Pre-payment
which a Fund sells securities for delivery Market
in a current month and simultaneously Regulatory
contracts with the same party to repurchase
similar but not identical securities on a
specified future date.
---------------------------------------------------------------------------------
Adjustable Rate Mortgage Loans ("ARMS"): 2, 7, 8 Pre-payment
Loans in a mortgage pool which provide for a Market
fixed initial mortgage interest rate for a Credit
specified period of time, after which the Regulatory
rate may be subject to periodic adjustments.
---------------------------------------------------------------------------------
Swaps, Caps and Floors: A Fund may enter 2-8 Management
into these transactions to manage its Credit
exposure to changing interest rates and Liquidity
other factors. Swaps involve an exchange of Market
obligations by two parties. Caps and floors
entitle a purchaser to a principal amount
from the seller of the cap or floor to the
extent that a specified index exceeds or
falls below a predetermined interest rate or
amount.
---------------------------------------------------------------------------------
New Financial Products: New options and 2-8 Management
futures contracts and other financial Credit
products continue to be developed and the Market
Funds may invest in such options, contracts Liquidity
and products.
---------------------------------------------------------------------------------
Structured Instruments: Debt securities 2-5 Market
issued by agencies and instrumentalities of 7-8 Liquidity
the U.S. government, banks, municipalities, Management
corporations and other businesses whose Credit
interest and/or principal payments are Foreign Investment
indexed to foreign currency exchange rates,
interest rates, or one or more other
referenced indices.
---------------------------------------------------------------------------------
Municipal Securities: Securities issued by a 1, 2, 7, 8 Market
state or political subdivision to obtain Credit
funds for various public purposes. Municipal Political
securities include private activity bonds Tax
and industrial development bonds, as well as Regulatory
General Obligation Notes, Tax Anticipation
Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Project Notes, other
short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing
authorities and single family revenue bonds.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 822
61
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Obligations of Supranational Agencies: 7-8 Credit
Obligations of supranational agencies who Foreign Investment
are chartered to promote economic
development and are supported by various
governments and governmental agencies.
---------------------------------------------------------------------------------
Currency Futures and Related Options: The 7-8 Management
Funds may engage in transactions in Liquidity
financial futures and related options, which Credit
are generally described above. The Funds Market
will enter into these transactions in Political
foreign currencies for hedging purposes Leverage
only. Foreign Investment
---------------------------------------------------------------------------------
Forward Foreign Exchange Transactions: 7-8 Management
Contractual agreement to purchase or sell Liquidity
one specified currency for another currency Credit
at a specified future date and price. The Market
Funds will enter into forward foreign Political
exchange transactions for hedging purposes Leverage
only. Foreign Investment
---------------------------------------------------------------------------------
Index Shares: Ownership interests in unit 3-8 Market
investment trusts and other pooled
investment vehicles that hold a portfolio of
securities or stocks designed to track the
price performance and dividend yield of a
particular index such as Standard & Poor's
Depository Receipts ("SPDRs") and Nasdaq
100's. The Equity Index Fund only invests in
SPDRs.
---------------------------------------------------------------------------------
Zero Coupon Debt Securities: Bonds and other 2, 7, 8 Credit
debt that pay no interest, but are issued at Market
a discount from their value at maturity. Zero-Coupon
When held to maturity, their entire return
equals the difference between their issue
price and their maturity value.
---------------------------------------------------------------------------------
Zero-Fixed-Coupon Debt Securities: Zero 2, 7, 8 Credit
coupon debt securities which convert on a Market
specified date to interest bearing debt Zero Coupon
securities.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 823
62
<TABLE>
<CAPTION>
FUND RISK
INSTRUMENT CODE TYPE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stripped Mortgage-Backed Securities: 2, 7, 8 Pre-payment
Derivative multi-class mortgage securities Market
usually structured with two classes of Credit
shares that receive different proportions of Regulatory
the interest and principal from a pool of
mortgage-backed obligations. These Funds
only invest in Stripped Mortgage-Backed
Securities issued or guaranteed by the U.S.
government, its agencies or
instrumentalities.
---------------------------------------------------------------------------------
Inverse Floating Rate Instruments: Leveraged 2, 7, 8 Market
variable rate debt instruments with interest Leverage
rates that reset in the opposite direction Credit
from the market rate of interest to which
the inverse floater is indexed.
---------------------------------------------------------------------------------
Loan Participations and Assignments: 2, 7, 8 Credit
Participations in, or assignments of all or Political
a portion of loans to corporations or to Liquidity
governments, including governments of the Foreign Investment
less developed countries ("LDC's"). Market
---------------------------------------------------------------------------------
Fixed Rate Mortgage Loans: Investments in 2, 7, 8 Credit
fixed rate mortgage loans or mortgage pools Pre-payment
which bear simple interest at fixed annual Regulatory
rates and have short to long term final Market
maturities.
---------------------------------------------------------------------------------
Short-Term Funding Agreements: Investments 1, 2, 7, 8 Credit
in short-term funding agreements issued by Liquidity
banks and highly rated U.S. insurance Market
companies such as Guaranteed Investment
Contracts ("GIC's") and Bank Investment
Contracts ("BIC's").
---------------------------------------------------------------------------------
Participation Interests: Interests in 1 Credit
municipal securities, including municipal Tax
leases, from financial institutions such as Market
commercial and investment banks, savings and
loan associations and insurance companies.
These interests may take the form of
participations, beneficial interests in a
trust, partnership interests or any other
form of indirect ownership that allows the
Funds to treat the income from the
investment as exempt from Federal Income
Tax.
</TABLE>
<PAGE> 824
63
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate,
as will the value of your investment in the Funds.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price of a
security can be adversely affected prior to actual
default as its credit status deteriorates and the
probability of default rises.
- Leverage Risk. The risk associated with securities or
practices that multiply small index or market
movements into large changes in value. Leverage is
often associated with investments in derivatives, but
also may be embedded directly in the characteristics
of other securities.
Hedged. When a derivative (a security whose value is
based on another security or index) is used as a hedge
against an opposite position that the Fund also holds,
any loss generated by the derivative should be
substantially offset by gains on the hedged
investment, and vice versa. While hedging can reduce
or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying
security, and there can be no assurance that a Fund's
hedging transactions will be effective.
Speculative. To the extent that a derivative is not
used as a hedge, the Fund is directly exposed to the
risks of that derivative. Gains or losses from
speculative positions in a derivative may be
substantially greater than the derivative's original
cost.
- Liquidity Risk. The risk that certain securities may
be difficult or impossible to sell at the time and the
price that would normally prevail in the market. The
seller may have to lower the price, sell other
securities instead or forego an investment
opportunity, any of which could have a negative effect
on Fund management or performance. This includes the
risk of missing out on an investment opportunity
because the assets necessary to take advantage of it
are tied up in less advantageous investments.
- Management Risk. The risk that a strategy used by a
Fund's management may fail to produce the intended
result. This includes the risk that changes in the
value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result
in unanticipated risks.
- Market Risk. The risk that the market value of a
security may move up and down, sometimes rapidly and
unpredictably. These fluctuations may cause a security
to be worth less than the price originally paid for
it, or less than it was worth at an earlier time.
Market risk may affect a single issuer, industry,
sector of the economy or the market as a whole. There
is also the risk that the current interest rate may
not accurately reflect existing market rates. For
fixed income securities, market risk is largely, but
not exclusively, influenced by changes in interest
rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes
a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable.
This is particularly relevant to investments in
foreign securities.
<PAGE> 825
64
- 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 may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing
credit risk.
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws which may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
- Zero Coupon Risk. The market prices of securities
structured as zero coupon or pay-in-kind securities
are generally affected to a greater extent by interest
rate changes. These securities tend to be more
volatile than securities which pay interest
periodically.
<PAGE> 826
65
ONE GROUP(R)
- ------------------------------------
--------------------------------------------------------
INVESTMENT PRACTICES OF
THE UNDERLYING FUNDS The following is a brief description of the principal
investment policies of each of the underlying funds.
ONE GROUP PRIME
MONEY MARKET FUND One Group Prime Money Market Fund seeks current income
with liquidity and stability of principal by investing
exclusively in high quality, short-term money market
instruments. These instruments include corporate notes,
commercial paper, funding agreements, certificates of
deposit, bank obligations and deposit notes. The Fund
will concentrate in the financial services industry,
including asset-backed commercial paper programs. The
Fund intends to comply with the regulations of the
Securities and Exchange Commission applicable to money
market funds using the amortized cost method for
calculating net asset value. These regulations impose
certain quality, maturity and diversification restraints
on investments by the fund. Under these regulations, the
fund will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a
dollar-weighted basis of 90 days or less, and will
acquire only "eligible securities" that present minimal
credit risks and are treated as having a maturity of 397
days or less.
ONE GROUP SHORT-TERM
BOND FUND One Group Short-Term Bond Fund seeks current income
consistent with preservation of capital through
investment in high and medium-grade fixed-income
securities. The Fund normally invests at least 80% of
total assets in debt securities of all types with short
to intermediate maturities. Debt securities include
bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one
of the four highest investment grade categories at the
time of investment, or if unrated, determined by Banc
One Investment Advisors to be of comparable quality,
some of which may be subject to repurchase agreements.
Many investments will satisfy both requirements. Under
normal market conditions, it is anticipated that the
fund's average weighted maturity ordinarily will be
three years taking into account expected amortization
and prepayment of principal on certain investments,
although for temporary defensive purposes the effective
average weighted maturity may exceed three years. The
fund may also purchase taxable or tax-exempt municipal
securities. Up to 20% of the fund's total assets may be
invested in preferred stocks. This Fund was formerly
called The One Group Limited Volatility Bond Fund.
<PAGE> 827
66
ONE GROUP INTERMEDIATE
BOND FUND One Group Intermediate Bond Fund seeks current income
consistent with the preservation of capital through
investments in high and medium-grade fixed-income
securities with intermediate maturities. The fund will
normally invest at least 80% of total assets in debt
securities of all types. Debt securities include bonds,
notes and other obligations. At least 65% of the fund's
total assets will consist of bonds rated in one of the
four highest investment grade categories at the time of
investment, or if unrated, determined by Banc One
Investment Advisors to be of comparable quality, and at
least 50% of total assets will consist of obligations
issued by the U.S. government or its agencies and
instrumentalities, some of which may be subject to
repurchase agreements. Many investments will satisfy
both requirements. The Fund also may invest in more
speculative debt securities if they present attractive
opportunities and are rated in the lowest investment
grade category. The fund may also purchase taxable or
tax-exempt municipal securities. Under normal market
conditions, it is anticipated that the fund's average
weighted maturity will range between three and ten
years. Up to 20% of the fund's total assets may be
invested in preferred stocks.
ONE GROUP INCOME
BOND FUND One Group Income Bond Fund seeks a high level of current
income by investing primarily in a diversified portfolio
of high, medium and low grade debt securities. The Fund
normally will invest at least 70% of its total assets in
debt securities of all types rated as investment grade
at the time of investment or, if unrated, determined by
Banc One Investment Advisors to be of comparable
quality. In addition, up to 30% of the Fund's total
assets may be invested in convertible securities,
preferred stock, loan participations and debt securities
rated below investment grade or, if unrated, determined
by Banc One Investment Advisors to be of comparable
quality. Securities rated below investment grade are
called "high yield bonds," "non-investment grade bonds"
and "junk bonds." These securities are rated in the
fifth or lower rating categories, for example, BB or
lower by Standard & Poor's Corporation ("S&P") and Ba or
lower by Moody's Investors Service, Inc. ("Moody's"),
and are considered to have speculative characteristics.
Even though it may invest in debt securities in all
rating categories, the Fund will not invest more than
20% of its total assets in securities rated below the
fifth rating category. As a matter of fundamental
policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or
tax-exempt municipal securities.
Under normal market conditions, it is anticipated that
the Fund's average weighted maturity will range between
five and twenty years. The Fund may shorten its
effective weighted average maturity to as little as two
years if deemed appropriate for temporary defensive
purposes.
ONE GROUP BOND FUND One Group Bond Fund seeks to maximize total return by
investing primarily in a diversified portfolio of
intermediate and long-term debt securities. The Fund
invests in all types of debt securities rated as
investment grade, as well as convertible securities,
preferred stock, and loan participations. The Fund's
average weighted maturity will normally range between
four and twelve years, although the Fund may shorten its
weighted average if deemed appropriate for temporary
defensive purposes. The Fund invests at least 65% of its
total assets in debt securities of all types with
intermediate to long maturities. As a matter of
fundamental policy, at least 65% of the Fund's total
assets will consist of bonds. The Fund also may purchase
taxable or tax-exempt municipal securities.
<PAGE> 828
67
ONE GROUP HIGH YIELD
BOND FUND The Fund seeks a high level of current income by
investing primarily in a diversified portfolio of debt
securities which are rated below investment grade or
unrated. Capital appreciation is a secondary objective.
The Fund invests in all types of high yield, high risk
debt securities. The Fund also may invest in convertible
securities, preferred stock, common stock, and loan
participations. The Fund's weighted average maturity
will normally range between five and ten years, although
the Fund may shorten its weighted average maturity to as
little as two years if deemed appropriate for temporary
defensive purposes. The Fund normally invests at least
80% of the Fund's total assets in debt securities which
are rated below investment grade or unrated, although
the Fund may invest up to 100% of the Fund's total
assets in such securities. Securities rated below
investment grade are called "high yield bonds,"
"non-investment grade bonds," "below investment grade
bonds" and "junk bonds." These securities are rated in
the fifth or lower rating categories (for example, BB or
lower by Standard & Poor's Corporation and Ba or lower
by Moody's Investors Service, Inc.), and are considered
to be speculative. The Fund also may invest up to 20% of
its total assets in other securities, including
investment grade debt securities. As a matter of
fundamental policy, at least 65% of the Fund's total
assets will consist of bonds.
ONE GROUP GOVERNMENT
BOND FUND One Group Government Bond Fund seeks a high level of
current income with liquidity and safety of principal.
The Fund will limit its investments to securities issued
by the U.S. Government and its agencies and
instrumentalities or related to securities issued by the
U.S. Government and its agencies and instrumentalities.
At least 65% of the total assets of the Fund will be
invested in obligations guaranteed as to principal and
interest by the U.S. government or its agencies and
instrumentalities, some of which may be subject to
repurchase agreements, and other securities representing
an interest in or collateralized by mortgages that are
issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The average weighted
maturity of the fund is expected to be between three and
fifteen years, however, the Fund's average weighted
remaining maturity may be outside this range if
warranted by market conditions. The balance of the
Fund's assets may be invested in debt securities and
taxable or tax-exempt municipal securities.
<PAGE> 829
68
ONE GROUP ULTRA
SHORT-TERM BOND FUND One Group Ultra Short-Term Bond Fund seeks a high level
of current income consistent with low volatility of
principal by investing in a diversified portfolio of
short-term investment grade securities. The Fund
normally invests at least 80% of its total assets in
debt securities of all types, including money market
instruments. In addition, up to 20% of the fund's total
assets may be invested in other securities, including
preferred stock. The fund will invest in adjustable rate
mortgage pass-through securities and other securities
representing an interest in or collateralized by
mortgages with periodic interest rate resets, some of
which may be subject to repurchase agreements. These
securities often are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. However,
the Fund also may purchase mortgage-backed securities
that are issued by non-governmental entities. Such
securities may or may not have private insurer
guarantees as to timely payments. The fund also may
purchase mortgage and interest rate swaps and interest
rate floors and caps. The fund also may employ other
investment techniques to enhance returns, such as loans
of fund securities, mortgage dollar rolls, repurchase
agreements, options contracts and reverse repurchase
agreements. The Fund will maintain a maximum duration of
approximately two years. This Fund was formerly called
The One Group Ultra Short-Term Income Fund.
ONE GROUP MID CAP
VALUE FUND One Group Mid Cap Value Fund seeks capital appreciation
with the secondary goal of achieving current income by
investing primarily in equity securities. The Fund will
invest mainly in equity securities with below-market
average price-to-earnings and price-to-book value
ratios. The issuer's soundness and earnings prospects
also will be considered. If Banc One Investment Advisors
determines that a company's fundamentals are declining
or that the company's ability to pay dividends has been
impaired, it likely will eliminate the Fund's holding of
the company's stock. The Fund normally invests at least
80% of the value of its total assets in equity
securities consisting of common stocks and debt
securities and preferred stocks that are convertible
into common stocks. The Fund also may enter into options
and futures transactions. The balance of the fund's
assets will be held in cash equivalents. This Fund was
formerly called The One Group Disciplined Value Fund.
ONE GROUP INTERNATIONAL
EQUITY INDEX FUND One Group International Equity Index Fund seeks to
provide investment results that correspond to the
aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan
Stanley Capital International Europe, Australasia and
Far East Index ("MSCI EAFE GDP Index" or "EAFE GDP
Index").(1) The Fund normally will invest at least 65%
of the value of its total assets in foreign equity
securities, which are representative of the Index and
secondarily in stock index futures. The Fund's
investments will consist of common stocks (including
sponsored and unsponsored American Depository Receipts)
and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges
or actively traded in the over-the-counter market),
warrants and depository receipts. No more than 10% of
the fund's net assets will be held in cash or cash
equivalents. The fund may invest up to 10% of its net
assets in securities of emerging international markets.
A substantial portion of the fund's assets will be
denominated in foreign currencies.
(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.
<PAGE> 830
69
ONE GROUP DIVERSIFIED
INTERNATIONAL FUND One Group Diversified International Fund seeks long-term
capital growth by investing primarily in equity
securities of foreign issuers. The Fund invests
primarily in the securities of companies located in
Europe, Asia and Latin America. The Fund also will
invest in other regions and countries that present
attractive investment opportunities, including
developing countries. In selecting a country for
investment, Banc One Investment Advisors analyzes the
global economic and political situation, as well as the
securities markets of selected countries. In selecting
individual securities, Banc One Investment Advisors
selects a representative sampling of the companies
comprising the individual country's stock market index.
Banc One Investment Advisors uses its best judgment,
experience and certain quantitative techniques to
determine the countries in which the Fund will invest,
as well as the amount invested in each country. Fund
assets will be invested in at least three countries. The
Fund will invest at least 65% of its total assets in
foreign equity securities, consisting of common stocks
(including American Depository Receipts), preferred
stocks, rights, warrants, convertible securities,
foreign currencies and options on foreign currency, and
other equity securities. Up to 20% of the Fund's total
assets may be invested in U.S. government securities,
other investment grade fixed income securities, cash and
cash equivalents.
ONE GROUP LARGE CAP
GROWTH FUND One Group Large Cap Growth Fund seeks long-term capital
appreciation and growth of income by investing primarily
in equity securities. The Fund will normally invest at
least 65%, of the value of its total assets in equity
securities consisting of common stocks, warrants and any
rights to purchase common stocks. To achieve its
objective, the Fund will invest primarily in equity
securities of large, well established companies with
weighted average capitalization in excess of the market
median capitalization of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index")(2) The
Fund may invest the remainder of its assets in
nonconvertible fixed income securities, repurchase
agreements, options and futures contracts, securities
issued by the U.S. government and its agencies and
instrumentalities, and cash equivalents. This Fund was
formerly called The One Group Large Company Growth Fund.
ONE GROUP LARGE CAP
VALUE FUND One Group Large Cap Value Fund seeks capital
appreciation with the incidental goal of achieving
current income by investing primarily in equity
securities. The Fund will invest in equity securities of
large capitalization companies that are believed to be
selling below their long-term investment values. The
average weighted market capitalization of the companies
in which the Fund invests will normally exceed the
median market capitalization of the S&P 500 Index. In
addition, the Fund may invest in stock of companies
which have "breakup" values well in excess of current
market values or which have uniquely undervalued
corporate assets. The Fund normally will invest at least
80% of the value of its total assets in equity
securities consisting of common stocks and debt
securities and preferred stocks which are convertible
into common stocks. The remainder of the fund's assets
will be held in cash equivalents. This Fund was formerly
called The One Group Large Company Value Fund.
(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> 831
70
ONE GROUP MID CAP
GROWTH FUND One Group Mid Cap Growth Fund seeks growth of capital
and, secondarily, current income by investing primarily
in equity securities. The Fund invests in securities
that have the potential to produce above-average
earnings growth per share over a one-to-three year
period. Typically, the Fund acquires shares of
established companies with a history of above-average
growth, as well as those companies expected to enter
periods of above-average growth. Not all the securities
purchased by the Fund will pay dividends. The Fund also
invests in smaller companies in emerging growth
industries. At least 80% of the value of its total
assets will be invested in equity securities consisting
of common stocks and debt securities and preferred
stocks that are convertible into common stocks. The Fund
also may enter into options and futures transactions.
The remainder of the fund's assets will be held in cash
equivalents. This Fund was formerly called The One Group
Growth Opportunities Fund.
ONE GROUP DIVERSIFIED
MID CAP FUND One Group Diversified Mid Cap Fund seeks long-term
capital growth by investing primarily in equity
securities of companies with intermediate
capitalizations. The Fund invests primarily in equity
securities of companies with market capitalizations of
$500 million to $10 billion. Banc One Investment
Advisors believes that there are many companies of this
size with strong growth potential, stable market share,
and an ability to quickly respond to new business
opportunities, all of which increase their likelihood of
obtaining superior levels of profitability and
investment returns. The Fund normally invests at least
65% of its total assets in common and preferred stock,
rights, warrants, convertible securities, and other
equity securities. While the Fund invests primarily in
securities of U.S. companies, up to 25% of its total
assets may be invested in equity securities of foreign
issuers. Up to 20% of the Fund's total assets may be
invested in U.S. Government Securities, other investment
grade fixed income securities, cash and cash
equivalents.
ONE GROUP DIVERSIFIED
EQUITY FUND One Group Diversified Equity Fund seeks long-term
capital growth and growth of income with a secondary
objective of providing a moderate level of current
income. The Fund invests primarily in common stocks of
overlooked or undervalued companies that have the
potential for earnings growth over time. The Fund uses a
multi-style approach, meaning that it may invest across
varied capitalization levels targeting both value and
growth oriented companies. Because the Fund seeks return
over the long term, Banc One Investment Advisors will
not attempt to time the market. The Fund normally will
invest at least 65% of the value of its total assets in
securities with the characteristics described above.
Although the Fund intends to invest all of its assets in
such securities, up to 35% of its total assets may be
held in cash or invested in U.S. Government Securities,
other investment grade fixed-income securities cash and
cash equivalents. This Fund was formerly called The One
Group Value Growth Fund.
<PAGE> 832
71
ONE GROUP SMALL CAP
GROWTH FUND One Group Small Cap Growth Fund seeks long-term capital
growth primarily by investing in a portfolio of equity
securities of small-capitalization and emerging growth
companies. The Fund invests primarily in a portfolio of
common stocks, debt securities, preferred stocks,
convertible securities, warrants and other equity
securities of small capitalization companies. Generally,
Banc One Investment Advisors selects a portfolio of
companies with a capitalization equivalent to the median
market capitalization of the S&P Small-Cap 600 Index,(3)
although the Fund may occasionally hold securities of
companies whose market capitalizations are considerably
larger if doing so contributes to the Fund's investment
objective. At least 65% of the value of the Fund's total
assets normally will be invested in securities with the
characteristics described above. Up to 35% of its total
assets may be held in cash or invested in U.S.
Government Securities, other investment grade
fixed-income securities and cash equivalents. This Fund
was formerly called The One Group Small Capitalization
Fund.
ONE GROUP SMALL CAP
VALUE FUND One Group Small Cap Value Fund seeks long-term capital
growth by investing primarily in equity securities of
companies with small capitalizations. The Fund invests
primarily in equity securities of small domestic issuers
with market capitalizations of $100 million to $3
billion. In reviewing investment opportunities, Banc One
Investment Advisors looks for high quality management, a
dominant position in a major product line, significant
equity ownership positions by management, a sound
financial position, and a relatively high rate of return
on invested capital. The Fund also will invest in
companies that demonstrate a potential for earnings
growth due to management changes, new products, or a
changing marketplace. The Fund normally invests at least
65% of its total assets in common and preferred stocks,
rights, warrants, convertible securities, and other
equity securities of companies described above.
While the Fund invests primarily in securities of U.S.
companies, up to 25% of its total assets may be invested
in equity securities of foreign issuers. Up to 20% of
the Fund's total assets may be invested in U.S.
Government Securities, other investment grade fixed
income securities, cash and cash equivalents.
ONE GROUP EQUITY
INCOME FUND One Group Equity Income Fund seeks current income
through regular payment of dividends with the secondary
goal of achieving capital appreciation by investing
primarily in equity securities. The Fund attempts to
keep its dividend 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.
(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> 833
72
ONE GROUP EQUITY
INDEX FUND One Group Equity Index Fund seeks investment results
that correspond to the aggregate price and dividend
performance of the securities in the S&P 500 Index. The
Fund normally invests in many of the stocks which
comprise the S&P 500 Index and secondarily in stock
index futures. Cash reserves will not normally exceed
10% of the fund's net assets. The Advisor generally
selects stocks for the Fund in the order of their
weightings in the S&P 500 Index beginning with the
heaviest weighted stocks. The percentage of the Fund's
assets to be invested in each stock is approximately the
same as the percentage it represents in the S&P 500
Index.
<PAGE> 834
(Intentionally Left Blank)
<PAGE> 835
- --------------------------------------------------------------------------------
The prospectus is intended for use in connection with
the Bank One Corporation Savings and Investment Plan. If
you want more information about the Funds, the following
documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Funds' investments is available in the Funds' annual
and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Funds and
is incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/annual reports or the SAI, request
other information or discuss your questions about the
Fund by calling 1-888-506-401K or by writing the Bank
One Corporation Savings and Investment Plan at:
BANK ONE CORPORATION SAVINGS AND INVESTMENT PLAN
MAIL CODE IL1-0002
1 BANK ONE PLAZA
CHICAGO, IL 60670-0002
You can also review and copy the Funds' reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-229 [ONE GROUP LOGO]
<PAGE> 836
ONE GROUP(R) BOND FUND
CLASS I SHARES
PROSPECTUS
NOVEMBER 1, 1999
[ONE GROUP LOGO]
THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT APPROVED OR DISAPPROVED THE SHARES OF
ANY OF THE FUNDS AS AN INVESTMENT OR
DETERMINED WHETHER THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
<PAGE> 837
TABLE OF
CONTENTS
<TABLE>
<C> <S>
FUND SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
One Group Bond Fund 2
---------
</TABLE>
<TABLE>
<C> <S>
MORE ABOUT THE FUND
Principal Investment Strategy 6
---------
Investment Risks 7
---------
Investment Policies 7
---------
Portfolio Quality 8
---------
Temporary Defensive Positions 9
---------
Portfolio Turnover 9
---------
</TABLE>
<TABLE>
<C> <S>
PURCHASING FUND SHARES 10
---------
</TABLE>
<TABLE>
<C> <S>
SHAREHOLDER INFORMATION
Voting Rights 10
---------
Dividend Policies 11
---------
Tax Treatment of Shareholders 11
---------
Shareholder Inquiries 11
---------
</TABLE>
<TABLE>
<C> <S>
MANAGEMENT OF ONE GROUP MUTUAL FUNDS
The Advisor 12
---------
The Fund Managers 12
---------
Year 2000 Readiness Disclosure 13
---------
</TABLE>
<TABLE>
<C> <S>
FINANCIAL HIGHLIGHTS 14
---------
APPENDIX A: INVESTMENT PRACTICES 15
---------
</TABLE>
<PAGE> 838
FUND SUMMARIES
INVESTMENTS, RISK & PERFORMANCE
<PAGE> 839
2
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY: INVESTMENTS, RISKS &
PERFORMANCE
One Group Bond Fund
WHAT IS THE GOAL OF THE
BOND FUND? The Fund seeks to maximize total return by investing
primarily in a diversified portfolio of intermediate and
long-term debt securities.
WHAT ARE THE BOND FUND'S
MAIN INVESTMENT
STRATEGIES? The Fund invests mainly in investment grade bonds and
debt securities. These include mortgage-backed and
asset-backed securities. Banc One Investment Advisors
selects securities for the Fund by analyzing both
individual securities and different market sectors. Banc
One Investment Advisors looks for market sectors and
individual securities that it believes will perform well
over time. Banc One Investment Advisors selects
individual securities after performing a risk/reward
analysis that includes an evaluation of interest rate
risk, credit risk, and the complex legal and technical
structure of the transaction. For more information about
the Bond Fund's investment strategies, please read "More
About the Funds" and "Principal Investment Strategies."
WHAT IS A
BOND? A "bond" is a debt security with a remaining maturity of
ninety days or more issued by the U.S. Government or its
agencies and instrumentalities, a corporation, or a
municipality, securities issued or guaranteed by a
foreign government or its agencies and
instrumentalities, securities issued or guaranteed by
domestic and supranational banks, mortgage-related and
mortgage-backed securities, asset-backed securities,
stripped government securities, and zero coupon
obligations.
WHAT ARE THE MAIN RISKS
OF INVESTING IN THE
BOND FUND? The main risks of investing in the Bond Fund and the
circumstances likely to adversely affect your investment
are described below. The share price of the Bond Fund
and its yield will change every day in response to
interest rates and other market conditions. You may lose
money if you invest in the Bond Fund. For additional
information on risk, please read "Investment Risks."
<PAGE> 840
3
- ------------------------------------
One Group Bond Fund
MAIN RISKS
- --------------------------
Interest Rate Risk. The Fund mainly invests in bonds and
other debt securities. These securities will increase or
decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments
generally declines. On the other hand, if rates fall,
the value of the investments generally increases. Your
investment will decline in value if the value of the
Fund's investments decrease. Securities with greater
interest rate sensitivity and longer maturities tend to
produce higher yields, but are subject to greater
fluctuations in value. Usually, changes in the value of
fixed income securities will not affect cash income
generated, but may affect the value of your investment.
Credit Risk. There is a risk that issuers and
counterparties will not make payments on securities and
repurchase agreements held by the Fund. Such default
could result in losses to the Fund. In addition, the
credit quality of securities held by the Fund may be
lowered if an issuer's financial condition changes.
Lower credit quality may lead to greater volatility in
the price of a security and in shares of a Fund. Lower
credit quality also may affect a security's liquidity
and make it difficult for the Fund to sell the security.
Prepayment and Call Risk. As part of its main investment
strategy, the Fund invests in mortgage-backed and
asset-backed securities. The issuers of these securities
and other callable securities may be able to repay
principal in advance, especially when interest rates
fall. Changes in pre-payment rates can affect the return
on investment and yield of mortgage and asset-backed
securities. When mortgage and other obligations are
pre-paid and when securities are called, the Fund may
have to reinvest in securities with a lower yield. The
Fund may also fail to recover premiums paid for the
securities, resulting in an unexpected capital loss.
Derivative Risk. The Fund invests in securities that may
be considered to be DERIVATIVES. The value of derivative
securities is dependent upon the performance of
underlying assets or securities. If the underlying
assets do not perform as expected, the value of the
derivative security and your investment in the Fund
declines. Derivatives generally are more volatile and
are riskier in terms of both liquidity and value than
traditional investments.
Not FDIC insured. An investment in the Fund is not a
deposit of Bank One Corporation or any of its affiliates
and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
<PAGE> 841
4
ONE GROUP(R)
- ------------------------------------
FUND SUMMARY
One Group Bond Fund
The Bar Chart shows changes
in the Fund's performance
from year to year. Total
returns assume reinvestment
of dividends and
distributions.
The Average Annual Total Return
Table shows how the Fund's
average annual returns for the
periods indicated compare to
those of a broad measure of
market performance. Average
annual total returns for more
than one year tend to smooth
out variations in the Fund's
total returns and are not the
same as actual year-by-year
results.
HOW HAS THE BOND FUND
PERFORMED? By showing the variability of the Bond Fund's
performance from year to year, the chart and table below
help show the risk of investing in the Fund. PLEASE
REMEMBER THAT THE PAST PERFORMANCE OF THE BOND FUND IS
NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL
PERFORM IN THE FUTURE.
BAR CHART (per calendar year) (1) -- CLASS I SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I SHARES
--------------
<S> <C>
1989 13.03
1990 9.25
1991 15.67
1992 6.57
1993 11.33
1994 -6.91
1995 23.68
1996 5.08
1997 9.92
1998 8.19
</TABLE>
(1) For the period from January 1, 1999 through
September 30, 1999, the Fund's total return was
-.39%. The above quoted performance data includes
the performance of a common trust fund, the
predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with One Group Bond Fund on March
22, 1999. The predecessor to the Pegasus Bond
Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its return
may have been lower.
- --------------------------------------------------------------------------------
Best Quarter: 7.61% 2Q1995 Worst
Quarter: -2.66% 1Q1994
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS through December 31,
1998 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
CLASS I (since 12/31/83)
<S> <C> <C> <C> <C>
One Group Bond Fund 8.19% 7.55% 9.32% 9.99%
--------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond
Index (2) 8.69% 7.27% 9.26% 10.31%
--------------------------------------------------------------------------------------------
Lipper Intermediate U.S.
Government Bond Funds
Index (3) 8.17% 6.12% * *
</TABLE>
(1) The above quoted performance data includes the
performance of a common trust fund, the
predecessor to the Pegasus Bond Fund and the
Pegasus Bond Fund for the period prior to the
consolidation with the One Group Bond Fund on
March 22, 1999. The predecessor to the Pegasus
Bond Fund commenced operations on June 1, 1991
subsequent to the transfer of assets from a
common trust fund with materially equivalent
investment objectives, policies, guidelines and
restrictions as the Fund. The quoted performance
of the Fund includes the performance of the
common trust fund for periods prior to the
commencement of operations of the predecessor to
the Pegasus Bond Fund as adjusted to reflect the
expenses associated with the Fund. The common
trust fund was not registered with the SEC and
was not subject to the investment restrictions,
limitations, and diversification requirements
imposed by law on registered mutual funds. If the
common trust fund had been registered, its
returns would have been lower.
(2) The Lehman Brothers Aggregate Bond Index is an
unmanaged index generally representative of the
bond markets as a whole. The performance of the
index does not reflect the deduction of expenses
associated with a mutual fund, such as investment
management fees. By contrast, the performance of
the Fund reflects the deduction of these
services.
(3) The Lipper Intermediate U.S. Government Bond
Funds Index consists of the equally weighted
average monthly return of the largest funds
within the universe of all funds in the category.
()* Index did not exist.
<PAGE> 842
5
- ------------------------------------
One Group Bond Fund
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay
if you buy and hold shares of
the Fund.
EXAMPLES
The example is intended to help
you compare the cost of
investing in the Fund with the
cost of investing in other
mutual funds. The example
assumes that you invest $10,000
in the Fund for the time
periods indicated and reflect
what you would pay if either
you redeemed all of your shares
or if you continued to hold
them at the end of the periods
shown. The Examples also assume
that your investment has a 5%
return each year and that the
Fund's operating expenses
remain the same. Your actual
costs may be higher or lower
than those shown below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases NONE
------------------------------------------------------------------------------
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) NONE
------------------------------------------------------------------------------
(as a percentage of original purchase price of redemption
proceeds, as applicable)
Redemption Fee NONE
------------------------------------------------------------------------------
Exchange Fee NONE
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (1) CLASS I
------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .60%
------------------------------------------------------------------------------
Distribution [and/or Service] (12b-1) Fees NONE
------------------------------------------------------------------------------
Other Expenses .21%
------------------------------------------------------------------------------
Total Annual Fund Operating Expenses .81%
------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement (2) (.21%)
------------------------------------------------------------------------------
Net Expenses .60%
------------------------------------------------------------------------------
</TABLE>
(1) Expense information has been restated to reflect
current fees.
(2) Banc One Investment Advisors Corporation and The
One Group Services Company have contractually
agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to
.60% for Class I shares for the period beginning
November 1, 1999 and ending on October 31, 2000.
<TABLE>
<CAPTION>
CLASS I
------------------------------
<S> <C> <C>
1 Year (1) $ 61
------------------------------
3 Years 238
------------------------------
5 Years 429
------------------------------
10 Years 982
------------------------------
</TABLE>
(1) Without contractual fee waivers, 1 Year expenses
would be $83.
<PAGE> 843
6
ONE GROUP(R)
- ------------------------------------
More About The Fund
The Fund described in this Prospectus is a series of One
Group Mutual Funds and is managed by Banc One Investment
Advisors Corporation. For more information about One
Group and Banc One Investment Advisors, please read
"Management of One Group Mutual Funds" and the Statement
of Additional Information.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGY The One Group Bond Fund is designed to maximize total
return. Banc One Investment Advisors looks for sectors
and securities that it believes will perform
consistently well over time as measured by total return.
The portfolio attempts to enhance total return by
selecting market sectors that offer risk/reward
advantages based on structural risks and credit trends.
The principal investment strategy that is used to meet
the Fund's investment objective is described in Fund
Summary: Investments, Risks, & Performance in the front
of this prospectus. It is also described below. There
can be no assurance that the Fund will achieve its
investment objective. Please note that the Fund may also
use strategies that are not described below, but which
are described in the Statement of Additional
Information.
FUNDAMENTAL POLICIES
A Fund's investment strategy may involve
"fundamental policies." A policy is
fundamental if it cannot be changed
without the consent of a majority of the
outstanding shares of the Fund.
The Fund invests in all types of debt securities rated
as investment grade, as well as convertible securities,
preferred stock, and loan participations.
- The Fund invests at least 65% of its total assets in
debt securities of all types with intermediate to long
maturities.
- As a matter of fundamental policy, at least 65% of the
Fund's total assets will consist of bonds.
- The Fund may purchase taxable or tax-exempt municipal
securities.
- The Fund may invest in debt securities that are rated
in the lowest investment grade category.
- 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.
WHAT IS AVERAGE WEIGHTED MATURITY?
Average weighted maturity is the average
of all the current maturities (that is,
the term of the securities) of the
individual securities in a fund calculated
so as to count most heavily those
securities with the highest dollar value.
Average weighted maturity is important to
investors as an indication of a fund's
sensitivity to changes in interest rates.
The longer the average weighted maturity,
the more fluctuation in share price you
can expect.
<PAGE> 844
7
- --------------------------------------------------------------------------------
INVESTMENT RISKS The risks associated with investing in the Fund are
described below and in Fund Summary: Investments, Risks,
& Performance at the front of this prospectus.
- -----
FIXED INCOME SECURITIES. Investments by the Fund 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 the
Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments
generally increases. The value of the securities in the
Fund, and the value of your investment in the Fund, will
increase and decrease as the value of the Fund's
investments increase and decrease.
- -----
DERIVATIVES. The Fund invests in securities that are
considered to be DERIVATIVES. These securities may be
more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage,
liquidity, and management risks.
WHAT IS A DERIVATIVE?
Derivatives are securities or contracts
(like futures and options) that derive
their value from the performance of
underlying assets or securities.
- -----
LOWER RATED SECURITIES. The Fund may purchase debt
securities rated in the lowest investment grade
category. Securities in this rating category are
considered to have speculative characteristics. Changes
in economic conditions or other circumstances may have a
greater effect on the ability of issuers of these
securities to make principal and interest payments than
they do on issuers of higher-grade securities.
For more information about risks associated with the
types of investments that the Fund purchases, please
read Fund Summary: Investments, Risks, & Performance,
Appendix A and the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES The Fund's investment objective and the investment
policies summarized below are fundamental. This means
that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full
text of the fundamental policies can be found in the
Statement of Additional Information.
The Fund will 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.
<PAGE> 845
8
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.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY Various rating organizations (like Standard & Poor's
Corporation and Moody's Investor Service) assign ratings
to securities (other than equity securities). Generally,
ratings are divided into two main categories:
"Investment Grade Securities" and "Non-Investment Grade
Securities." Although there is always a risk of default,
rating agencies believe that issuers of Investment Grade
Securities have a high probability of making payments on
such securities. Non-Investment Grade Securities include
securities that, in the opinion of the rating agencies,
are more likely to default than Investment Grade
Securities. Banc One Investment Advisors will look at a
security's rating at the time of investment. If the
securities are unrated, Banc One Investment Advisors
must determine that they are of comparable quality to
rated securities.
The Bond Fund only purchases securities that meet the
following criteria:
- -----
DEBT SECURITIES
- The Fund may invest in debt securities rated in any of
the four investment grade rating categories.
- -----
PREFERRED STOCK
- The Fund may only invest in preferred stock rated in
any of the four highest rating categories.
- -----
MUNICIPAL SECURITIES
- The Fund may only invest in municipal bonds rated in
any of the four investment grade rating categories.
- The Fund may only invest in other municipal
securities, such as tax-exempt commercial paper,
notes, and variable rate demand obligations that are
rated in the highest or second highest investment
grade rating categories.
- -----
COMMERCIAL PAPER
- The Fund may invest in commercial paper rated in the
highest or second highest rating category.
For more information about ratings, please see
"Description of Ratings" in the Statement of Additional
Information.
<PAGE> 846
9
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE
POSITIONS To provide liquidity and to allow the Fund to respond to
unusual market conditions, the Fund may invest all or a
portion of its assets in cash and CASH EQUIVALENTS (see
below) for temporary defensive purposes. Investments in
cash and cash equivalents may result in a lower yield
than lower-quality or longer term investments and may
prevent the Fund from meeting its investment objective.
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.
WHAT IS A CASH EQUIVALENT?
Cash Equivalents are highly liquid, high
quality instruments with maturities of
three months or less on the date they are
purchased. They include securities issued
by the U.S. Government, its agencies and
instrumentalities, repurchase agreements
(other than equity repurchase agreements),
certificates of deposit, bankers'
acceptances, commercial paper (rated in
one of the two highest rating categories),
variable rate master demand notes, and
bank money market deposit accounts.
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment
strategies. Portfolio turnover may vary greatly from
year to year, as well as within a particular year.
Higher portfolio turnover rates will likely result in
higher transaction costs to the Fund. The portfolio
turnover rate for the Fund for the fiscal year ended
June 30, 1999 is shown on the Financial Highlights.
<PAGE> 847
10
ONE GROUP(R)
- ------------------------------------
- --------------------------------------------------------------------------------
PURCHASING
FUND SHARES
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
allocable to a class (minus class expenses) by the
number of outstanding shares in that class.
- A Fund's NAV changes every business 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.
- It is the responsibility of your Plan Administrator to
send your purchase or redemption order to the Fund.
Please contact your Plan Administrator for information
regarding cut-off times for purchase and redemption
requests.
- The Fund is open for business every day, other than
weekends, days on which the New York Stock Exchange
("NYSE") is closed, and the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, Christmas Eve, and Christmas.
HOW DO I BUY FUND SHARES?
- Please contact your Plan Administrator for information
on participating in your company's plan.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
VOTING RIGHTS
- -------------------------
The Fund does not hold annual shareholder meetings, but
may hold special meetings. The special meetings are
held, for example, to elect or remove Trustees, change a
Fund's fundamental investment objective, or approve an
investment advisory contract.
The 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.
<PAGE> 848
11
DIVIDEND POLICIES
- -------------------------
DIVIDENDS. The Fund generally declares dividends on each
business day. Dividends are distributed on the first
business day of the next month after they are declared.
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.
DIVIDEND REINVESTMENT. You automatically will receive
all income dividends and capital gain distributions in
additional shares of the same Fund and class. The value
of the shares distributed is the NAV determined
immediately following the dividend record date.
TAX TREATMENT OF
SHAREHOLDERS
- -------------------------
TAXATION OF DISTRIBUTIONS. The Fund will distribute
substantially all of its net investment income
(including, for this purpose, the excess of net
short-term capital gains over net long-term capital
losses) and net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital
losses) on at least an annual basis.
TAXATION OF
RETIREMENT PLANS
- -------------------------
Distributions by the Fund to qualified retirement plans
generally will not be taxable. However, if shares are
held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions
will be taxable to the plan or individual. 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.
TAXATION OF ZERO-
COUPON SECURITIES
- -------------------------
The Fund 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 that 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
will select which securities to sell.
SHAREHOLDER INQUIRIES
- -------------------------
If you have any questions or need additional
information, please contact your Plan Administrator.
<PAGE> 849
12
ONE GROUP(R)
- ------------------------------------
Management of
One Group Mutual Funds
- --------------------------------------------------------------------------------
THE ADVISOR Banc One Investment Advisors (1111 Polaris Parkway, P.O.
Box 71021, Columbus, Ohio 43271-0211) makes the
day-to-day investment decisions for the Fund and
continuously reviews, supervises and administers the
Fund's investment program. Banc One Investment Advisors
performs its responsibilities subject to the supervision
of, and policies established by, the Trustees of One
Group Mutual Funds. Banc One Investment Advisors has
served as investment advisor to the Trust since its
inception. In addition, Banc One Investment Advisors
serves as investment advisor to other mutual funds and
individual corporate, charitable, and retirement
accounts. As of June 30, 1999, Banc One Investment
Advisors, an indirect wholly-owned subsidiary of Bank
One Corporation, managed over $126 billion in assets.
- --------------------------------------------------------------------------------
ADVISORY FEES Banc One Investment Advisors is paid a fee based on an
annual percentage of the average daily net assets of
each year. For the most recent fiscal year, the Fund
paid advisory fees at the following rate:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
<S> <C>
One Group(R) Bond Fund(1) 40%
--------------------------------------------------------------------------------------
</TABLE>
(1) In March 1999, the Pegasus Funds and One Group
Mutual Funds merged. The investment advisory fee
includes fees paid to First Chicago NBD
Investment Management Company, an affiliate of
Banc One Investment Advisors, as advisor to the
Pegasus Funds.
- -----------------------------------------------------------------------------
THE FUND MANAGERS The Fund is managed by a team, which includes a Fund
manager, 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 the 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.
<PAGE> 850
13
- --------------------------------------------------------------------------------
YEAR 2000
READINESS
DISCLOSURE The services provided to One Group by Banc One
Investment Advisors and other service providers
(including foreign subcustodians and depositories) are
dependent on those service providers' computer systems.
Many computer software and hardware systems in use today
cannot distinguish between the year 2000 and the year
1900 because of the way dates are encoded and calculated
(the "Year 2000 Issue"). The failure to make this
distinction could have a negative implication on
handling securities, trades, pricing and account
services. Banc One Investment Advisors and One Group's
other service providers have taken steps that each
believes are reasonably designed to address the Year
2000 Issue with respect to the computer systems they
use. The Fund has no reason to believe these steps will
not be sufficient to avoid any material adverse impact
on One Group, although there can be no assurances. The
costs or consequences of incomplete or untimely
resolution of the Year 2000 Issue are unknown to Banc
One Investment Advisors and One Group's other service
providers at this time but could have a material adverse
impact on the operations of One Group, Banc One
Investment Advisors, The One Group Services Company and
One Group's other service providers.
In addition, companies in which the Fund invests may
experience Year 2000 problems. Foreign issuers,
especially those in emerging markets, may be more
susceptible to such problems than U.S. issuers. These
problems could negatively affect the value of the
issuer's securities, which in turn could impact the
Fund's performance.
<PAGE> 851
14
ONE GROUP(R)
- ------------------------------------
FINANCIAL HIGHLIGHTS
Bond Fund
The Financial Highlights tables are intended to help you understand the Fund's
performance for the last five years or the period of the Fund's operations,
whichever is shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). The information for the Fund
has been audited by PricewaterhouseCoopers, LLP and other independent
accountants. PricewaterhouseCooper's 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,
SIX MONTHS ENDED ----------------------------------------------------------------
CLASS I JUNE 30, 1999(D) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01 $ 10.32
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35 0.65 0.66 0.68 0.63 0.61
Net realized and unrealized
gains (losses) from
investments (0.44) 0.19 0.32 (0.18) 1.45 (1.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities (0.09) 0.84 0.98 0.50 2.08 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.35) (0.65) (0.66) (0.68) (0.64) (0.59)
Net realized gains - - - - - (0.02)
Total Distributions (0.35) (0.65) (0.66) (0.68) (0.64) (0.61)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.78 $ 10.59 $ 10.27 $ 10.45 $ 9.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (0.87%)(A) 8.17% 9.97% 5.08% 23.75% (6.99%)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000) $1,330,527 $1,277,246 $1,101,894 $757,627 $485,851 $395,116
Ratio of expenses to average net
assets 0.64%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income
to average net assets 6.65%(B) 6.10% 6.41% 6.71% 6.39% 6.36%
Ratio of expenses to average net
assets* 0.75%(B) 0.64% 0.61% 0.66% 0.74% 0.74%
Ratio of net investment income
to average net assets* 6.54%(B) 6.10% 6.41% 6.71% 6.39% 6.36%
Portfolio turnover(C) 10.89% 34.69% 17.60% 24.92% 41.91% 75.67%
</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)
Not annualized. (B) Annualized. (C) portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued. (D) Upon reorganizing as a fund of One Group, the Pegasus Bond
Fund became One Group Bond Fund. Financial highlights for the periods prior to
March 22, 1999 represent the Pegasus Bond Fund.
<PAGE> 852
15
ONE GROUP(R)
- ------------------------------------
Appendix A
- --------------------------------------------------------------------------------
INVESTMENT
PRACTICES The Fund invests in a variety of securities and employs
a number of investment techniques. Each security and
technique involves certain risks. What follows is a list
of the securities and techniques utilized by the Fund,
as well as the risks inherent in their use. Fixed income
securities are primarily influenced by market, credit
and prepayment risks, although certain securities may be
subject to additional risks. For a more complete
discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS, and Market
CUBES.
--------------------------------------------------------------------------
Treasury Receipts: TRS, TIGRs, and CATS. Market
--------------------------------------------------------------------------
U.S. Government Agency Securities: Securities issued by Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
--------------------------------------------------------------------------
Certificates of Deposit: Negotiable instruments with a Market
stated maturity. Credit
Liquidity
--------------------------------------------------------------------------
Time Deposits: Non-negotiable receipts issued by a bank in Liquidity
exchange for the deposit of funds. Credit
Market
--------------------------------------------------------------------------
Repurchase Agreements: The purchase of a security and the Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
--------------------------------------------------------------------------
Reverse Repurchase Agreements: The sale of a security and 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 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit as collateral. Leverage
--------------------------------------------------------------------------
</TABLE>
<PAGE> 853
16
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
When-Issued Securities and Forward Commitments: Purchase or Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
Credit
--------------------------------------------------------------------------
Investment Company Securities: Shares of other mutual funds, Market
including One Group money market funds and shares of other
money market funds for which Banc One Investment Advisors
serves as investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when investing
in funds for which it serves as investment advisor.
--------------------------------------------------------------------------
Convertible Securities: Bonds or preferred stock that Market
convert to common stock. Credit
--------------------------------------------------------------------------
Call and Put Options: A call option gives the buyer the 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 Fund Leverage
will sell covered call and secured put options.
--------------------------------------------------------------------------
Futures and Related Options: A contract providing for the Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
--------------------------------------------------------------------------
Real Estate Investment Trusts ("REITs"): Pooled investment Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
--------------------------------------------------------------------------
Bankers' Acceptances: Bills of exchange or time drafts drawn Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
--------------------------------------------------------------------------
Commercial Paper: Secured and unsecured short-term Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
--------------------------------------------------------------------------
Foreign Securities: Stocks issued by foreign companies, as 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
Receipts and Global Depository Receipts, and American Investment
Depository Securities.
--------------------------------------------------------------------------
</TABLE>
<PAGE> 854
17
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Restricted Securities: Securities not registered under the Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities. Credit
--------------------------------------------------------------------------
Variable and Floating Rate Instruments: Obligations with 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.
--------------------------------------------------------------------------
Preferred Stock: A class of stock that generally pays a Market
dividend at a specified rate and has preference over common
stock in the payment of dividends and in liquidation.
--------------------------------------------------------------------------
Mortgage-Backed Securities: Debt obligations secured by real 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 Market
non-convertible debt securities. Credit
--------------------------------------------------------------------------
Demand Features: Securities that are subject to puts and Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
--------------------------------------------------------------------------
Asset-Backed Securities: Securities secured by company Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
--------------------------------------------------------------------------
Mortgage Dollar Rolls: A transaction in which a Fund sells 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 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 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> 855
18
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Financial Products: New options and futures contracts Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
--------------------------------------------------------------------------
Structured Instruments: Debt securities issued by agencies 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
other referenced indices. Investment
--------------------------------------------------------------------------
Municipal Securities: Securities issued by a state or Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation Notes, Tax Anticipation Notes, Bond Anticipation 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 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 Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero
Coupon
--------------------------------------------------------------------------
Stripped Mortgage-Backed Securities: Derivative multi-class 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
The Fund 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 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 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
--------------------------------------------------------------------------
</TABLE>
<PAGE> 856
19
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fixed Rate Mortgage Loans: Investments in fixed rate 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 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").
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT RISKS Below is a more complete discussion of the types of
risks inherent in the securities and investment
techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate,
as will the value of your investment in the Fund.
Certain investments are more susceptible to these risks
than others.
- Credit Risk. The risk that the issuer of a security,
or the counterparty to a contract, will default or
otherwise become unable to honor a financial
obligation. Credit risk is generally higher for
non-investment grade securities. The price of a
security can be adversely affected prior to actual
default as its credit status deteriorates and the
probability of default rises.
- Leverage Risk. The risk associated with securities or
practices 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.
<PAGE> 857
20
- 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 may affect the ability of an issuer to
repay U.S. dollar denominated debt, thereby increasing
credit risk.
- Pre-Payment Risk. The risk that the principal
repayment of a security will occur at an unexpected
time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly
sooner or later than expected. Changes in pre-payment
rates can result in greater price and yield
volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other
obligations are pre-paid, a Fund may have to reinvest
in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities
will fail to comply with certain requirements of the
Internal Revenue Code, which would cause adverse tax
consequences.
- Regulatory Risk. The risk associated with Federal and
state laws that may restrict the remedies that a
lender has when a borrower defaults on loans. These
laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy
and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
- Zero Coupon Risk. The market prices of securities
structured as zero coupon or pay-in-kind securities
are generally affected to a greater extent by interest
rate changes. These securities tend to be more
volatile than securities that pay interest
periodically.
<PAGE> 858
(Intentionally Left Blank)
<PAGE> 859
- --------------------------------------------------------------------------------
If you want more information about the Fund, the
following documents are free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about
the Fund's investments is available in the Fund's annual
and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"): The SAI
provides more detailed information about the Fund and is
incorporated into this prospectus by reference.
HOW CAN I GET MORE INFORMATION? You can get a free copy
of the semiannual/ annual reports or the SAI, request
other information or discuss your questions about the
Fund by contacting your Plan Administrator.
You can also review and copy the Fund's reports and the
SAI at the Public Reference Room of the Securities and
Exchange Commission ("SEC"). (For information about the
SEC's Public Reference Room call 1-800-SEC-0330). You
can also get reports and other information about the
Funds from the SEC's web site at http://www.sec.gov or
by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 and paying a copying charge.
(Investment Company Act File No. 811-4236)
TOG-F-228 [LOGO]
<PAGE> 860
STATEMENT OF ADDITIONAL INFORMATION
ONE GROUP(R) MUTUAL FUNDS
ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
(THE "U.S. TREASURY SECURITIES MONEY MARKET FUND")
ONE GROUP PRIME MONEY MARKET FUND (THE "PRIME MONEY MARKET FUND")
ONE GROUP MUNICIPAL MONEY MARKET FUND (THE "MUNICIPAL MONEY MARKET FUND")
ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND (THE "OHIO MUNICIPAL MONEY MARKET
FUND")
ONE GROUP BALANCED FUND (THE "BALANCED FUND")
ONE GROUP LARGE CAP GROWTH FUND (THE "LARGE CAP GROWTH FUND")
ONE GROUP LARGE CAP VALUE FUND (THE "LARGE CAP VALUE FUND")
ONE GROUP MID CAP GROWTH FUND (THE "MID CAP GROWTH FUND")
ONE GROUP INTERNATIONAL EQUITY INDEX FUND (THE "INTERNATIONAL EQUITY INDEX
FUND")
ONE GROUP MID CAP VALUE FUND (THE "MID CAP VALUE FUND")
ONE GROUP EQUITY INDEX FUND (THE "EQUITY INDEX FUND")
ONE GROUP EQUITY INCOME FUND (THE "EQUITY INCOME FUND")
ONE GROUP DIVERSIFIED EQUITY FUND (THE "DIVERSIFIED EQUITY FUND")
ONE GROUP SMALL CAP GROWTH FUND (THE "SMALL CAP GROWTH FUND")
ONE GROUP INTERMEDIATE BOND FUND (THE "INTERMEDIATE BOND FUND")
ONE GROUP INCOME BOND FUND (THE "INCOME BOND FUND")
ONE GROUP GOVERNMENT BOND FUND (THE "GOVERNMENT BOND FUND")
ONE GROUP ULTRA SHORT-TERM BOND FUND (THE "ULTRA SHORT-TERM BOND FUND")
ONE GROUP SHORT-TERM BOND FUND (THE "SHORT-TERM BOND FUND")
ONE GROUP TREASURY & AGENCY FUND (THE "TREASURY & AGENCY FUND")
ONE GROUP HIGH YIELD BOND FUND (THE "HIGH YIELD BOND FUND")
ONE GROUP INTERMEDIATE TAX-FREE BOND FUND (THE "INTERMEDIATE TAX-FREE BOND
FUND")
ONE GROUP MUNICIPAL INCOME FUND (THE "MUNICIPAL INCOME FUND")
ONE GROUP ARIZONA MUNICIPAL BOND FUND
(THE "ARIZONA MUNICIPAL BOND FUND")
ONE GROUP WEST
VIRGINIA MUNICIPAL BOND FUND (THE "WEST VIRGINIA MUNICIPAL BOND FUND")
ONE GROUP LOUISIANA MUNICIPAL BOND FUND
(THE "LOUISIANA MUNICIPAL BOND FUND")
ONE GROUP OHIO MUNICIPAL BOND FUND (THE "OHIO MUNICIPAL BOND FUND")
ONE GROUP KENTUCKY MUNICIPAL BOND FUND (THE "KENTUCKY MUNICIPAL BOND FUND")
ONE GROUP TREASURY ONLY MONEY MARKET FUND (THE "TREASURY ONLY
MONEY MARKET FUND")
ONE GROUP GOVERNMENT MONEY MARKET FUND
(THE "GOVERNMENT MONEY MARKET FUND")
ONE GROUP TAX-EXEMPT
MONEY MARKET FUND (THE "TAX-EXEMPT MONEY MARKET FUND")
ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND (THE "INSTITUTIONAL PRIME MONEY
MARKET FUND")
ONE GROUP INVESTOR GROWTH FUND (THE "INVESTOR GROWTH FUND")
ONE GROUP INVESTOR GROWTH & INCOME FUND (THE "INVESTOR GROWTH & INCOME FUND")
ONE GROUP INVESTOR BALANCED FUND (THE "INVESTOR BALANCED FUND")
ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND (THE "INVESTOR CONSERVATIVE
GROWTH FUND")
ONE GROUP SMALL CAP VALUE FUND (THE "SMALL CAP VALUE FUND")
1
<PAGE> 861
ONE GROUP DIVERSIFIED MID CAP FUND (THE "DIVERSIFIED MID CAP FUND")
ONE GROUP DIVERSIFIED INTERNATIONAL FUND (THE "DIVERSIFIED INTERNATIONAL FUND")
ONE GROUP MARKET EXPANSION INDEX FUND (THE "MARKET EXPANSION INDEX FUND")
ONE GROUP BOND FUND (THE "BOND FUND")
ONE GROUP SHORT-TERM MUNICIPAL BOND FUND (THE "SHORT-TERM MUNICIPAL BOND FUND")
ONE GROUP TAX-FREE BOND FUND (THE "TAX-FREE BOND FUND")
ONE GROUP MICHIGAN MUNICIPAL BOND FUND (THE "MICHIGAN MUNICIPAL BOND FUND")
ONE GROUP MICHIGAN MUNICIPAL MONEY MARKET FUND (THE "MICHIGAN MUNICIPAL MONEY
MARKET FUND")
ONE GROUP CASH MANAGEMENT MONEY MARKET FUND (THE "CASH MANAGEMENT MONEY MARKET
FUND")
ONE GROUP TREASURY CASH MANAGEMENT MONEY MARKET FUND (THE "TREASURY CASH
MANAGEMENT MONEY MARKET FUND")
ONE GROUP TREASURY PRIME CASH MANAGEMENT MONEY MARKET FUND (THE "TREASURY PRIME
CASH MANAGEMENT MONEY MARKET FUND")
ONE GROUP U.S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET FUND
(THE "U.S. GOVERNMENT SECURITIES CASH MANAGEMENT MONEY MARKET
FUND")
ONE GROUP MUNICIPAL CASH MANAGEMENT MONEY MARKET FUND (THE "MUNICIPAL CASH
MANAGEMENT MONEY MARKET FUND")
ONE GROUP REAL ESTATE FUND (THE "REAL ESTATE FUND")
ONE GROUP TECHNOLOGY FUND (THE "TECHNOLOGY FUND")
ONE GROUP U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (THE "US GOVERNMENT
SECURITIES MONEY MARKET FUND") AND
ONE GROUP TREASURY PRIME MONEY MARKET FUND (THE "TREASURY PRIME MONEY
MARKET FUND")
(EACH A "FUND," AND COLLECTIVELY THE "FUNDS")
NOVEMBER 1, 1999
This Statement of Additional Information is not a Prospectus, but supplements
and should be read in conjunction with the Prospectuses dated November 1, 1999.
This Statement of Additional Information is incorporated in its entirety into
each Fund's Prospectus. The Annual Report for the Funds for the fiscal year
ended June 30, 1999 is incorporated by reference into this Statement of
Additional Information. A copy of the Annual Report and each Prospectus is
available without charge by writing to The One Group Services Company, 3435
Stelzer Road, Columbus, Ohio 43219, or by telephoning toll free (800) 480-4111.
2
<PAGE> 862
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST
INVESTMENT OBJECTIVES AND POLICIES........................................................................ 10
Additional Information on Fund Instruments .......................................................... 10
Asset-Backed Securities ......................................................................... 10
Bank Obligations ................................................................................ 10
Commercial Paper ................................................................................ 11
Common Stock .................................................................................... 11
Convertible Securities .......................................................................... 12
Demand Features ................................................................................. 12
Foreign Investments ............................................................................. 12
Risk Factors of Foreign Investments ........................................................ 12
Limitations on the Use of Foreign Investments .............................................. 13
Foreign Currency Transactions ................................................................... 14
Position Hedging ........................................................................... 15
Forward Foreign Currency Exchange Contracts ................................................ 15
Foreign Currency Futures Contracts ......................................................... 16
Foreign Currency Options ................................................................... 17
Foreign Currency Conversion ................................................................ 18
Other Foreign Currency Hedging Strategies .................................................. 18
Risk Factors in Hedging Transactions ....................................................... 18
Futures and Options Trading ..................................................................... 19
Futures Contracts .......................................................................... 19
Limitations on the Use of Futures Contracts ................................................ 20
Risk Factors in Futures Transactions ....................................................... 21
Options Contracts .......................................................................... 22
Writing (Selling) Covered Calls ............................................................ 23
Purchasing Call Options .................................................................... 25
Purchasing Put Options ..................................................................... 25
Secured Puts ............................................................................... 25
Straddles and Spreads ...................................................................... 25
Risk Factors in Options Transactions ....................................................... 25
Limitations on the Use of Options .......................................................... 26
Government Securities ........................................................................... 26
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds ........................................................... 27
High Yield/High Risk Securities/Junk Bonds ...................................................... 28
Index Investing by the Equity Index, Market Expansion Index
and International Equity Index Funds ....................................................... 30
Index Shares
Investment Company Securities ................................................................... 31
Loan Participations and Assignments ............................................................. 32
Mortgage-Related Securities ..................................................................... 33
Mortgage-Backed Securities (CMOs and REMICs) ............................................... 33
Limitations on the Use of Mortgage Backed Securities ....................................... 35
Mortgage Dollar Rolls ...................................................................... 36
Stripped Mortgage Backed Securities ........................................................ 36
Adjustable Rate Mortgage Loans.............................................................. 37
Risk Factors of Mortgage-Related Securities ................................................ 38
Municipal Securities ............................................................................ 39
Risk Factors in Municipal Securities ....................................................... 40
Limitations on the Use of Municipal Securities ............................................. 41
Arizona Municipal Securities ............................................................... 42
Kentucky Municipal Securities .............................................................. 43
Louisiana Municipal Securities ............................................................. 43
Michigan Municipal Securities .............................................................. 44
Ohio Municipal Securities .................................................................. 46
West Virginia Municipal Securities ......................................................... 46
New Financial Products .......................................................................... 47
PERCS ........................................................................................... 47
</TABLE>
3
<PAGE> 863
<TABLE>
<CAPTION>
PAGE
<S> <C>
Preferred Stock ................................................................................. 47
Real Estate Investment Trusts ("REITs").......................................................... 48
Repurchase Agreements ........................................................................... 48
Reverse Repurchase Agreements ................................................................... 49
Restricted Securities ........................................................................... 49
Securities Lending .............................................................................. 50
Short-term Funding Agreements ................................................................... 51
Structured Instruments .......................................................................... 51
Swaps, Caps and Floors .......................................................................... 52
Treasury Receipts ............................................................................... 54
U.S. Treasury Obligations ....................................................................... 54
Variable and Floating Rate Instruments .......................................................... 55
Warrants ........................................................................................ 56
When-Issued Securities and Forward Commitments .................................................. 56
Ratings of Portfolio Securities ..................................................................... 57
Investment Restrictions ............................................................................. 70
Portfolio Turnover .................................................................................. 76
Additional Tax Information Concerning All Funds ..................................................... 78
Additional Tax Information Concerning the Tax-Advantaged Funds ...................................... 81
Additional Tax Information Concerning the International Funds ....................................... 83
Foreign Tax Credit .................................................................................. 83
Additional Tax Information Concerning the Funds of Funds ............................................ 84
VALUATION
Valuation of the Money Market and Institutional Money Market Funds .................................. 85
Valuation of the Equity Funds, the Bond Funds and the Municipal
Bond Funds ...................................................................................... 85
ADDITIONAL INFORMATION REGARDING THE CALCULATION OF PER SHARE
NET ASSET VALUE ..................................................................................... 86
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ........................................................... 86
Exchanges ........................................................................................... 87
Redemptions.......................................................................................... 88
MANAGEMENT OF THE TRUST .................................................................................. 89
Trustees & Officers ................................................................................. 89
Investment Advisor and Sub-Advisors ................................................................. 93
Glass-Steagall Act .................................................................................. 100
Portfolio Transactions .............................................................................. 100
Administrator ....................................................................................... 103
Distribution Plan ................................................................................... 110
Predecessor Funds' Distribution and Shareholder Servicing Plans ..................................... 112
Cash Compensation to Shareholder Servicing Agents
Custodian, Transfer Agent and Dividend Disbursing Agent.............................................. 114
Subcustodian ........................................................................................ 115
Experts ............................................................................................. 115
ADDITIONAL INFORMATION ................................................................................... 117
Description of Shares ............................................................................... 117
Shareholder and Trustee Liability ................................................................... 118
Performance ......................................................................................... 119
Calculation of Performance Data ..................................................................... 119
Miscellaneous ....................................................................................... 133
FINANCIAL STATEMENTS
</TABLE>
4
<PAGE> 864
THE TRUST
One Group Mutual Funds (the "TRUST") is an open-end management
investment company. The Trust was formed as a Massachusetts Business Trust on
May 23, 1985. The Trust changed its name from The One Group(R) to One Group
Mutual Funds in March, 1999. The Trust consists of fifty-four series of units
of beneficial interest ("SHARES") each representing interests in one of the
following separate investment portfolios ("FUNDS"):
Money Market Funds: The U.S. Treasury Securities Money Market Fund
(formerly, the U.S. Treasury Money Market Portfolio), the Prime Money
Market Fund, the Municipal Money Market Fund (formerly, the Tax-Free
Obligations Portfolio) the Ohio Municipal Money Market Fund, the
Michigan Municipal Money Market Fund (formerly, Pegasus Michigan
Municipal Money Market Fund), the U.S. Government Securities Money
Market Fund, and the Treasury Prime Money Market Fund (these seven
Funds being collectively referred to as the "MONEY MARKET FUNDS"),
Equity Funds: The Equity Income Fund (formerly, the Income Equity
Fund), the Mid Cap Value Fund (formerly, the Disciplined Value Fund),
the Mid Cap Growth Fund (formerly, the Growth Opportunities Fund and
the Small Company Growth Fund), the Equity Index Fund, the
International Equity Index Fund, the Large Cap Value Fund (formerly,
the Large Company Value Fund and the Quantitative Equity Portfolio),
the Large Cap Growth Fund (formerly, the Large Company Growth Fund),
the Balanced Fund (formerly, the Asset Allocation Fund and the
Flexible Balanced Portfolio), the Diversified Equity Fund (formerly,
the Value Growth Fund), the Small Cap Growth Fund (formerly, the
Small Capitalization Fund and the Gulf South Growth Fund), the Small
Cap Value Fund (formerly, Pegasus Small-Cap Opportunity Fund), the
Diversified Mid Cap Fund (formerly, Pegasus Mid-Cap Opportunity
Fund), Diversified International Fund (formerly, Pegasus
International Equity Fund), and the Market Expansion Index Fund
(formerly, Pegasus Market Expansion Index Fund), the Real Estate
Fund, and the Technology Fund (these sixteen Funds being collectively
referred to as the "EQUITY FUNDS"),
Bond Funds: The Intermediate Bond Fund, the Income Bond Fund, the
Government Bond Fund, the Ultra Short-Term Bond Fund (formerly the
Ultra Short-Term Income Fund and the Government ARM Fund), the
Short-Term Bond Fund (formerly, the Limited Volatility Bond Fund),
the Treasury & Agency Fund, the High Yield Bond Fund (formerly, the
Income Fund) and the Bond Fund (formerly, Pegasus Bond Fund) (these
eight Funds being collectively referred to as the "BOND FUNDS"),
Municipal Bond Funds: The Intermediate Tax-Free Bond Fund, the
Municipal Income Fund (formerly the Tax-Free Bond Fund), the Tax-Free
Bond Fund (formerly, Pegasus Municipal Bond Fund), the Short-Term
Municipal Bond Fund (formerly, Pegasus Short Municipal Bond Fund),
the Ohio Municipal Bond Fund, the West Virginia Municipal Bond Fund,
the Kentucky Municipal Bond Fund, the Arizona Municipal Bond Fund,
the Louisiana Municipal Bond Fund, and the Michigan Municipal Bond
Fund (formerly, Pegasus Michigan Municipal Bond Fund) (these ten
Funds being collectively referred to as the "MUNICIPAL BOND FUNDS"),
Institutional Money Market Funds: The Treasury Only Money Market
Fund, the Government Money Market Fund, the Tax-Exempt Money Market
Fund, the Institutional Prime Money Market Fund, the Cash Management
Money Market Fund (formerly, Pegasus Cash Management Fund), the
Treasury Cash Management Money Market Fund (formerly, Pegasus
Treasury Cash Management Fund), the Treasury Prime Cash Management
Money Market Fund (formerly, Pegasus Treasury Prime Cash Management
Fund), the U.S. Government Securities Cash Management Money Market
Fund (formerly, Pegasus U.S. Government Securities Cash Management
Fund), and the Municipal Cash Management Money Market Fund (formerly,
Pegasus Municipal
5
<PAGE> 865
Cash Management Fund) (these nine Funds being collectively referred
to as the "INSTITUTIONAL MONEY MARKET FUNDS"),
Funds of Funds: The Investor Growth Fund, the Investor Growth &
Income Fund, the Investor Conservative Growth Fund, and the Investor
Balanced Fund (these four Funds being collectively referred to as the
"FUNDS OF FUNDS").
TAX-ADVANTAGED FUNDS: The Municipal Money Market Fund, the Ohio Municipal Money
Market Fund, the Michigan Municipal Money Market Fund, the Municipal Bond Funds,
the Tax-Exempt Money Market Fund, and the Municipal Cash Management Money Market
Fund are also referred to as the "TAX-ADVANTAGED FUNDS."
INTERNATIONAL FUNDS: The Diversified International Fund and the International
Equity Index Fund are also referred to as the "INTERNATIONAL FUNDS."
CASH MANAGEMENT FUNDS: The Cash Management Money Market Fund, the Treasury Cash
Management Money Market Fund, the Treasury Prime Cash Management Money Market
Fund, the U.S. Government Securities Cash Management Money Market Fund, and the
Municipal Cash Management Money Market Fund are also referred to as the "CASH
MANAGEMENT FUNDS."
DIVERSIFICATION. All of the Trust's Funds are diversified, as defined under the
Investment Company Act of 1940, as amended (the "1940 ACT"), except the
following which are non-diversified:
1. the Ohio Municipal Bond Fund,
2. the Kentucky Municipal Bond Fund,
3. the West Virginia Municipal Bond Fund,
4. the Arizona Municipal Bond Fund,
5. the Michigan Municipal Bond Fund,
6. the Michigan Municipal Money Market Fund,
7. the Ohio Municipal Money Market Fund,
8. the Louisiana Municipal Bond Fund,
9. the Real Estate Fund, and
10. the Technology Fund.
SHARE CLASSES. Shares in the Funds of the Trust (other than the Institutional
Money Market Funds and the Money Market Funds) are generally offered in four
separate classes: Class I Shares, Class A Shares, Class B Shares and Class C
Shares. The following chart shows the share classes offered (or which are
anticipated to be offered) by each of the Funds as of the date of this Statement
of Additional Information:
6
<PAGE> 866
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FUND Class A Class B Class C Service Class S Class I
Class
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. Small Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
2. Small Cap Value X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
3. Mid Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
4. Mid Cap Value X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
5. Diversified Mid X X X X
Cap
- ---------------------------------------------------------------------------------------------------------------------------------
6. Large Cap Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
7. Large Cap Value X X X
- ---------------------------------------------------------------------------------------------------------------------------------
8. Equity Income X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
9. Diversified Equity X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
10. Balanced X X X
- ---------------------------------------------------------------------------------------------------------------------------------
11. Equity Index X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
12. Market Expansion X X X X
Index
- ---------------------------------------------------------------------------------------------------------------------------------
13. International X X X X
Equity Index
- ---------------------------------------------------------------------------------------------------------------------------------
14. Diversified X X X X
International
- ---------------------------------------------------------------------------------------------------------------------------------
15. Real Estate X* X* X* X*
- ---------------------------------------------------------------------------------------------------------------------------------
16. Ultra Short-Term X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
17. Short-Term Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
18. Intermediate Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
19. Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
20. Income Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
21. Government Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
22. Treasury & Agency X X X
- ---------------------------------------------------------------------------------------------------------------------------------
23. High Yield Bond X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
24. Short-Term X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
25. Intermediate Tax- X X X
Free Bond
- ---------------------------------------------------------------------------------------------------------------------------------
26. Tax-Free Bond X X X
- ---------------------------------------------------------------------------------------------------------------------------------
27. Municipal Income X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
28. Arizona Municipal X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
29. Kentucky X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
30. Louisiana X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
31. Michigan X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
32. Ohio Municipal X X X
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
33. West Virginia X X X
Municipal Bond
- ---------------------------------------------------------------------------------------------------------------------------------
34. Investor Growth X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
35. Investor Growth & X X X X
Income
- ---------------------------------------------------------------------------------------------------------------------------------
36. Investor Balanced X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
37. Investor X X X X
Conservative Growth
- ---------------------------------------------------------------------------------------------------------------------------------
38. Cash Management X X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
39. Treasury Cash X X
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
40. Treasury Prime X X
Cash Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 867
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
FUND Class A CLASS B Class C Service Class S CLASS I
Class
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
41. U.S. Government X X
Securities Cash
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
42. Municipal Cash X X
Management Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
43. Prime Money X X X X X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
44. U.S. Treasury X X X X X
Securities Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
45. Municipal Money X X X X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
46. Michigan X X X
Municipal Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
47. Ohio Municipal X X X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
48. Treasury Prime X* X* X* X*
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
49. U.S. Government X* X* X* X*
Securities Money
Market
- ---------------------------------------------------------------------------------------------------------------------------------
50. Institutional X** X
Prime Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
51. Treasury Only X** X
Money Market
- ---------------------------------------------------------------------------------------------------------------------------------
52. Government Money X** X
Market
- ---------------------------------------------------------------------------------------------------------------------------------
53. Tax-Exempt Money X* X*
Market
- ---------------------------------------------------------------------------------------------------------------------------------
54. Technology X* X* X* X*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* As of the date of this Statement of Additional Information, the Fund
had not commenced operations.
** As of the date of this Statement of Additional Information, the shares
had not commenced operations.
Much of the information contained herein expands upon subjects discussed in the
Prospectuses for the respective Funds. No investment in a particular class of
Shares of a Fund should be made without first reading that Fund's Prospectus.
PEGASUS CONSOLIDATION. In March, 1999, the Funds of the Trust consolidated with
the Pegasus Funds pursuant to an Agreement and Plan of Reorganization. Except
for the Funds listed below, One Group Mutual Funds are considered to be the
surviving funds for accounting purposes. The following list shows the name of
the former Pegasus funds that are considered to be the surviving funds for
accounting purposes and the current name of such Funds:
8
<PAGE> 868
<TABLE>
<CAPTION>
NAME OF FORMER PEGASUS FUND ONE GROUP MUTUAL FUNDS' NAME
<S> <C> <C> <C>
1. Pegasus Multi-Sector Bond Fund 1. the Income Bond Fund
2. Pegasus Intermediate Bond Fund 2. the Intermediate Bond Fund
3. Pegasus Small-Cap Opportunity Fund 3. the Small Cap Value Fund
4. Pegasus Mid-Cap Opportunity Fund 4. the Diversified Mid Cap Fund
5. Pegasus International Equity Fund 5. the Diversified International
Fund
6. Pegasus Market Expansion Index Fund 6. the Market Expansion Index
Fund
7. Pegasus Bond Fund 7. the Bond Fund
8. Pegasus Short Municipal Bond Fund 8. the Short-Term Municipal Bond
Fund
9. Pegasus Municipal Bond Fund 9. the Tax-Free Bond Fund
10. Pegasus Michigan Municipal Bond Fund 10. the Michigan Municipal Bond
Fund
11. Pegasus Michigan Municipal Money 11. the Michigan Municipal Money
Market Fund Market Fund
12. Pegasus Cash Management Fund 12. the Cash Management Money
Market Fund
13. Pegasus Treasury Cash Management Fund 13. the Treasury Cash Management
Money Market Fund
14. Pegasus Treasury Prime Cash 14. the Treasury Prime Cash
Management Fund Management Money Market Fund
15. Pegasus U.S. Government Securities 15. the U.S. Government Securities
Cash Management Fund Cash Management Money Market
Fund
16. Pegasus Municipal Cash Management Fund 16. the Municipal Cash Management
Money Market Fund
</TABLE>
These 16 Funds are collectively referred to as the PREDECESSOR FUNDS. Individual
Predecessor Funds are identified in this Statement of Additional Information by
their One Group Mutual Funds' names.
9
<PAGE> 869
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement each Fund's investment objective and
policies as set forth in the respective Prospectus for that Fund.
ADDITIONAL INFORMATION ON FUND INSTRUMENTS
ASSET-BACKED SECURITIES
Asset-backed securities consist of securities secured by company
receivables, home equity loans, truck and auto loans, leases, credit card
receivables and other securities backed by other types of receivables or other
assets. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis.
Prepayment Risks. These securities involve prepayment risk, which is the risk
that the issuers of asset-backed securities may be able to repay principal in
advance if interest rates fall. Also, the underlying assets (for example, the
underlying credit card debt) may be refinanced or paid off prior to maturity
during periods of declining interest rates. If asset-backed securities are
pre-paid, a Fund may have to reinvest the proceeds from the securities at a
lower rate. In addition, potential market gains on a security subject to
prepayment risk may be more limited than potential market gains on a comparable
security that is not subject to prepayment risk. Under certain prepayment rate
scenarios, a Fund may fail to recoup any premium paid on asset-backed
securities.
BANK OBLIGATIONS
Bank obligations consist of bankers' acceptances, certificates of
deposit, and demand and time deposits.
Bankers' Acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks and savings and loan associations having, at the time
of investment, total assets in excess of $1 billion (as of the date of their
most recently published financial statements).
Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
will be those of domestic and foreign branches of U.S. commercial banks which
are members of the Federal Reserve System or the deposits of which are insured
by the Federal Deposit Insurance Corporation, and in certificates of deposit of
domestic savings and loan associations the deposits of which are insured by the
Federal Deposit Insurance Corporation if, at the time of purchase, such
institutions have total assets in excess of $1 billion (as of the date of their
most recently published financial statements). Certificates of deposit may also
include those issued by foreign banks outside the United States with total
assets at the time of purchase in excess of the equivalent of $1 billion. The
Funds may also invest in Eurodollar certificates of deposit, which are U.S.
dollar-denominated certificates of deposit issued by branches of foreign and
domestic banks located outside the United States, and Yankee certificates of
deposit, which are certificates of deposit issued by a U.S. branch of a foreign
bank denominated in U.S. dollars and held in the United States. Certain Funds
may also invest in obligations (including banker's acceptances and certificates
of deposit) denominated in foreign currencies (see "Foreign Investments"
herein).
10
<PAGE> 870
Demand Deposits are funds deposited in a commercial bank or a savings
and loan association which, without prior notice to the bank, may be withdrawn
generally by negotiable draft. Time and demand deposits will be maintained only
at banks or savings and loan associations from which a Fund could purchase
certificates of deposit. TIME DEPOSITS are interest-bearing non-negotiable
deposits at a bank or a savings and loan association that have a specific
maturity date. A time deposit earns a specific rate of interest over a definite
period of time. Time deposits cannot be traded on the secondary market and those
exceeding seven days and with a withdrawal penalty are considered to be
illiquid.
COMMERCIAL PAPER
Commercial paper consists of promissory notes issued by corporations.
Although such notes are generally unsecured, the Funds may also purchase secured
commercial paper. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return. The Funds only purchase commercial paper
that meets the following criteria.
Bond Funds. The Short-Term Bond Fund, the Intermediate Bond Fund, the
Bond Fund and the Ultra Short-Term Bond Fund may purchase commercial
paper consisting of issues rated at the time of purchase in the highest
or second highest rating category by at least one Nationally Recognized
Statistical Rating Organization ("NRSRO") (such as A-2 or better by
Standard & Poor's Corporation ("S&P"), Aa or better by Moody's
Investors Service, Inc. ("MOODY'S") or A2 or better by Fitch IBCA
("FITCH")) or if unrated, determined by Banc One Investment Advisors
Corporation ("BANC ONE INVESTMENT ADVISORS") to be of comparable
quality. The High Yield Bond Fund and the Income Bond Fund may purchase
commercial paper in any rating category by at least one NRSRO, or, if
unrated, determined by Banc One Investment Advisors or with respect to
the High Yield Bond Fund, Banc One High Yield Partners, LLC (the "HIGH
YIELD SUB-ADVISOR" or a "SUB-ADVISOR") to be of comparable quality.
Municipal Bond Funds. The Municipal Bond Funds may purchase commercial
paper consisting of issues rated at the time of purchase in the highest
or second highest rating category by at least one NRSRO (such as A-2 or
better by S&P, P-2 or better by Moody's or F-2 or better by Fitch) or
if unrated, determined by Banc One Investment Advisors to be of
comparable quality.
Money Market Funds. The Money Market Funds (other than the U.S.
Treasury Securities Money Market Fund), may purchase commercial paper
consisting of issues rated at the time of purchase in the highest or
second highest rating category by at least one NRSRO (such as A-2 or
better by S&P, P-2 or better by Moody's or F-2 or better by Fitch) or
if unrated, determined by Banc One Investment Advisors to be of
comparable quality.
Institutional Money Market Funds. The Cash Management Money Market Fund
and the Municipal Cash Management Money Market Fund may purchase
commercial paper rated at the time of purchase in the highest or second
highest rating category by at least one NRSRO (such as A-2 or better by
S&P, P-2 or better by Moody's or F-2 or better by Fitch) or if unrated,
determined by Banc One Investment Advisors to be of comparable quality.
Equity Funds. The Equity Funds may purchase commercial paper consisting
of issues rated at the time of purchase in the highest or second
highest rating category by at least one NRSRO (such as A-2 or better by
S&P, P-2 or better by Moody's or F-2 or better by Fitch) or if unrated,
determined by Banc One Investment Advisors to be of comparable quality.
COMMON STOCK
Common stock represents a share of ownership in a company and usually
carries voting rights and earns dividends. Unlike preferred stock, dividends on
common stock are not fixed but are declared at the discretion of the issuer's
board of directors.
11
<PAGE> 871
(Equity securities such as common stock will generally comprise no more than 10%
of the High Yield Bond Fund's total assets).
CONVERTIBLE SECURITIES
Convertible securities have characteristics similar to both fixed
income and equity securities. Convertible securities may be issued as bonds or
preferred stock. Because of the conversion feature, the market value of
convertible securities tends to move together with the market value of the
underlying stock. As a result, the Funds' selection of convertible securities is
based, to a great extent, on the potential for capital appreciation that may
exist in the underlying stock. The value of convertible securities is also
affected by prevailing interest rates, the credit quality of the issuer, and any
call provisions.
DEMAND FEATURES
Some of the Funds may acquire securities that are subject to puts and
standby commitments ("DEMAND FEATURES") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The underlying securities subject to a put may be sold at any time at
market rates. The Funds expect that they will acquire puts only where the puts
are available without the payment of any direct or indirect consideration.
However, if advisable or necessary, a premium may be paid for put features. A
premium paid will have the effect of reducing the yield otherwise payable on the
underlying security.
Under a "STAND-BY COMMITMENT," a dealer would agree to purchase, at a
Fund's option, specified municipal securities at a specified price. A Fund will
acquire these commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes. Stand-by
commitments may also be referred to as put options. A Fund will generally limit
its investments in stand-by commitments to 25% of its total assets.
The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity to permit the Fund to meet redemption requests and
remain as fully invested as possible.
FOREIGN INVESTMENTS
Some of the Funds may invest in certain obligations or securities of
foreign issuers. Possible investments include equity securities of foreign
entities, obligations of foreign branches of U.S. banks and of foreign banks,
including, without limitation, Eurodollar Certificates of Deposit, Eurodollar
Time Deposits, Eurodollar Bankers' Acceptances, Canadian Time Deposits and
Yankee Certificates of Deposits, and investments in Canadian Commercial Paper,
and Europaper. Securities of foreign issuers may include sponsored and
unsponsored American Depository Receipts ("ADRs"). Sponsored ADRs are listed on
the New York Stock Exchange; unsponsored ADRs are not. Therefore, there may be
less information available about the issuers of unsponsored ADRs than the
issuers of sponsored ADRs. Unsponsored ADRs are restricted securities.
RISK FACTORS OF FOREIGN INVESTMENTS
Political and Exchange Risks. Foreign investments may subject a Fund to
investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. Such risks include
future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible
seizure, nationalization or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source,
greater fluctuations in value due to changes in exchange rates, or the
adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such
obligations.
12
<PAGE> 872
Higher Transaction Costs. Foreign investments may entail higher
custodial fees and sales commissions than domestic investments.
Accounting and Regulatory Differences. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in
business practices different from those respecting domestic issuers of
similar securities or obligations. Foreign branches of U.S. banks and
foreign banks are not regulated by U.S. banking authorities and may be
subject to less stringent reserve requirements than those applicable to
domestic branches of U.S. banks. In addition, foreign banks generally
are not bound by the accounting, auditing, and financial reporting
standards comparable to those applicable to U.S. banks.
Currency Risk. A substantial portion of the securities of the
International Funds will be denominated in foreign currencies. In
addition, the International Funds may hold funds in foreign currencies.
Thus, the value of an International Fund's shares will be affected by
changes in currency exchange rates. The value of the Fund's investments
denominated in foreign currencies and any funds held in foreign
currencies will depend on the relative strength of those currencies and
the U.S. dollar, and the Funds may be affected favorably or unfavorably
by exchange control regulations or changes in exchange rates between
foreign currencies and the U.S. dollar. Changes in the foreign currency
exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to Shareholders
by a Fund. The exchange rates between the U.S. dollar and other
currencies are determined by the forces of supply and demand in foreign
exchange markets. Accordingly, the ability of a Fund to achieve its
investment objective may depend, to a certain extent, on exchange rate
movements.
By investing in foreign securities, the International Funds attempt to
take advantage of differences between both economic trends and the performance
of securities markets in the various countries, regions and geographic areas as
prescribed by a Fund's investment objective and policies. During certain periods
the investment return on securities in some or all countries may exceed the
return on similar investments in the United States, while at other times the
investment return may be less than that on similar U.S. securities. Shares of
the International Funds, when included in appropriate amounts in a portfolio
otherwise consisting of domestic equity and debt securities, will provide a
source of increased diversification.
The International Funds seek increased diversification by combining
securities from various countries and geographic areas that offer different
investment opportunities and are affected by different economic trends.
o The international investments of the International Equity
Index Fund may reduce the effect that events in any one
country or geographic area will have on its investment
holdings. Of course, negative movement by one of the Fund's
investments in one foreign market represented in its portfolio
may offset potential gains from the Fund's investments in
another country's markets.
o The Diversified International Fund invests primarily in the
securities of companies located in Europe, Asia and Latin
America. The Fund may also invest in other regions and
countries that present attractive investment opportunities,
including developing countries. Because the Fund may invest
over 25% of its total assets in a single country, political
and economic developments in that country will have a greater
impact on the performance of the Fund than would be the case
if the Fund were more widely diversified.
LIMITATIONS ON THE USE OF FOREIGN INVESTMENTS. Investments in all types
of foreign obligations or securities will not exceed 25% of the net assets of
the Equity Funds (with the exception of the International Funds) and the Income
Bond, the High Yield Bond, the Bond and the Short-Term Bond Funds.
13
<PAGE> 873
FOREIGN CURRENCY TRANSACTIONS
The International Funds may engage in various strategies to hedge
against interest rate and currency risks. These strategies may consist of use of
any of the following, some of which also have been described above: options on
Fund positions or currencies, financial and currency futures, options on such
futures, forward foreign currency transactions, forward rate agreements and
interest rate and currency swaps, caps and floors. The International Funds may
engage in such transactions in both U.S. and non-U.S. markets. To the extent a
Fund enters into such transactions in markets other than in the United States, a
Fund may be subject to certain currency, settlement, liquidity, trading and
other risks similar to those described above with respect to the Fund's
investments in foreign securities. The International Funds may enter into such
transactions only in connection with hedging strategies.
While a Fund's use of hedging strategies is intended to reduce the
volatility of the net asset value of Fund shares, the net asset value of the
Fund will fluctuate. There can be no assurance that a Fund's hedging
transactions will be effective. Furthermore, a Fund may only engage in hedging
activities from time to time and may not necessarily be engaging in hedging
activities when movements in interest rates or currency exchange rates occur.
The International Funds are authorized to deal in forward foreign
exchange between currencies of the different countries in which the Fund will
invest and multi-national currency units as a hedge against possible variations
in the foreign exchange rate between these currencies. This is accomplished
through contractual agreements entered into in the interbank market to purchase
or sell one specified currency for another currency at a specified future date
(up to one year) and price at the time of the contract. Each International
Fund's dealings in forward foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions.
Transaction Hedging. When the International Funds engage in
transaction hedging, they enter into foreign currency transactions with respect
to specific receivables or payables of the Funds generally arising in connection
with the purchase or sale of their portfolio securities. The International Funds
will engage in transaction hedging when they desire to "lock in" the U.S. dollar
price of a security it has agreed to purchase or sell, or the U.S. dollar
equivalent of a dividend or interest payment in a foreign currency. By
transaction hedging, the International Funds will attempt to protect themselves
against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the applicable foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the date
on which such payments are made or received.
The International Funds may purchase or sell a foreign currency on
a spot (or cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in that foreign
currency. The International Funds may also enter into contracts to purchase or
sell foreign currencies at a future date ("FORWARD CONTRACTS"). Although there
is no current intention to do so, the International Funds reserve the right to
purchase and sell foreign currency futures contracts traded in the United States
and subject to regulation by the CFTC.
For transaction hedging purposes the International Funds may also
purchase U.S. exchange-listed call and put options on foreign currency futures
contracts and on foreign currencies. A put option on a futures contract gives a
Fund the right to assume a short position in the futures contract until
expiration of the option. A put option on currency gives a Fund the right to
sell a currency at an exercise price until the expiration of the option. A call
option on a futures contract gives a Fund the right to assume a long position in
the futures contract until the expiration of the option. A call option on
currency gives a Fund the right to purchase a currency at the exercise price
until the expiration of the option.
14
<PAGE> 874
POSITION HEDGING. When engaging in position hedging, the
International Funds will enter into foreign currency exchange transactions to
protect against a decline in the values of the foreign currencies in which their
portfolio securities are denominated or an increase in the value of currency for
securities which Banc One Investment Advisors expects to purchase, when the Fund
holds cash or short-term investments. In connection with the position hedging, a
Fund may purchase or sell foreign currency forward contracts or foreign currency
on a spot basis. The International Funds may purchase U.S. exchange-listed put
or call options on foreign currency and foreign currency futures contracts and
buy or sell foreign currency futures contracts traded in the United States and
subject to regulation by the CFTC, although the International Funds have no
current intention to do so.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward contract or
futures contract. Accordingly, the International Funds may have to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Fund is obligated to deliver and if a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market value of such security or securities exceeds the amount
of foreign currency the Fund is obligated to deliver.
Although the International Funds have no current intention to do
so, the International Funds may write covered call options on up to 100% of the
currencies in its portfolio to offset some of the costs of hedging against
fluctuations in currency exchange rates.
Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the International Funds own or
expect to purchase or sell. They simply seek to maintain an investment portfolio
that is relatively neutral to fluctuations in the value of the U.S. dollar
relative to major foreign currencies and establish a rate of exchange which one
can achieve at some future point in time. Additionally, although these
techniques tend to minimize the risk of loss due to a decline in the value of
the hedged currency, they tend to limit any potential gain which might result
from the increase in the value of such currency. Moreover, it may not be
possible for a Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the anticipated devaluation level.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The International
Funds, for hedging purposes only, may purchase forward foreign currency exchange
contracts, which involve an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancellable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades.
The maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties, rather than a
predetermined date in a given month. Forward contracts may be in any amounts
agreed upon by the parties rather than predetermined amounts. Also, forward
foreign exchange contracts are entered into directly between currency traders so
that no intermediary is required. A forward contract generally requires no
margin or other deposit.
15
<PAGE> 875
At the maturity of a forward contract, a Fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
FOREIGN CURRENCY FUTURES CONTRACTS. The International Funds may
purchase foreign currency futures contracts. Foreign currency futures contracts
traded in the United States are designed by and traded on exchanges regulated by
the CFTC, such as the New York Mercantile Exchange. A Fund will enter into
foreign currency futures contracts solely for bona fide hedging or other
appropriate risk management purposes as defined in CFTC regulations.
When a Fund purchases or sells a futures contract, it is required
to deposit with its custodian an amount of cash or U.S. Treasury bills known as
"initial margin." The nature of initial margin is different from that of margin
in security transactions in that it does not involve borrowing money to finance
transactions.
Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to the Fund upon termination of the contract,
assuming the Fund satisfies its contractual obligation.
Subsequent payments to and from the broker occur on a daily basis
in a process known as "marking to market." These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying currency rises above the delivery price, the Fund's position declines
in value. The Fund then pays a broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the currency underlying the futures contract. Conversely, if the price
of the underlying currency falls below the delivery price of the contract, the
Fund's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the currency underlying the futures
contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or gain. Such closing transactions involve
additional commission costs.
In addition to the margin requirements discussed above,
transactions in currency futures contracts may involve the segregation of funds
pursuant to requirements imposed by the Securities and Exchange Commission (the
"SEC"). Under those requirements, where a Fund has a long position in a futures
or forward contract, it may be required to establish a segregated account (not
with a futures commission merchant or broker) containing cash or certain liquid
assets equal to the purchase price of the contract (less any margin on deposit).
For a short position in futures or forward contracts held by a Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker) with cash or certain liquid assets that,
when added to the amounts deposited as margin, equal the market value of the
instruments or currency underlying the futures or forward contracts (but are not
less than the price at which the short positions were established). However,
segregation of assets is not required if the Fund "covers" a long position. For
example, instead of segregating assets, a Fund, when holding a long position in
a futures or forward contract, could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held by the Fund. In addition, where a Fund takes short positions, or
engages in sales of call options, it need not segregate assets if it "covers"
these positions. For example, where a Fund holds a short position in a futures
or forward contract, it may cover by owning the instruments or currency
underlying the contract. A Fund may also cover such a position by holding a call
16
<PAGE> 876
option permitting it to purchase the same futures or forward contract at a price
no higher than the price at which the short position was established. Where a
Fund sells a call option on a futures or forward contract, it may cover either
by entering into a long position in the same contract at a price no higher than
the strike price of the call option or by owning the instruments or currency
underlying the futures or forward contract. The Fund could also cover this
position by holding a separate call option permitting it to purchase the same
futures or forward contract at a price no higher than the strike price of the
call option sold by the Fund.
At the maturity of a futures contract, the Fund may either accept
or make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a secondary market in
such contracts. Although the International Funds intend to purchase or sell
foreign currency futures contracts only on exchanges or boards of trade where
there appears to be an active secondary market, there is no assurance that a
secondary market on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures position and, in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin.
FOREIGN CURRENCY OPTIONS. The International Funds may purchase
U.S. exchange-listed call and put options on foreign currencies. Such options on
foreign currencies operate similarly to options on securities. Options on
foreign currencies are affected by all of those factors which influence foreign
exchange rates and investments generally.
A Fund is authorized to purchase or sell listed foreign currency
options, and currency swap contracts as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be effected with
respect to hedges on non-U.S. dollar denominated securities (including
securities denominated in the ECU) owned by the Fund, sold by the Fund but not
yet delivered, committed or anticipated to be purchased by the Fund, or in
transaction or cross-hedging strategies. As an illustration, a Fund may use such
techniques to hedge the stated value in U.S. dollars of an investment in a
Japanese yen-dominated security. In such circumstances, for example, the Fund
may purchase a foreign currency put option enabling it to sell a specified
amount of yen for dollars at a specified price by a future date. To the extent
the hedge is successful, a loss in the value of the dollar relative to the yen
will tend to be offset by an increase in the value of the put option. To offset,
in whole or in part, the cost of acquiring such a put option, the Fund also may
sell a call option which, if exercised, requires it to sell a specified amount
of yen for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such call option in this illustration, the Fund gives up
the opportunity to profit without limit from increases in the relative value of
the yen to the dollar.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or to sell a currency at a fixed price on a future date. Listed options are
third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) which are issued by a
clearing corporation, traded on an exchange and have standardized strike prices
and expiration dates. OTC options are two-party contracts and have negotiated
strike prices and expiration dates. Options on futures contracts are traded on
boards of trade or futures exchanges. Currency swap contracts are negotiated two
party agreements entered into in the interbank market whereby the parties
exchange two foreign currencies at the inception of the contract and agree to
reverse the exchange at a specified future time and at a specified exchange
rate. The International Funds will not speculate in foreign currency options,
futures or related options or currency swap contracts. Accordingly,
17
<PAGE> 877
the International Funds will not hedge a currency substantially in excess (as
determined by Banc One Investment Advisors) of the market value of the
securities denominated in such currency which they own, the expected acquisition
price of securities which they have committed or anticipate to purchase which
are denominated in such currency, and, in the cases of securities which have
been sold by a Fund but not yet delivered, the proceeds thereof in its
denominated currency. Further, the International Funds will segregate, at its
Custodians, U.S. government or other high quality securities having a market
value representing any subsequent net decrease in the market value of such
hedged positions including net positions with respect to cross-currency hedges.
The International Funds may not incur potential net liabilities with respect to
currency and securities positions, including net liabilities with respect to
cross-currency hedges, of more than 33 1/3% of its total assets from foreign
currency options, futures, related options and forward currency transactions.
The value of a foreign currency option is dependent upon the value
of the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that quotations
available through dealer or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options market.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do
not charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
OTHER FOREIGN CURRENCY HEDGING STRATEGIES. New options and futures
contracts and other financial products, and various combinations thereof,
continue to be developed, and the International Funds may invest in any such
options, contracts and products as may be developed to the extent consistent
with the Fund's investment objective and the regulatory requirements applicable
to investment companies, and subject to the supervision of the Trust's Board of
Trustees.
RISK FACTORS IN HEDGING TRANSACTIONS
Imperfect Correlation. Foreign currency hedging transactions
present certain risks. In particular, the variable degree of
correlation between price movements of the instruments used in
hedging strategies and price movements in the security being hedged
creates the possibility that losses on the hedge may be greater than
gains in the value of a Fund's securities.
Liquidity. In addition, these instruments may not be liquid in all
circumstances. As a result, in volatile markets, the Funds may not be
able to dispose of or offset a transaction without incurring losses.
Although the contemplated use of hedging instruments should tend to
reduce the risk of loss due to a decline in the value of the hedged
security, at the same time the use of these instruments could tend to
limit any potential gain which might result from an increase in the
value of such security.
18
<PAGE> 878
Judgement of the Advisor and the International Sub-Advisor. Successful use
of hedging instruments by the International Funds is subject to the ability of
the Banc One Investment Advisors and/or the International Sub-Adviser, in the
case of the International Equity Index Fund to predict correctly movements in
the direction of interest and currency rates and other factors affecting markets
for securities. If the expectations of Banc One Investment Advisors or the
International Sub-Advisor are not met, a Fund would be in a worse position than
if a hedging strategy had not been pursued. For example, if a Fund has hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities in its portfolio and the price of such securities
increases instead, the Fund will lose part or all of the benefit of the
increased value of its securities because it will have offsetting losses in its
hedging positions. In addition, when hedging with instruments that require
variation margin payments, if the Fund has insufficient cash to meet daily
variation margin requirements, it may have to sell securities to meet such
requirements. Such sales of securities may, but will not necessarily, be at
increased prices which reflect the rising market. Thus, a Fund may have to sell
securities at a time when it is disadvantageous to do so.
FUTURES AND OPTIONS TRADING
Some of the Funds may enter into futures contracts, options,
options on futures contracts and stock index futures contracts and options
thereon for the purposes of remaining fully invested, reducing transaction
costs, or managing interest rate risk.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security, class of
securities, or an index at a specified future time and at a specified price. A
stock index futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading of the contracts and the price at which the futures contract is
originally struck. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S.
government agency.
Although most futures contracts by their terms call for actual
delivery and acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold," or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period. Brokerage commissions are
incurred when a futures contract is bought or sold.
When making futures trades, the Funds are required to make a good
faith margin deposit in cash or government securities with a broker or custodian
to initiate and maintain open positions in futures contracts. A margin deposit
is intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Initial margin deposits on futures
contracts are customarily set at levels much lower than the prices at which the
underlying securities are purchased and sold, typically ranging upward from less
than 5% of the value of the contract being traded.
19
<PAGE> 879
After a futures contract position is opened, the value of the
contract is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements, payment
of additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Funds
expect to earn interest income on their margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the prices of underlying securities. The Funds intend to enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the CFTC if, to the extent that such
futures and options are not for "bona fide hedging purposes" (as defined by the
CFTC), the aggregate initial margin and premiums on such positions (excluding
the amount by which options are in the money) do not exceed 5% of the Fund's
total assets at current value. A Fund, however, may invest more than such amount
for bona fide hedging purposes, and also may invest more than such amount if it
obtains authority to do so from the CFTC without rendering the fund a commodity
pool operator or adversely affecting its status as an investment company for
federal securities laws.
A Fund may buy and sell futures contracts and related options to
manage its exposure to changing interest rates and security prices. When
interest rates are expected to rise or market values of portfolio securities are
expected to fall, a Fund can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, a Fund, through the
purchase of such contracts, can attempt to secure better rates or prices for the
Fund than might later be available in the market when it effects anticipated
purchases.
Although techniques other than the sale and purchase of futures
contracts could be used to control the Funds' exposure to market fluctuations,
the use of futures contracts may be a more effective means of managing this
exposure. While the Funds will incur commission expenses in both opening and
closing out futures positions, these costs may be lower than transaction costs
that would be incurred in the purchase and sale of the underlying securities.
A Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying reference
security or index. Second, it is possible that a lack of liquidity for futures
contracts could exist in the secondary market, resulting in an inability to
close a futures position prior to its maturity date. Third, the purchase of a
futures contract involves the risk that a Fund could lose more than the original
margin deposit required to initiate a futures transaction.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS
None of the Funds will enter into futures contract transactions
for purposes other than bona fide hedging purposes to the extent that,
immediately thereafter, the sum of its initial margin deposits and premiums on
open contracts exceeds 5% of the market value of the respective Fund's total
assets. The Funds of Funds will not enter into futures contract transactions,
however, the One Group Mutual Funds in which they invest may do so as described
herein. In addition, none of the Equity Funds will enter into futures contracts
to the extent that the value of the futures contracts held would exceed 25% of
the respective Fund's total assets.
The Funds have undertaken to restrict their futures contract
trading as follows: first, the Funds will not engage in transactions in futures
contracts for speculative purposes; second, the Funds will not market themselves
to the public as
20
<PAGE> 880
commodity pools or otherwise as vehicles for trading in the commodities futures
or commodity options markets; third, the Funds will disclose to all prospective
Shareholders the purpose of and limitations on their commodity futures trading;
fourth, the Funds will submit to the CFTC special calls for information.
Accordingly, registration as a commodities pool operator with the CFTC is not
required.
In addition to the margin restrictions discussed above,
transactions in futures contracts may involve the segregation of funds pursuant
to requirements imposed by the SEC. Under those requirements, where a Fund has a
long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker) containing
cash or certain liquid assets equal to the purchase price of the contract (less
any margin on deposit). For a short position in futures or forward contracts
held by a Fund, those requirements may mandate the establishment of a segregated
account (not with a futures commission merchant or broker) with cash or certain
liquid assets that, when added to the amounts deposited as margin, equal the
market value of the instruments underlying the futures contracts (but are not
less than the price at which the short positions were established). However,
segregation of assets is not required if a Fund "covers" a long position. For
example, instead of segregating assets, a Fund, when holding a long position in
a futures contract, could purchase a put option on the same futures contract
with a strike price as high or higher than the price of the contract held by the
Fund. In addition, where a Fund takes short positions, or engages in sales of
call options, it need not segregate assets if it "covers" these positions. For
example, where a Fund holds a short position in a futures contract, it may cover
by owning the instruments underlying the contract. The Funds may also cover such
a position by holding a call option permitting it to purchase the same futures
contract at a price no higher than the price at which the short position was
established. Where a Fund sells a call option on a futures contract, it may
cover either by entering into a long position in the same contract at a price no
higher than the strike price of the call option or by owning the instruments
underlying the futures contract. A Fund could also cover this position by
holding a separate call option permitting it to purchase the same futures
contract at a price no higher than the strike price of the call option sold by
the Fund. In certain circumstances, entry into a futures contract that
substantially eliminates risk of loss and the opportunity for gain in an
"appreciated financial position" will also accelerate gain to the Funds.
RISK FACTORS IN FUTURES TRANSACTIONS
Liquidity. Positions in futures contracts may be closed out only
on an exchange which provides a secondary market for such futures.
However, there can be no assurance that a liquid secondary market
will exist for any particular futures contract at any specific time.
Thus, it may not be possible to close a futures position. In the
event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain the required margin.
In such situations, if a Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time
when it may be disadvantageous to do so. In addition, a Fund may be
required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures
positions also could have an adverse impact on the ability to
effectively hedge such positions. The Funds will minimize the risk
that they will be unable to close out a futures contract by only
entering into futures contracts which are traded on national futures
exchanges and for which there appears to be a liquid secondary
market.
Risk of Loss. The risk of loss in trading futures contracts in
some strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage involved
in futures pricing. Because the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
market, there may be increased participation by speculators in the
futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the
value of the futures
21
<PAGE> 881
contract would result in a total loss of the margin deposit, before
any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% of
the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess
of the amount invested in the contract. However, because the futures
strategies engaged in by the Funds are only for risk management
purposes, Banc One Investment Advisors and, with respect to the
International Equity Index Fund, the International Sub-Advisor, and,
with respect to the High Yield Bond, the High Yield Sub-Advisor do
not believe that the Funds are subject to the risks of loss
frequently associated with futures transactions. Each Fund would
presumably have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial
instrument and sold it after the decline.
Correlation Risk. Utilization of futures transactions by a Fund
involves the risk of imperfect or no correlation where the securities
underlying futures contracts have different maturities than the
portfolio securities being hedged. It is also possible that a Fund
could lose money on futures contracts and also experience a decline
in value of its portfolio securities. There is also the risk of loss
by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or
related option.
Price Fluctuations. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the
price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions. Futures
contract prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
Some futures strategies, including selling futures, buying puts
and writing covered calls, may reduce a Fund's exposure to price fluctuations.
Other strategies, including buying futures, and buying calls, tend to increase
market exposure. Futures and options may be combined with each other in order to
adjust the risk and return characteristics of the overall portfolio. A Fund
expects to enter into these transactions to manage a return or spread on a
particular investment or portion of its assets, to protect against any increase
in the price of securities a Fund anticipates purchasing at a later date, or for
other risk management strategies.
OPTIONS CONTRACTS
Some of the Funds may use options on securities or futures
contracts as a hedging device. An option gives the buyer of the option the right
(but not the obligation) to purchase a futures contract or security at a
specified price (also called the STRIKE price). A CALL OPTION gives the buyer
the "right to purchase" a security at a specified price (the exercise price) at
any time until a certain date (the expiration date). So long as the obligation
of the writer of a call option continues, the writer may be assigned an exercise
notice by the broker-dealer through whom such option was sold, requiring the
writer to deliver the underlying security against payment of the exercise price.
This obligation terminates upon the expiration of the call option, or such
earlier time at which the writer effects a closing purchase transaction by
repurchasing an option identical to that previously sold. To secure the writer's
obligation to deliver the underlying security in the case of a call option,
subject to the rules of the Options Clearing Corporation, a writer is required
to deposit in escrow the underlying security or other assets in accordance with
such rules.
A PUT OPTION gives the buyer the right to sell the underlying
futures contract or security. The purchase price of an option is referred to as
its
22
<PAGE> 882
"premium." The seller (or "writer") of a put option must purchase futures
contracts or securities at a strike price if the option is exercised. In the
case of a call option, the seller must sell the futures contract or security in
the underlying futures contract or security at the strike price if the option is
exercised.
A NAKED OPTION is an option written by a party who does not own
the underlying futures contract or security. A COVERED OPTION is an option
written by a party who does own the underlying position. The initial purchase
(sale) of an option is an "opening transaction." In order to close out an option
position, the Fund may enter into a "closing transaction". This involves the
sale (purchase) of an option contract on the same security with the same
exercise price and expiration date as the option contract originally opened. A
call option on a futures contract or security is said to be "in-the-money" if
the strike price is below current market levels and "out-of-the-money" if the
strike price is above current market levels. A put option is "in-the-money" if
the strike price is above current market levels, and "out-of-the-money" if the
strike price is below current market levels.
Options have limited life spans, usually tied to the delivery or
settlement date of the underlying futures contract or security. Some options,
however, expire significantly in advance of such dates. An option that is
"out-of-the-money" and not offset by the time it expires becomes worthless. On
certain exchanges "in-the-money" options are automatically exercised on their
expiration date, but on others unexercised options simply become worthless after
their expiration date. Options usually trade at a premium (referred to as the
"time value" of the option) above their intrinsic value (the difference between
the market price for the underlying futures contract or equity security and the
strike price). As an option nears its expiration date, the market value and the
intrinsic value move into parity as the time value diminishes.
Increased market volatility generally increases the value of
options by increasing the probability of favorable market swings, putting
outstanding options "in-the-money." Although purchasing options is a limited
risk trading approach, significant losses can be incurred by doing so.
WRITING (SELLING) COVERED CALLS
Some of the Funds may write (sell) covered call options and
purchase options to close out options previously written by the Fund. The Funds'
purpose in writing covered call options is to generate additional premium
income. This premium income will serve to enhance a Fund's total return and will
reduce the effect of any price decline of the security involved in the option.
Generally, the Funds will write covered call options on securities which, in the
opinion of Banc One Investment Advisors or the applicable Sub-Advisor, are not
expected to make any major price moves in the near future but which, over the
long term, are deemed to be attractive investments for the Fund. The Funds will
write only covered call options. This means that a Fund will only write a call
option on a security which a Fund already owns.
Fund securities on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked options, which a Fund will not do), but capable
of enhancing the Fund's total return. When writing a covered call option, a
Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
Unlike one who owns securities not subject to an option, a Fund has no control
over when it may be required to sell the underlying securities, since it may be
assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. Thus, the security could be "called away" at a price
substantially below the fair market value of the security. If a call option
which a Fund has written expires, a Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security during the option period. If the call option is
exercised, a Fund will realize a gain or loss from the sale of the underlying
security. The security covering the call will be maintained in a segregated
account of the Fund's custodian.
23
<PAGE> 883
The Funds do not consider a security covered by a call to be "pledged" as that
term is used in each Fund's policy which limits the pledging or mortgaging of
its assets.
The premium received is the market value of an option. The premium
each Fund will receive from writing a call option will reflect, among other
things, the current market price of the underlying security, the relationship of
the exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Fund's Advisor or Sub-Advisor, in
determining whether a particular call option should be written on a particular
security, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The
premium received by a Fund for writing covered call options will be recorded as
a liability in the Fund's statement of assets and liabilities. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per Share of the Fund
is computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The liability will be extinguished upon expiration
of the option, the purchase of an identical option in the closing transaction,
or delivery of the underlying security upon the exercise of the option.
Generally, a Fund, in order to avoid the exercise of an option
sold by it, will be able to cancel its obligation under the option by entering
into a closing purchase transaction, if available, unless selling (in the case
of a call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in a Fund's best interest. A closing purchase
transaction consists of a Fund purchasing an option having the same terms as the
option sold by a Fund, and has the effect of cancelling a Fund's position as a
seller. The premium which a Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by a Fund
are exercised and a Fund delivers securities to the holder of a call option, a
Fund's turnover rate will increase, which would cause a Fund to incur additional
brokerage expenses.
Closing transactions will be effected in order to realize a profit
on an outstanding call option, to prevent an underlying security from being
called, or to permit the sale of the underlying security.
Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. If a Fund desires to sell a
particular security from its portfolio on which it has written a call option it
will seek to effect a closing transaction prior to, or concurrently with, the
sale of the security. There is, of course, no assurance that a Fund will be able
to effect such closing transactions at a favorable price. If a Fund cannot enter
into such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security. This could result in higher transaction costs. A Fund will pay
transaction costs in connection with the writing of options to close out
previously written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration dates
of less than nine months from the date written. The exercise price of the
options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. From time to time, a
Fund may purchase an underlying security for delivery in accordance with an
exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
24
<PAGE> 884
PURCHASING CALL OPTIONS
Certain Funds may purchase call options to hedge against an
increase in the price of securities that the Fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Fund might
have realized had it bought the underlying security at the time it purchased the
call option. In the event that paying a premium for a call option, together with
a price movement in the underlying security, is such that exercise of the option
would not be profitable to the Fund, loss of the premium may be offset by a
decrease in the acquisition cost of securities by the Fund.
PURCHASING PUT OPTIONS
Certain Funds may also purchase put options to protect their
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
Fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the Fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
cost. However, any loss of premium may be offset by an increase in the value of
the Fund's securities.
SECURED PUTS
Certain Funds may write secured puts. For the secured put writer,
substantial depreciation in the value of the underlying security would result in
the security being "put to" the writer at the strike price of the option which
may be substantially in excess of the fair market value of the security. If a
secured put option expires unexercised, the writer realizes a gain in the amount
of the premium.
STRADDLES AND SPREADS
Certain Funds also may engage in straddles and spreads. In a
straddle transaction, a Fund either buys a call and a put or sells a call and a
put on the same security. In a spread, the Fund purchases and sells a call or a
put. The Fund will sell a straddle when Banc One Investment Advisors or the
applicable Sub-Advisor believes the price of a security will be stable. The Fund
will receive a premium on the sale of the put and the call. A spread permits the
Fund to make a hedged investment that the price of a security will increase or
decline.
RISK FACTORS IN OPTIONS TRANSACTIONS
Risk of Loss. When it purchases an option, a Fund runs the risk
that it will lose its entire investment in the option in a relatively
short period of time, unless the Fund exercises the option or enters
into a closing sale transaction with respect to the option during the
life of the option. If the price of the underlying security does not
rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction costs,
a Fund will lose part or all of its investment in the option. This
contrasts with an investment by a Fund in the underlying securities,
since the Fund may continue to hold its investment in those
securities notwithstanding the lack of a change in price of those
securities. In addition, there may be imperfect or no correlation
between the changes in market value of the securities held by the
Funds and the prices of the options.
Judgement of Advisor and Sub-Advisors. The successful use of the
options strategies depends on the ability of Banc One Investment
Advisors or the
25
<PAGE> 885
applicable Sub-Advisor to assess interest rate and market movements
correctly and to accurately calculate the fair price of the option.
The effective use of options also depends on a Fund's ability to
terminate option positions at times when Banc One Investment Advisors
or the applicable Sub-Advisor, deems it desirable to do so. A Fund
will take an option position only if Banc One Investment Advisors or
the applicable Sub-Advisor believes there is a liquid secondary
market for the option, however, there is no assurance that a Fund
will be able to effect closing transactions at any particular time or
at an acceptable price.
Liquidity. If a secondary trading market in options were to become
unavailable, a Fund could no longer engage in closing transactions.
Lack of investor interest might adversely affect the liquidity of the
market for particular options or series of options. A marketplace may
discontinue trading of a particular option or options generally. In
addition, a market could become temporarily unavailable if unusual
events, such as volume in excess of trading or clearing capability,
were to interrupt normal market operations. A marketplace may at
times find it necessary to impose restrictions on particular types of
options transactions, which may limit a Fund's ability to realize its
profits or limit its losses.
Market Restrictions. Disruptions in the markets for the securities
underlying options purchased or sold by a Fund could result in losses
on the options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as well.
As a result, a Fund as purchaser or writer of an option will be
unable to close out its positions until option trading resumes, and
it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing
Corporation ("OCC") or other options markets may impose exercise
restrictions. If a prohibition on exercise is imposed at the time
when trading in the option has also been halted, a Fund as purchaser
or writer of an option will be locked into its position until one of
the two restrictions has been lifted. If a prohibition on exercise
remains in effect until an option owned by a Fund has expired, the
Fund could lose the entire value of its option.
Foreign Investment Risks. Special risks are presented by
internationally-traded options. Because of time differences between
the United States and the various foreign countries, and because
different holidays are observed in different countries, foreign
option markets may be open for trading during hours or on days when
U.S. markets are closed. As a result, option premiums may not reflect
the current prices of the underlying interest in the United States.
LIMITATIONS ON THE USE OF OPTIONS
Each Fund will limit the writing of put and call options to 25% of
its net assets. Some Funds may enter into over-the-counter option transactions.
There will be an active over-the-counter market for such options which will
establish their pricing and liquidity. Broker/Dealers with whom the Trust will
enter into such option transactions shall have a minimum net worth of
$20,000,000.
GOVERNMENT SECURITIES
Obligations of certain agencies and instrumentalities of the U.S.
government, such as the Government National Mortgage Association ("GINNIE MAE")
and the Export-Import Bank, are supported by the full faith and credit of the
U.S. Treasury; others, such as the Federal National Mortgage Association
("FANNIE MAE"), are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and still others, such as the
Federal Farm Credit Banks and the Federal Home Loan Mortgage Corporation
("FREDDIE MAC") are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. government would provide financial support
to U.S. government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. A Fund will invest in the obligations of such
agencies or instrumentalities only when Banc One Investment
26
<PAGE> 886
Advisors or the applicable Sub-Advisor believes that the credit risk with
respect thereto is minimal. For information on mortgage-related securities
issued by certain agencies or instrumentalities of the U.S. government, see
"Investment Objectives and Policies--Mortgage-Related Securities" in this
Statement of Additional Information.
HIGH QUALITY INVESTMENTS WITH REGARD TO THE MONEY MARKET AND
INSTITUTIONAL MONEY MARKET FUNDS
The Money Market and Institutional Money Market Funds, may invest
only in obligations determined by the Fund's investment Advisor, Banc One
Investment Advisors to present minimal credit risks under guidelines adopted by
the Trust's Board of Trustees.
The U.S. Treasury Securities Money Market Fund, the Treasury Only
Money Market Fund, the Treasury Cash Management Money Market Fund, and the
Treasury Prime Cash Management Money Market Fund may only invest in U.S.
Treasury bills, notes and other U.S. Treasury obligations issued or guaranteed
by the U.S. government. Some of the securities held by the U.S. Treasury
Securities Money Market Fund and the Treasury Cash Management Money Market Fund
may be subject to repurchase agreements.
The Government Money Market Fund and the U.S. Government
Securities Cash Management Money Market Fund invest exclusively in securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
With regard to the Money Market Funds and the Institutional Money
Market Funds, investments will be limited to those obligations which, at the
time of purchase, (i) possess one of the two highest short-term ratings from
an NRSRO in the case of single-rated securities; or (ii) possess, in the case
of multiple-rated securities, one of the two highest short-term ratings by at
least two NRSROs or (iii) do not possess a rating (i.e., are unrated) but are
determined by Banc One Investment Advisors to be of comparable quality to the
rated instruments eligible for purchase by the Trust under guidelines adopted
by the Board of Trustees (collectively, "ELIGIBLE SECURITIES"). A security that
has not received a rating will be deemed to possess the rating assigned to an
outstanding class of the issuer's short-term debt obligations if determined by
Banc One Investment Advisors to be comparable in priority and security to the
obligation selected for purchase by the Trust.
A security subject to a tender or demand feature will be
considered an Eligible Security only if both the demand feature and the
underlying security possess a high quality rating or, if such do not possess a
rating, are determined by Banc One Investment Advisors to be of comparable
quality; provided, however, that where the demand feature would be readily
exercisable in the event of a default in payment of principal or interest on the
underlying security, the obligation may be acquired based on the rating
possessed by the demand feature or, if the demand feature does not possess a
rating, a determination of comparable quality by Banc One Investment Advisors. A
security which at the time of issuance had a maturity exceeding 397 days but, at
the time of purchase, has a remaining maturity of 397 days or less, is not
considered an Eligible Security if it does not possess a high quality rating and
the long-term rating, if any, is not within the top three highest rating
categories.
Eligible Securities include First-Tier Securities and Second-Tier
Securities. First-Tier Securities include those that possess a rating in the
highest category, in the case of a single-rated security, or at least two
ratings in the highest rating category, in the case of multiple-rated
securities, or, if the
27
<PAGE> 887
securities do not possess a rating, are determined to be of comparable quality
by Banc One Investment Advisors pursuant to the guidelines adopted by the Board
of Trustees. Second-Tier Securities are all other Eligible Securities.
Each Money Market Fund (other than the Ohio Municipal Money Market
Fund, the Michigan Municipal Money Market Fund, and the Municipal Money Market
Fund) and Institutional Money Market Fund (other than the Tax-Exempt Money
Market Fund) will not invest more than 5% of its total assets in the First Tier
Securities of any one issuer (as defined by or permitted under Rule 2a-7). In
addition, each Fund (other than the Municipal Money Market Fund, the Ohio
Municipal Money Market Fund, the Michigan Municipal Money Market Fund and the
Tax-Exempt Money Market Fund) may not invest more than 5% of its total assets in
Second Tier Securities, with investment in the Second Tier Securities of any one
issuer further limited to the greater of 1% of the Fund's total assets or $1
million. If a percentage limitation is satisfied at the time of purchase, a
later increase in such percentage resulting from a change in the Fund's net
asset value or a subsequent change in a security's qualification as a First Tier
or Second Tier Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of a Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities and, with respect to each Money Market Fund and
each Institutional Money Market Fund (other than the Treasury Only Money Market
Fund and the Treasury Prime Cash Management Money Market Fund), repurchase
agreements fully collateralized by such obligations.
Under the guidelines adopted by the Trust's Board of Trustees and
in accordance with Rule 2a-7 under the 1940 Act, Banc One Investment Advisors
may be required to promptly dispose of an obligation held in a Fund's portfolio
in the event of certain developments that indicate a diminishment of the
instrument's credit quality, such as where an NRSRO downgrades an obligation
below the second highest rating category, or in the event of a default relating
to the financial condition of the issuer.
A rating by an NRSRO may be utilized only where the NRSRO is
neither controlling, controlled by, or under common control with the issuer of,
or any issuer, guarantor, or provider of credit support for, the instrument.
HIGH YIELD/HIGH RISK SECURITIES/JUNK BONDS
Some of the Funds may invest in high yield securities. High yield,
high risk bonds are securities that are generally rated below investment grade
by the primary rating agencies (BB or lower by S&P and Ba or lower by Moody's).
Other terms used to describe such securities include "lower rated bonds,"
"non-investment grade bonds," "below investment grade bonds," and "junk bonds."
Generally, lower rated debt securities provide a higher yield than higher rated
debt securities of similar maturity, but are subject to a greater degree of risk
with respect to the ability of the issuer to meet its principal and interest
obligations. Issuers of high yield securities may not be as strong financially
as those issuing higher rated securities. These securities are regarded as
predominately speculative. The market value of high yield securities may
fluctuate more than the market value of higher rated securities, since high
yield securities tend to reflect short-term corporate and market developments to
a greater extent than higher rated securities, which fluctuate primarily in
response to the general level of interest rates, assuming that there has been no
change in the fundamental quality of such securities. The market prices of fixed
income securities generally fall when interest rates rise. Conversely, the
market prices of fixed-income securities generally rise when interest rates
fall. Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Funds more difficult, at least in the
absence of price concessions. Reduced liquidity also could adversely affect the
Funds' ability to accurately value high yield securities. Issuers of high yield
securities also are more vulnerable to real or perceived economic changes (for
instance, an economic downturn or prolonged period of rising interest rates),
political changes or adverse developments specific to the
28
<PAGE> 888
issuer. Adverse economic, political or other developments may impair the
issuer's ability to service principal and interest obligations, to meet
projected business goals and to obtain additional financing, particularly if the
issuer is highly leveraged. In the event of a default, the Funds would
experience a reduction of their income and could expect a decline in the market
value of the defaulted securities.
Further, proposed or yet to be proposed new laws may have a
possible negative impact on the market for high yield, high risk bonds. As an
example, in the late 1980's, legislation required federally-insured savings and
loan associations to divest their investments in high yield, high risk bonds.
New legislation, if enacted, could have a material negative effect on a Fund's
net asset value and investment practices.
Finally, the market prices of high-yield, high risk securities
structured as zero coupon or pay-in-kind securities (as defined below) are
generally affected to a greater extent by interest rate changes and tend to be
more volatile than securities which pay interest periodically. In addition, zero
coupon, pay-in-kind and delayed interest bonds often do not pay interest until
maturity. Accordingly, such bonds may involve greater credit risks than bonds
paying interest currently. However, the Fund must recognize a computed amount of
interest income and pay dividends to shareholders even though it has received no
cash. In some instances, the Funds may have to sell securities to have
sufficient cash to pay the dividends.
The high yield, high risk investments include the following:
Straight fixed-income debt securities. These include bonds and
other debt obligations which bear a fixed or variable rate of
interest payable at regular intervals and have a fixed or
resettable maturity date. The particular terms of such securities
vary and may include features such as call provisions and sinking
funds.
Zero-coupon debt securities. These bear no interest obligation
but are issued at a discount from their value at maturity. When
held to maturity, their entire return equals the difference
between their issue price and their maturity value.
Zero-fixed-coupon debt securities. These are zero-coupon debt
securities which convert on a specified date to interest-bearing
debt securities.
Pay-in-kind bonds. These are bonds which allow the issuer, at
its option, to make current interest payments on the bonds either
in cash or in additional bonds.
Private Placements. These are bonds sold directly to a small
number of investors, usually institutional, without registration
under the Securities Act of 1933.
Convertible Securities. These are bonds or preferred stock that
convert to common stock.
Preferred Stock. These are stocks that generally pay a dividend
at a specified rate and which have preference over common stock in
the payment of dividends and in liquidation.
Loan Participations and Assignments. These are participations
in, or assignments of all or a portion of loans to corporations or
to governments, including governments of the less developed
countries ("LDC'S").
This foregoing list is not definitive. The prospectus and this Statement of
Additional Information list additional types of permissible investments. Such
investments may be purchased by some of the Funds even if they are classified as
non-investment grade securities.
29
<PAGE> 889
INDEX INVESTING BY THE EQUITY INDEX, MARKET EXPANSION INDEX AND
INTERNATIONAL EQUITY INDEX FUNDS
Equity Index Fund. The Equity Index Fund attempts to track the
performance of the S&P 500 Index (the "INDEX") to achieve a correlation between
the performance of its portfolio and that of the Index of at least 0.95, without
taking into account expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Fund's net asset value, including
the value of its dividend and capital gains distributions, increases or
decreases in exact proportion to changes in the Index. The Fund's ability to
correlate its performance with the Index, however, may be affected by, among
other things, changes in securities markets, the manner in which the Index is
calculated by Standard & Poor's Corporation ("S&P") and the timing of purchases
and redemptions. In the future, the Trustees of the Trust, subject to the
approval of Shareholders, may select another index if such a standard of
comparison is deemed to be more representative of the performance of common
stocks.
S&P chooses the stocks to be included in the Index largely on a
statistical basis. Inclusion of a stock in the Index in no way implies an
opinion by S&P as to its attractiveness as an investment. The Index is
determined, composed and calculated by S&P without regard to the Equity Index
Fund. S&P is neither a sponsor of, nor in any way affiliated with the Equity
Index Fund, and S&P makes no representation or warranty, expressed or implied on
the advisability of investing in the Equity Index Fund or as to the ability of
the Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Index or any data included in the Index. "S&P 500" is a service
mark of S&P.
The weights of stocks in the Index are based on each stock's
relative total market value, i.e., market price per share times the number of
Shares outstanding. Because of this weighting, approximately 50% of the Index is
currently composed of the 50 largest companies in the Index, and the Index
currently represents over 65% of the market value of all U.S. common stocks
listed on the New York Stock Exchange. Typically, companies included in the
Index are the largest and most dominant firms in their respective industries.
Banc One Investment Advisors generally selects stocks for the
Equity Index Fund in the order of their weights in the Index beginning with the
heaviest weighted stocks. The percentage of the Equity Index Fund's assets to be
invested in each stock is approximately the same as the percentage it represents
in the Index. No attempt is made to manage the Equity Index Fund in the
traditional sense using economic, financial and market analysis. The Equity
Index Fund is managed using a computer program to determine which stocks are to
be purchased and sold to replicate the Index to the extent feasible. From time
to time, administrative adjustments may be made in the Fund because of changes
in the composition of the Index, but such changes should be infrequent.
Market Expansion Index Fund. The Market Expansion Index Fund
invests in a representative sampling of stocks of medium-sized and small U.S.
companies that are included in the Standard & Poor's SmallCap 600 Index and the
Standard & Poor's MidCap 400 Index (the "INDICES") and which trade on the New
York and American Stock Exchanges as well as over-the-counter stocks that are
part of the National Market System. (Not all of the stocks in the Indices are
included in the Fund). The Fund will attempt to achieve a correlation between
the performance of its portfolio and that of the combined Indices of at least
0.95, without taking into account expenses. A correlation of 1.00 would indicate
perfect correlation, which would be achieved when the Fund's net asset value,
including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in the combined Indices. The Fund's
ability to correlate its performance with the combined Indices, however, may be
affected by, among other things, changes in securities markets, the manner in
which the Indices are calculated by S&P and the timing of purchases and
redemptions. In the future, the Trustees of the Trust, subject to the approval
of Shareholders, may select other indices if such a standard of comparison is
deemed to be more representative of the performance of common stocks.
30
<PAGE> 890
The Indices are determined, composed and calculated by S&P without
regard to the Market Expansion Index Fund. S&P is neither a sponsor of, nor in
any way affiliated with the Market Expansion Index Fund, and S&P makes no
representation or warranty, expressed or implied on the advisability of
investing in the Market Expansion Index Fund or as to the ability of the Indices
to track general stock market performance, and S&P disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Indices or any data included therein.
International Equity Index Fund. It is anticipated that the
indexing approach that will be employed by the International Equity Index Fund
will be an effective method of substantially tracking percentage changes in the
Gross Domestic Product ("GDP") weighted MSCI EAFE Index (the "INTERNATIONAL
INDEX"). The Fund will attempt to achieve a correlation between the performance
of its portfolio and that of the International Index of at least 0.95, without
taking into account expenses. It is a reasonable expectation that there will be
a close correlation between the Fund's performance and that of the International
Index in both rising and falling markets. A correlation of 1.00 would indicate
perfect correlation, which would be achieved when the Fund's net asset value,
including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in the International Index. The
Fund's ability to correlate its performance with the International Index,
however, may be affected by, among other things, changes in securities markets,
the manner in which the International Index is calculated by Morgan Stanley
Capital International ("MSCI") and the timing of purchases and redemptions. In
the future, the Trustees of the Trust, subject to the approval of Shareholders,
may select another index if such a standard of comparison is deemed to be more
representative of the performance of common stocks.
MSCI computes and publishes the International Index. MSCI also
computes the country weights which are established based on annual GDP data.
Gross Domestic Product is defined as a country's Gross National Product, or
total output of goods and services, adjusted by the following two factors: net
labor income (labor income of domestic residents working abroad less labor
income of foreigners working domestically) plus net interest income (interest
income earned from foreign investments less interest income earned from domestic
investments by foreigners). Country weights are thus established in proportion
to the size of their economies as measured by Gross Domestic Product, which
results in a more uniform distribution of capital across the EAFE markets than
if capitalization weights were used as the basis. The country weights within the
International Index are systematically rebalanced annually to the most recent
GDP weights.
MSCI chooses the stocks to be included in the International Index
largely on a statistical basis. Inclusion of a stock in the International Index
in no way implies an opinion by MSCI as to its attractiveness as an investment.
The International Index is determined, composed and calculated by MSCI without
regard to the International Equity Index Fund. MSCI is neither a sponsor of, nor
in any way affiliated with the International Equity Index Fund, and MSCI makes
no representation or warranty, expressed or implied on the advisability of
investing in the International Equity Index Fund or as to the ability of the
International Index to track general stock market performance, and MSCI
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the International Index or any data included therein.
"MSCI EAFE Index" is a service mark of MSCI.
INDEX SHARES
Certain of the Funds may invest in Index Shares. Index shares are
ownership interests in unit investment trusts and other pooled investment
vehicles that hold a portfolio of securities or stocks designed to track the
price performance and dividend yield. Index shares include Standard & Poor's
Depository Receipts ("SPDRS") and Nasdaq-100 Trusts (NASDAQ-100S). Nasdaq-100s
and SPDRs are interests in unit investment trusts. SPDRs invest in a securities
portfolio that includes substantially all of the common stocks (in substantially
the same weights) as the common stocks included in a particular Standard &
Poor's Index such as the S&P 500.
31
<PAGE> 891
Nasdaq-100s invest in a securities portfolio that includes substantially all of
the securities of the Nasdaq-100 index. SPDRs and Nasdaq 100's are traded on the
American Stock Exchange, but may not be redeemed. The results of SPDRs and
Nasdaq-100s will not match the performance of the designated index due to
reductions in the performance attributable to transaction and other expenses,
including fees paid by the SPDR or Nasdaq-100s to service providers. SPDRs
distribute dividends on a quarterly basis.
SPDRs and Nasdaq-100s are not actively managed. Rather, a SPDR's
or Nasdaq-100s objective is to track the performance of a specified index.
Therefore, securities may be purchased, retained and sold at times when an
actively managed trust would not do so. As a result, you can expect greater risk
of loss (and a correspondingly greater prospect of gain) from changes in the
value of securities that are heavily weighted in the index than would be the
case if the SPDR or Nasdaq-100 was not fully invested in such securities.
A Fund will limit its investments in any one SPDR or Nasdaq-100s
to 5% of the Fund's total assets and 3% of the outstanding voting securities of
the SPDR or Nasdaq-100. Moreover, a Fund's investments in SPDRs and Nasdaq-100s
will not exceed 10% of the Fund's total assets, when aggregated with all other
investments in investment companies.
INVESTMENT COMPANY SECURITIES
Some of the Funds may invest up to 5% of their total assets in the
securities of any one investment company (another mutual fund), but may not own
more than 3% of the outstanding securities of any one investment company or
invest more than 10% of their total assets in the securities of other investment
companies. These limits do not apply to the Funds of Funds. Other investment
company securities may include securities of a money market fund of the Trust,
and securities of other money market funds for which Banc One Investment
Advisors serves as investment advisor or administrator. Because other investment
companies employ an investment advisor, such investments by the Funds may cause
Shareholders to bear duplicate fees. Banc One Investment Advisors will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust and in other funds advised by Banc One Investment Advisors;
and, to the extent required by the laws of any state in which shares of the
Trust are sold, Banc One Investment Advisors will waive its fees attributable to
the assets of any Fund invested in any investment company.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Some of the Funds may invest in fixed and floating rate loans
("LOANS") arranged through private negotiations between issuers (which may be
corporate issuers or issuers of Sovereign Debt Obligations) and one or more
financial institutions ("LENDERS"). Investments in loans are expected in most
instances to be in the form of participations in Loans ("PARTICIPATIONS") and
assignments of all or a portion of Loans ("ASSIGNMENTS") from third parties.
Because loan participants and assignments may be illiquid, a Fund will invest no
more than 15% (10% for the Money Market Funds) of its net assets in loan
participations and other illiquid assets. The government that is the borrower on
the Loan will be considered by the Fund to be the issuer of a Participations or
Assignment for purposes of the fund's fundamental investment policy that it will
not invest 25% or more of its total assets in securities of issuers conducting
their principal business activities in the same industry (i.e., foreign
government). A Fund's investment in Participations typically will result in the
Fund having a contractual relationship only with the Lender and not with the
borrower.
When a Fund purchases Assignments from Lenders it will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by a Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. The assignability of certain Sovereign Debt Obligations
is restricted by the governing documentation as to the nature of the assignee
such that the only way in which a Fund may acquire an interest in a Loan is
through a Participation and not an Assignment. A Fund may have difficulty
disposing of Assignments and Participations because to do so it will have
32
<PAGE> 892
to assign such securities to a third party. Because there is no liquid market
for such securities, the Funds anticipate that such securities could be sold
only to a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse impact on the value of such securities and
a Fund's ability to dispose of particular Assignments or Participations when
necessary to meet a Fund's liquidity needs in response to a specific economic
event such as a deterioration in the creditworthiness of the borrower. The lack
of a liquid secondary market for Assignments and Participations also may make it
more difficult for a Fund to assign a value to those securities for purposes of
valuing a Fund's portfolio and calculating its net asset value.
MORTGAGE-RELATED SECURITIES
MORTGAGE-BACKED SECURITIES (CMOS AND REMICS). Certain of the Funds
may invest in mortgage-backed securities including collateralized mortgage
obligations ("CMOS") and Real Estate Mortgage Investment Conduits ("REMICS").
Mortgage-backed securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as Ginnie Mae and
government-related organizations such as Fannie Mae and Freddie Mac, as well as
by nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies. Such
non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. A REMIC is a CMO that qualifies
for special tax treatment under the Code and invests in certain mortgages
principally secured by interests in real property and other permitted
investments.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue.
Ginnie Mae Securities. Mortgage-related securities issued by
Ginnie Mae include Ginnie Mae Mortgage Pass-Through Certificates
which are guaranteed as to the timely payment of principal and
interest by Ginnie Mae and such guarantee is backed by the full faith
and credit of the United States. Ginnie Mae is a wholly-owned U.S.
government corporation within the Department of Housing and Urban
Development. Ginnie Mae certificates also are supported by the
authority of Ginnie Mae to borrow funds from the U.S. Treasury to
make payments under its guarantee.
Fannie Mae Securities. Mortgage-related securities issued by
Fannie Mae include Fannie Mae Guaranteed Mortgage Pass-Through
Certificates which are solely the obligations of Fannie Mae and are
not backed by or entitled to the full faith and credit of the United
States. Fannie Mae is a government-sponsored organization owned
entirely by private stock-holders. Fannie Mae Certificates are
guaranteed as to timely payment of the principal and interest by
Fannie Mae.
Freddie Mac Securities. Mortgage-related securities issued by
Freddie Mac include Freddie Mac Mortgage Participation Certificates.
Freddie Mac is a corporate instrumentality of the United States,
created pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks.
Freddie Mac Certificates are not guaranteed by the United States
or by any Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank.
Freddie Mac Certificates entitle the holder to timely payment of
interest, which is guaranteed by Freddie Mac. Freddie Mac guarantees
either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When Freddie Mac does not
guarantee timely payment of principal, Freddie Mac may remit the
amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in
no event later than one year after it becomes payable.
CMOs and guaranteed REMIC pass-through certificates ("REMIC
CERTIFICATES") issued by Fannie Mae, Freddie Mac, Ginnie Mae and private issuers
are types of
33
<PAGE> 893
multiple class pass-through securities. Investors may purchase beneficial
interests in REMICs, which are known as "regular" interests or "residual"
interests. The Funds do not currently intend to purchase residual interests in
REMICs. The REMIC Certificates represent beneficial ownership interests in a
REMIC Trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage pass-through certificates (the "MORTGAGE
ASSETS"). The obligations of Fannie Mae, Freddie Mac or Ginnie Mae under their
respective guaranty of the REMIC Certificates are obligations solely of Fannie
Mae, Freddie Mac or Ginnie Mae, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to
timely distribution of principal and interest by Fannie Mae. In addition, Fannie
Mae will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates ("PCs"). PCs represent undivided interests in specified residential
mortgages or participation therein purchased by Freddie Mac and placed in a PC
pool. With respect to principal payments on PCs, Freddie Mac generally
guarantees ultimate collection of all principal of the related mortgage loans
without offset or deduction. Freddie Mac also guarantees timely payment of
principal on certain PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely
payment of interest and principal on each class of securities (in accordance
with the terms of those classes as specified in the related offering circular
supplement). The Ginnie Mae guarantee is backed by the full faith and credit of
the United States of America.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie
Mae are treated as U.S. government securities for purposes of investment
policies. CMOs and REMIC Certificates provide for the redistribution of cash
flow to multiple classes. Each class of CMOs or REMIC Certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date. This
reallocation of interest and principal results in the redistribution of
prepayment risk across to different classes. This allows for the creation of
bonds with more or less risk than the underlying collateral exhibits. Principal
prepayments on the mortgage loans or the Mortgage Assets underlying the CMOs or
REMIC Certificates may cause some or all of the classes of CMOs or REMIC
Certificates to be retired substantially earlier than their final distribution
dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC
Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be
allocated among the several classes of CMOs or REMIC Certificates in various
ways. In certain structures (known as "sequential pay" CMOs or REMIC
Certificates), payments of principal, including any principal prepayments, on
the Mortgage Assets generally are applied to the classes of CMOs or REMIC
Certificates in the order of their respective final distribution dates. Thus, no
payment of principal will be made on any class of sequential pay CMOs or REMIC
Certificates until all other classes having an earlier final distribution date
have been paid in full.
Additional structures of CMOs and REMIC Certificates include,
among others, "parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or
REMIC Certificates are those which are structured to apply principal payments
and prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel
pay or sequential pay structures. These securities include accrual certificates
(also known as "Z-BONDS"), which only accrue interest at a specified rate until
all other certificates having an earlier final distribution date have been
retired and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally
34
<PAGE> 894
require that specified amounts of principal be applied on each payment date to
one or more classes of REMIC Certificates (the "PAC CERTIFICATES"), even though
all other principal payments and prepayments of the Mortgage Assets are then
required to be applied to one or more other classes of the certificates. The
scheduled principal payments for the PAC Certificates generally have the highest
priority on each payment date after interest due has been paid to all classes
entitled to receive interest currently. Shortfalls, if any, are added to the
amount of principal payable on the next payment date. The PAC Certificate
payment schedule is taken into account in calculating the final distribution
date of each class of PAC. In order to create PAC tranches, one or more tranches
generally must be created that absorb most of the volatility in the underlying
Mortgage Assets. These tranches tend to have market prices and yields that are
much more volatile than the PAC classes. The Z-Bonds in which the Funds may
invest may bear the same non-credit- related risks as do other types of Z-Bonds.
Z-Bonds in which the Fund may invest will not include residual interest.
LIMITATIONS ON THE USE OF MORTGAGE-BACKED SECURITIES
Equity Funds. The Balanced Fund, the Small Cap Value Fund, the
Diversified Mid Cap Fund, and the Diversified International Fund may
invest in mortgage-backed securities issued by private issuers
including Guaranteed CMOs and REMIC pass-through Securities that are
rated in one of the four highest rating categories by at least one
NRSRO at the time of investment or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality.
Bond Funds. The Government Bond Fund and the Treasury & Agency
Fund may only invest in mortgage-backed securities issued or
guaranteed by the U.S. government, or its agencies or
instrumentalities. The other Bond Funds that invest in
mortgage-backed securities may invest in mortgage-backed securities
issued by private issuers including Guaranteed CMOs and REMIC
pass-through securities. The Government Bond Fund and the Treasury &
Agency Fund may invest in mortgage-backed securities that are rated
in one of the three highest rating categories by at least one NRSRO
at the time of investment or, if unrated, determined by Banc One
Investment Advisors to be of comparable quality. The Short-Term Bond
Fund, the Ultra Short-Term Bond Fund, the Intermediate Bond Fund, and
the Bond Fund may invest in mortgage-backed securities that are rated
in one of the four highest rating categories by at least one NRSRO at
the time of investment or, if unrated, determined by Banc One
Investment Advisor to be of comparable quality. The Income Bond Fund
and the High Yield Bond Fund can invest in mortgage-backed securities
in ANY rating category.
Municipal Bond Funds. The Municipal Bond Funds may invest in
mortgage-backed securities that are rated in one of the four highest
rating categories by at least one NRSRO at the time of investment or,
if unrated, determined by Banc One Investment Advisor to be of
comparable quality.
Money Market Funds. The Government Money Market Fund may only
invest in mortgage-backed securities issued or guaranteed by the U.S.
government, or its agencies or instrumentalities. The other Money
Market Funds that invest in mortgage-backed securities may invest in
mortgage-backed securities issued by private issuers including
Guaranteed CMOs and REMIC pass-through securities. The Prime Money
Market Fund, the Municipal Money Market Fund, the Ohio Municipal
Money Market Fund, and the Michigan Municipal Money Market Fund may
invest in mortgage-backed securities that are rated in one of the two
highest rating categories by at least one NRSRO at the time of
investment or, if unrated, determined by Banc One Investment Advisors
to be of comparable quality.
Institutional Money Market Funds. The Institutional Money Market
Funds (other than the Municipal Cash Management Money Market Fund and
the Cash Management Money Market Fund) may only invest in
mortgage-backed securities issued or guaranteed by the U.S.
government, or its agencies or instrumentalities. The Municipal Cash
Management Money Market Fund may invest in mortgage-backed securities
issued by private issuers including Guaranteed
35
<PAGE> 895
CMOs and REMIC pass-through securities. With respect to the
Institutional Money Market Funds, mortgage-backed securities must be
rated in one of the two highest rating categories by at least one
NRSRO at the time of investment or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality.
MORTGAGE DOLLAR ROLLS. Some of the Funds may enter into Mortgage
Dollar Rolls in which the Funds sell securities for delivery in the current
month and simultaneously contract with the same counterparty to repurchase
similar (same type, coupon and maturity) but not identical securities on a
specified future date. When a Fund enters into mortgage dollar rolls, the Fund
will hold and maintain a segregated account until the settlement date, cash or
liquid, high grade debt securities in an amount equal to the forward purchase
price. The Funds benefit to the extent of any difference between the price
received for the securities sold and the lower forward price for the future
purchase (often referred to as the "drop") or fee income plus the interest
earned on the cash proceeds of the securities sold until the settlement date of
the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the Funds compared
with what such performance would have been without the use of mortgage dollar
rolls. The benefits derived from the use of mortgage dollar rolls may depend
upon Banc One Investment Advisors' ability to predict correctly mortgage
prepayments and interest rates. There is no assurance that mortgage dollar rolls
can be successfully employed. The Funds currently intend to enter into mortgage
dollar rolls that are accounted for as a financing transaction. For purposes of
diversification and investment limitations, mortgage dollar rolls are considered
to be mortgage-backed securities.
STRIPPED MORTGAGE BACKED SECURITIES. Stripped Mortgage Backed
Securities ("SMBS") are derivative multi-class mortgage securities. SMBS are
usually structured with two classes that receive different proportions of the
interest and principal distributions from a pool of mortgage assets. A common
type of SMBS will have one class receiving all of the interest from the mortgage
assets ("IOS"), while the other class will receive all of the principal ("POS").
Mortgage IOs receive monthly interest payments based upon a notional amount that
declines over time as a result of the normal monthly amortization and
unscheduled prepayments of principal on the associated mortgage POs.
In addition to the risks applicable to Mortgage-Related Securities
in general, SMBS are extremely sensitive to changes in prepayments and interest
rates. Even though such securities have been guaranteed by an agency or
instrumentality of the U.S. government, under certain interest rate or
prepayment rate scenarios, the Funds may fail to fully recover their investment
in such securities. Changes in prepayment rates can cause the return on
investment in IOs to be highly volatile, and under extremely high prepayment
conditions IOs can incur significant losses. POs are bought at a discount to the
ultimate principal repayment value. The rate of return on a PO will vary with
prepayments, rising as prepayments increase and falling as prepayments decrease.
The market value of the class consisting entirely of principal payments
generally is unusually volatile in response to changes in interest rates. The
yields on a class of SMBS that receives all or most of the interest from
mortgage assets are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that any premium paid will not be fully recouped.
Banc One Investment Advisors will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using certain
analytical and hedging strategies.
The Bond Funds (other than the Treasury & Agency Fund), the
Municipal Bond Funds, and the Balanced Fund may invest in SMBS to enhance
revenues or hedge against interest rate risk. The Funds may only invest in SMBS
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Although the market for SMBS is increasingly liquid, certain SMBS may not be
readily marketable and will be considered illiquid for purposes of the Funds'
limitations on investments in illiquid securities.
36
<PAGE> 896
ADJUSTABLE RATE MORTGAGE LOANS. The Bond Funds and the Balanced
Fund, may invest in adjustable rate mortgage loans ("ARMS"). The Treasury &
Agency Fund may buy only government ARMs. ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time. Thereafter, the interest rates (the "MORTGAGE
INTEREST RATES") may be subject to periodic adjustment based on changes in the
applicable index rate (the "INDEX RATE"). The adjusted rate would be equal to
the Index Rate plus a gross margin, which is a fixed percentage spread over the
Index Rate established for each ARM at the time of its origination.
Adjustable interest rates can cause payment increases that some
borrowers may find difficult to make. However, certain ARMs may provide that the
Mortgage Interest Rate may not be adjusted to a rate above an applicable
lifetime maximum rate or below an applicable lifetime minimum rate for such ARM.
Certain ARMs may also be subject to limitations on the maximum amount by which
the Mortgage Interest Rate may adjust for any single adjustment period (the
"MAXIMUM ADJUSTMENT"). Other ARMs ("NEGATIVELY AMORTIZING ARMS") may provide
instead or as well for limitations on changes in the monthly payment on such
ARMs. Limitations on monthly payments can result in monthly payments which are
greater or less than the amount necessary to amortize a Negatively Amortizing
ARM by its maturity at the Mortgage Interest Rate in effect in any particular
month. In the event that a monthly payment is not sufficient to pay the interest
accruing on a Negatively Amortizing ARM, any such excess interest is added to
the principal balance of the loan, causing negative amortization and will be
repaid through future monthly payments. It may take borrowers under Negatively
Amortizing ARMs longer periods of time to achieve equity and may increase the
likelihood of default by such borrowers. In the event that a monthly payment
exceeds the sum of the interest accrued at the applicable Mortgage Interest Rate
and the principal payment which would have been necessary to amortize the
outstanding principal balance over the remaining term of the loan, the excess
(or "accelerated amortization") further reduces the principal balance of the
ARM. Negatively Amortizing ARMs do not provide for the extension of their
original maturity to accommodate changes in their Mortgage Interest Rate. As a
result, unless there is a periodic recalculation of the payment amount (which
there generally is), the final payment may be substantially larger than the
other payments. These limitations on periodic increases in interest rates and on
changes in monthly payment protect borrowers from unlimited interest rate and
payment increases.
Certain adjustable rate mortgage loans may provide for periodic
adjustments of scheduled payments in order to amortize fully the mortgage loan
by its stated maturity. Other adjustable rate mortgage loans may permit their
stated maturity to be extended or shortened in accordance with the portion of
each payment that is applied to interest as affected by the periodic interest
rate adjustments.
There are two main categories of indices which provide the basis
for rate adjustments on ARMs: those based on U.S. Treasury securities and those
derived from a calculated measure such as a cost of funds index or a moving
average of mortgage rates. Commonly utilized indices include the one-year,
three-year and five-year constant maturity Treasury bill rates, the three-month
Treasury bill rate, the 180-day Treasury bill rate, rates on longer-term
Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds, the
National Median Cost of Funds, the one-month, three-month, six-month or one-year
London Interbank Offered Rate ("LIBOR"), the prime rate of a specific bank, or
commercial paper rates. Some indices, such as the one-year constant maturity
Treasury rate, closely mirror changes in market interest rate levels. Others,
such as the 11th District Federal Home Loan Bank Cost of Funds index, tend to
lag behind changes in market rate levels and tend to be somewhat less volatile.
The degree of volatility in the market value of the Fund's portfolio and
therefore in the net asset value of the Fund's shares will be a function of the
length of the interest rate reset periods and the degree of volatility in the
applicable indices.
In general, changes in both prepayment rates and interest rates
will change the yield on Mortgage-Backed Securities. The rate of principal
prepayments with respect to ARMs has fluctuated in recent years. As is the case
with fixed mortgage loans, ARMs may be subject to a greater rate of principal
prepayments in a declining interest rate environment. For example, if prevailing
interest rates fall
37
<PAGE> 897
significantly, ARMs could be subject to higher prepayment rates than if
prevailing interest rates remain constant because the availability of fixed rate
mortgage loans at competitive interest rates may encourage mortgagors to
refinance their ARMs to "lock-in" a lower fixed interest rate. Conversely, if
prevailing interest rates rise significantly, ARMs may prepay at lower rates
than if prevailing rates remain at or below those in effect at the time such
ARMs were originated. As with fixed rate mortgages, there can be no certainty as
to the rate of prepayments on the ARMs in either stable or changing interest
rate environments. In addition, there can be no certainty as to whether
increases in the principal balances of the ARMs due to the addition of deferred
interest may result in a default rate higher than that on ARMs that do not
provide for negative amortization. Other factors affecting prepayment of ARMs
include changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgage properties and servicing decisions.
RISKS FACTORS OF MORTGAGE-RELATED SECURITIES
Guarantor Risk. There can be no assurance that the U.S. government
would provide financial support to Fannie Mae, Freddie Mac or Ginnie
Mae if necessary in the future. Although certain mortgage-related
securities are guaranteed by a third party or otherwise similarly
secured, the market value of the security, which may fluctuate, is
not so secured.
Interest Rate Sensitivity. If a Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline
in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such
securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true since
in periods of declining interest rates the mortgages underlying the
securities are prone to prepayment. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages and, therefore,
it is not possible to predict accurately the security's return to the
Funds. In addition, regular payments received in respect of
mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Funds of the Trust will
receive when these amounts are reinvested.
Market Value. The market value of the Fund's adjustable rate
Mortgage-Backed Securities may be adversely affected if interest
rates increase faster than the rates of interest payable on such
securities or by the adjustable rate mortgage loans underlying such
securities. Furthermore, adjustable rate Mortgage-Backed Securities
or the mortgage loans underlying such securities may contain
provisions limiting the amount by which rates may be adjusted upward
and downward and may limit the amount by which monthly payments may
be increased or decreased to accommodate upward and downward
adjustments in interest rates.
Prepayments. Although having less risk of decline during periods
of rising interest rates, adjustable rate Mortgage-Backed Securities
have less potential for capital appreciation than fixed rate
Mortgage-Backed Securities because their coupon rates will decline in
response to market interest rate declines. The market value of fixed
rate Mortgage-Backed Securities may be adversely affected as a result
of increases in interest rates and, because of the risk of
unscheduled principal prepayments, may benefit less than other fixed
rate securities of similar maturity from declining interest rates.
Finally, to the extent Mortgage-Backed Securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments
may result in some loss of the Fund's principal investment to the
extent of the premium paid. On the other hand, if such securities are
purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal will increase current and total
returns and will accelerate the recognition of income.
Yield Characteristics. The yield characteristics of
Mortgage-Backed Securities differ from those of traditional fixed
income securities. The major differences typically include more
frequent interest and principal payments,
38
<PAGE> 898
usually monthly, and the possibility that prepayments of principal
may be made at any time. Prepayment rates are influenced by changes
in current interest rates and a variety of economic, geographic,
social and other factors and cannot be predicted with certainty. As
with fixed rate mortgage loans, adjustable rate mortgage loans may be
subject to a greater prepayment rate in a declining interest rate
environment. The yields to maturity of the Mortgage-Backed Securities
in which the Funds invest will be affected by the actual rate of
payment (including prepayments) of principal of the underlying
mortgage loans. The mortgage loans underlying such securities
generally may be prepaid at any time without penalty. In a
fluctuating interest rate environment, a predominant factor affecting
the prepayment rate on a pool of mortgage loans is the difference
between the interest rates on the mortgage loans and prevailing
mortgage loan interest rates (giving consideration to the cost of any
refinancing). In general, if mortgage loan interest rates fall
sufficiently below the interest rates on fixed rate mortgage loans
underlying mortgage pass-through securities, the rate of prepayment
would be expected to increase. Conversely, if mortgage loan interest
rates rise above the interest rates on the fixed rate mortgage loans
underlying the mortgage pass-through securities, the rate of
prepayment may be expected to decrease.
MUNICIPAL SECURITIES
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "PRIVATE ACTIVITY
BONDS" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
inter-city rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation.
Certain debt obligations known as "INDUSTRIAL DEVELOPMENT BONDS"
under prior federal tax law may have been issued by or on behalf of public
authorities to obtain funds to provide certain privately operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to fund the construction, improvement, equipment or
repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law. The aggregate amount of most
private activity bonds and industrial development bonds is limited (except in
the case of certain types of facilities) under federal tax law by an annual
"volume cap." The volume cap limits the annual aggregate principal amount of
such obligations issued by or on behalf of all governmental instrumentalities in
the state.
The two principal classifications of Municipal Securities consist
of "general obligation" and "limited" (or revenue) issues. General obligation
bonds are obligations involving the credit of an issuer possessing taxing power
and are payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon appropriation by the issuer's
legislative body. Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Private
activity bonds and industrial development bonds generally are revenue bonds and
thus not payable from the unrestricted revenues of the issuer. The credit and
quality of such bonds is generally related to the credit of the bank selected to
provide the letter of credit underlying the bond. Payment of
39
<PAGE> 899
principal of and interest on industrial development revenue bonds is the
responsibility of the corporate user (and any guarantor).
The Funds may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities, and in other tax-exempt
investments including pollution control bonds and tax-exempt commercial paper.
Each Fund may purchase short-term tax-exempt General Obligations Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, and other forms of short-term tax-exempt loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements, or other revenues. Project Notes are issued by a
state or local housing agency and are sold by the Department of Housing and
Urban Development. While the issuing agency has the primary obligation with
respect to its Project Notes, they are also secured by the full faith and credit
of the United States through agreements with the issuing authority which provide
that, if required, the federal government will lend the issuer an amount equal
to the principal of and interest on the Project Notes.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligations, and the rating of the
issue. The ratings of Moody's and S&P represent their opinions as to the quality
of Municipal Securities. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Securities with
the same maturity, interest rate and rating may have different yields while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by a Fund, an issue
of Municipal Securities may cease to be rated or its rating may be reduced below
the minimum rating required for purchase by the Fund. Banc One Investment
Advisors or the applicable Sub-Advisor will consider such an event in
determining whether the Fund should continue to hold the obligations.
Municipal securities may include OBLIGATIONS OF MUNICIPAL HOUSING
AUTHORITIES and SINGLE-FAMILY MORTGAGE REVENUE BONDS. Weaknesses in Federal
housing subsidy programs and their administration may result in a decrease of
subsidies available for payment of principal and interest on housing authority
bonds. Economic developments, including fluctuations in interest rates and
increasing construction and operating costs, may also adversely impact revenues
of housing authorities. In the case of some housing authorities, inability to
obtain additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
MUNICIPAL LEASES are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Banc One Investment Advisors is
responsible for determining the credit quality of unrated municipal leases, on
an ongoing basis, including an assessment of the likelihood that the lease will
not be canceled.
RISK FACTORS IN MUNICIPAL SECURITIES
Tax Risk. The Code imposes certain continuing requirements on
issuers of tax-exempt bonds regarding the use, expenditure and
investment of bond proceeds and the payment of rebates to the United
States of America. Failure by the issuer to comply subsequent to the
issuance of tax-exempt bonds with certain of these requirements could
cause interest on the bonds to become includable in gross income
retroactive to the date of issuance.
Housing Authority Tax Risk. The exclusion from gross income for
Federal income tax purposes for certain housing authority bonds
depends on
40
<PAGE> 900
qualification under relevant provisions of the Code and on other
provisions of Federal law. These provisions of Federal law contain
certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage
bonds and the income levels of tenants of the rental projects
financed with the proceeds of the multi-family housing bonds. While
the issuers of the bonds, and other parties, including the
originators and servicers of the single-family mortgages and the
owners of the rental projects financed with the multi-family housing
bonds, covenant to meet these ongoing requirements and generally
agree to institute procedures designed to insure that these
requirements will be consistently met, there is no assurance that the
requirements will be consistently met. The failure to meet these
requirements could cause the interest on the bonds to become taxable,
possibly retroactively from the date of issuance, thereby reducing
the value of the bonds and subjecting Shareholders to unanticipated
tax liabilities and possibly requiring a Fund to sell the bonds at
the reduced value. Furthermore, any failure to meet these ongoing
requirements might constitute an event of default under the
applicable mortgage or permit the holder to accelerate payment of the
bond or require the issuer to redeem the bond. In any event, where
the mortgage is insured by the Federal Housing Administration
("FHA"), the consent of the FHA may be required before insurance
proceeds would become payable to redeem the mortgage subsidy.
Information Risk. Information about the financial condition of
issuers of Municipal Securities may be less available than about
corporations having a class of securities registered under the
Securities Exchange Act of 1934.
State and Federal Laws. An issuer's obligations under its
Municipal Securities are subject to the provisions of bankruptcy,
insolvency, and other laws affecting the rights and remedies of
creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the
time for payment of principal or interest, or both, or imposing other
constraints upon the enforcement of such obligations. The power or
ability of an issuer to meet its obligations for the payment of
interest on and principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
Litigation and Current Developments. Such litigation or conditions
may from time to time have the effect of introducing uncertainties in
the market for tax-exempt obligations, or may materially affect the
credit risk with respect to particular bonds or notes. Adverse
economic, business, legal or political developments might affect all
or a substantial portion of a Fund's Municipal Securities in the same
manner.
New Legislation. From time to time, proposals have been introduced
before Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on tax exempt bonds, and
similar proposals may be introduced in the future. The Supreme Court
has held that Congress has the constitutional authority to enact such
legislation. It is not possible to determine what effect the adoption
of such proposals could have on (i) the availability of Municipal
Securities for investment by the Funds, and (ii) the value of the
investment portfolios of the Funds.
LIMITATIONS ON THE USE OF MUNICIPAL SECURITIES
As a matter of fundamental policy, under normal market conditions,
at least 80% of the total assets (net assets in the case of the Louisiana
Municipal Bond Fund) of each of the Municipal Money Market Fund, the Ohio
Municipal Money Market Fund, the Michigan Municipal Money Market Fund, the
Municipal Income Fund, the Intermediate
Tax-Free Bond Fund, the Ohio Municipal Bond Fund, the Michigan Municipal Bond
Fund, the Kentucky Municipal Bond Fund, the Louisiana Municipal Bond Fund, the
West Virginia Municipal Bond Fund, the Arizona Municipal Bond Fund, and the
Tax-Exempt Money Market Fund will be invested in Municipal Securities. Other
Funds may also invest in Municipal Securities if Banc One Investment Advisors or
the applicable Sub-Advisor determines that such Municipal Securities offer
attractive yields. The Funds may invest in Municipal Securities either by
purchasing them directly or by
41
<PAGE> 901
purchasing certificates of accrual or similar instruments evidencing direct
ownership of interest payments or principal payments, or both, on Municipal
Securities, provided that, in the opinion of counsel to the initial seller of
each such certificate or instrument, any discount accruing on such certificate
or instrument that is purchased at a yield not greater than the coupon rate of
interest on the related Municipal Securities will to the same extent as interest
on such Municipal Securities be exempt from federal income tax and state income
tax (where applicable) and not treated as a preference item for individuals for
purposes of the federal alternative minimum tax.
The Funds may also invest in Municipal Securities by purchasing
from banks participation interests in all or part of specific holdings of
Municipal Securities. Such participation may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from a Fund in connection with the arrangement. A Fund will
not purchase participation interests unless it receives an opinion of counsel or
a ruling of the Internal Revenue Service that interest earned by it on Municipal
Securities in which it holds such participation interest is exempt from federal
income tax and state income tax (where applicable) and not treated as a
preference item for individuals for purposes of the federal alternative minimum
tax.
The Tax-Advantaged Funds may not be a desirable investment for
"substantial users" of facilities financed by private activity bonds or
industrial development bonds or for "related persons" of substantial users. Each
Fund will limit its investment in municipal leases to no more than 5% of its
total assets.
ARIZONA MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "Arizona Municipal Securities" refers to debt securities
which are issued by or on behalf of Arizona or its respective authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of counsel for the issuer, is exempt from both
federal income tax and Arizona personal income tax .
Risk Factors Regarding Investments in Arizona Municipal
Securities. Over the past several decades, Arizona's economy has grown faster
than most other regions of the country. Arizona's population experienced an
increase of 2.9% in 1997 and a substantially similar percentage increase in
1998. Current State projections include continuing population gains averaging
approximately 2.7% per year through the year 2002.Arizona's employment rate
increased 6.7% in 1994, 6.1% in 1995, 5.6% in 1996,4.4% in 1997 and 4.7% in
1998. More significantly, Arizona was ranked the fastest growing state seven out
of 12 months during 1998 and ranked second during the other five months. Job
growth is expected to continue, but at a somewhat slower pace. The two-year
forecast indicates that 155,000 new jobs will be created in Arizona, which
translates into an average annual growth rate of 3.7% per year. The State's
unemployment rate was 5.5% in 1996, 4.0% in 1997 and 4.1% in 1998.
Arizona's per capita personal income has generally varied between
5% and 15% below the national average due to such factors as the chronic poverty
on the state's Indian reservations, the states relatively high number of
retirees and children, and the state's below-average wage scale. However,
Arizona's aggregate personal income grew from $60.9 billion in 1990 to $100.6
billion in 1998, an increase of 65.2% and an average annual growth rate of 8.1%
per year.
Despite an increase in population, employment and aggregate
personal income, retail sales growth rates declined between 1994 and 1997, but
have recently begun to rise again. The retail sales growth rate was 11.8% for
fiscal year 1994-1995, 7.4% for fiscal year 1995-1996, 5% for 1996-1997, 7.8%
for fiscal year 1997-1998 and 8.2% for fiscal year 1998-1999.
After experiencing several years of budget shortfalls requiring
mid-year adjustments, the State of Arizona has had significant budget surpluses
each year from 1993 through 1998. However, during fiscal year 1999, a
significant portion of the accumulated surpluses were committed to construction
and renovation of public school
42
<PAGE> 902
facilities, reducing the projected surplus at June 30, 1998 to approximately $70
million. An amendment to the Arizona Constitution requiring a 2/3 majority vote
in both houses of the Legislature to enact any tax or fee increase limits
Arizona's ability to raise additional revenue when needed, but Arizona has
placed some of its surplus revenues in a rainy-day fund to address this risk.
The State of Arizona, as such, has no general obligation debt. The
Arizona Department of Transportation, the Arizona Board of Regents, the Arizona
Power Authority and the Water Infrastructure Authority of Arizona have each
issued revenue bonds. The State of Arizona has financed certain capital
improvements and equipment through certificates of participation, which
represent undivided interests in lease payments to be made by the state that are
subject to annual appropriations by the Arizona legislature.
The Arizona Constitution limits the amount of debt that can be
issued by the state's counties, cities, towns, school districts and other
municipal corporations in the form of indebtedness payable from property taxes
or other general fund sources. In general, those political subdivisions may not
become indebted in an amount exceeding six percent of the value of the taxable
property in the political subdivision without the approval of a majority of the
qualified electors voting at an election. No county or school district may
become indebted in an amount exceeding 15% (30% for unified school districts) of
the value of taxable property, even with voter approval. Incorporated cities or
towns with voter approval may become indebted in an amount up to 20% of the
value of taxable property, for purposes of supplying water, light, sewers, open
space preserves, parks, playgrounds and recreational facilities. These
constitutional debt limits generally do not apply to revenue bonds payable from
a special fund revenue source.
In July 1994, the Arizona Supreme Court ruled that Arizona's
system for financing public education created substantial disparities in
facilities among school districts and violated the provisions of the Arizona
Constitution which require the Legislature to establish and maintain "a general
and uniform public school system." After several attempts, each of which were
held unconstitutional by the Arizona Supreme Court, the Legislature enacted
legislation in July 1998, which establishes a centralized state school capital
finance system and, among other things, limits the ability of school districts
to issue bonds. This legislation should have no effect on the obligation or
ability of Arizona school districts to pay debt service on currently outstanding
bonds.
KENTUCKY MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "Kentucky Municipal Securities" refers to debt securities
which are issued by or on behalf of Kentucky or its respective authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of counsel for the issuer, is exempt from both
federal income tax and Kentucky personal income tax.
Risk Factors Regarding Investments in Kentucky Municipal
Securities. As of June 30, 1999, Kentucky had an unemployment rate of 4.6%,
slightly more than the 4.5% national average. For calendar year 1998, Kentucky's
per capita income ranked 39th in the nation and was 81% of the national average.
The most current audited financial statements for Kentucky indicate a surplus of
funds in the General Fund of $731,323,000 as of June 30, 1998, which was
$535,699,000 above the budgeted balance.
Unlike the municipal securities of most states, nearly all
Kentucky Municipal Securities are not general obligations of the issuer; rather,
payment depends on revenues generated by the property financed by the
securities.
LOUISIANA MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "Louisiana Municipal Securities" refers to debt securities
which are issued by or on behalf of Louisiana or its respective authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of
43
<PAGE> 903
counsel for the issuer, is exempt from both federal income tax and Louisiana
personal income tax.
Risk Factors Regarding Investments in Louisiana Municipal
Securities. The State of Louisiana continues to consolidate its economic and
financial gains after a period of difficulty. In the mid-1980's, abrupt declines
in the price of oil disrupted both the economy and financial operations of the
State. Recent years have generally produced operating surpluses and major
financial issues, such as Medicaid and risk management, have been addressed.
Louisiana has reduced its per capita debt to more moderate levels in recent
years. Available general fund revenue was $5,788 million in fiscal year
1997/1998 and 1999/2000 will be $5,814 million and $5,879 million, respectively.
Louisiana's economy is resource based, led by oil and gas, but
agribusiness and tourism are also significant components. Growth in the service
employment sector is providing more diversity, but the State is still very
dependent on oil and gas for direct or indirect employment and income. The price
of oil is estimated at $17 per barrel in 1998 and $17.50 in 1999.
Increases in personal income exceed the national rates during 1990
to 1994 on both a total and per capita basis, but these increases have slowed in
recent years. During the next two fiscal years, personal income in the state is
projected to increase by 4.5% and 4.3%, respectively. With regard to employment,
Louisiana's annual average employment growth rate was 2.3% during the 90's.
Employment is projected to increase by 1.4% and 1.3%, respectively, during the
next two fiscal years.
MICHIGAN MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "Michigan Municipal Securities" refers to debt securities
which are issued by or on behalf of Michigan or its respective authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of counsel for the issuer, is exempt from both
Federal income tax and Michigan income tax.
Risk Factors Regarding Michigan Municipal Securities. The State of
Michigan's economy is principally dependent on manufacturing (particularly
automobiles, office equipment and other durable goods), tourism and agriculture,
and historically has been highly cyclical.
Total State wage and salary employment is estimated to have grown
by 1.9% in 1998. The rate of unemployment is estimated to have been 3.8% in
1998, below the national average for the fifth consecutive year. Personal income
grew at an estimated 5.1% annual rate in 1998, up from the 4.6% growth reported
for 1997.
During the past five years, improvements in the Michigan economy
have resulted in increased revenue collections which, together with restraints
on the expenditure side of the budget, have resulted in State General Fund
budget surpluses, most of which were transferred to the State's Counter-Cyclical
Budget and Economic Stabilization Fund. The balance of that Fund as of September
30, 1998 is estimated to have been in excess of $1.1 billion.
The Michigan Constitution limits the amount of total State
revenues that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar 1977 State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of
State spending paid to all units of local government to total State spending may
not be reduced below the proportion in effect in the 1978-79 fiscal year. The
State originally determined that portion to be 41.6%. If such spending does not
meet the required level in a given year, an additional appropriation for local
government
44
<PAGE> 904
units is required by the following fiscal year; which means the year following
the determinations of the shortfall, according to an opinion issued by the
State's Attorney General. Spending for local units met this requirement for
fiscal years 1986-87 through 1991-92. As the result of litigation, the State
agreed to reclassify certain expenditures, beginning with fiscal year 1992-93,
and has recalculated the required percentage of spending paid to local
government units to be 48.97%.
The Michigan Constitution limits State general obligation debt to
(i) short term debt for State operating purposes, (ii) short and long term debt
for the purpose of making loans to school districts, and (iii) long term debt
for voter-approved purposes.
The State has issued and has outstanding general obligation full
faith and credit bonds for Water Resources, Environmental Protection Program,
Recreation Program and School Loan purposes. As of September 30, 1998, the State
had approximately $874 million of general obligation bonds outstanding.
The State may issue notes or bonds without voter approval for the
purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligation bonds issued by local school districts.
The State is a party to various legal proceedings seeking damages
or injunctive or other relief. In addition to routine litigation, certain of
these proceedings could, if unfavorably resolved from the point of view of the
State, substantially affect State programs or finances. As of early 1999, these
lawsuits involved programs generally in the areas of corrections, tax
collection, commerce, and proceedings involving budgetary reductions to school
districts and governmental units, and court funding. Notable among these legal
proceedings are lawsuits brought by a number of school districts challenging the
constitutionality of certain State-mandated special education services without
corresponding funding.
The State Constitution also limits the extent to which
municipalities or political subdivisions may levy taxes upon real and personal
property through a process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and
school finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general property tax. All local school boards
are authorized, with voter approval, to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes on nonhomestead
property and nonqualified agricultural property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A and its implementing legislation shifted significant
portions of the cost of local school operations from local school districts to
the State and raised additional State revenues to fund these additional State
expenses. These additional revenues will be included within the State's
constitutional revenue limitations and may impact the State's ability to raise
additional revenues in the future.
A state economy during a recessionary cycle would also, as a
separate matter, adversely affect the capacity of users of facilities
constructed or acquired
45
<PAGE> 905
through the proceeds of private activity bonds or other "revenue" securities to
make periodic payments for the use of those facilities.
OHIO MUNICIPAL SECURITIES
As used in the Prospectuses and this Statement of Additional
Information, the term "Ohio Municipal Securities" refers to debt securities
which are issued by or on behalf of Ohio or its respective authorities,
agencies, instrumentalities and political subdivisions which produce interest
which, in the opinion of counsel for the issuer, are exempt from both federal
income tax and Ohio personal income tax.
RISK FACTORS REGARDING INVESTMENTS IN OHIO MUNICIPAL SECURITIES
The economy of Ohio, while becoming increasingly diversified and
increasingly reliant on the service sector, continues to rely in significant
part on durable goods manufacturing, which is largely concentrated in motor
vehicles and equipment, steel, rubber products and household appliances. As a
result, general economic activity in Ohio, as in many other industrial states,
tends to be more cyclical than in some other states and in the nation as a
whole. Agriculture also is an important segment of the Ohio economy, and the
state has instituted several programs to provide financial assistance to
farmers. Although revenue obligations of the state or its political subdivisions
may be payable from a specific source or project, and general obligation debt
may be payable from a specific tax, there can be no assurance that future
economic difficulties and the resulting impact on state and local government
finances will not adversely affect the market value of the Ohio Municipal
Securities in the Funds of the Trust or the ability of the respective obligors
to make timely payment of interest and principal on such obligations.
Since the Ohio Municipal Bond Fund and Ohio Municipal Money Market
Fund invest primarily in Ohio Municipal Securities, the value of each Fund's
Shares may be especially affected by factors pertaining to the economy of Ohio
and other factors specifically affecting the ability of issuers of Ohio
Municipal Securities to meet their obligations. As a result, the value of the
Shares of the Ohio Municipal Bond Fund and the Ohio Municipal Money Market Fund
may fluctuate more widely than the value of Shares of a portfolio investing in
securities relating to a number of different states. The ability of Ohio state,
county, or local governments to meet their obligations will depend primarily on
the availability of tax and other revenues to those governments and on their
fiscal conditions generally. The amounts of tax and other revenues available to
issuers of Ohio Municipal Securities may be affected from time to time by
economic, political and demographic conditions within the state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of Ohio Municipal Securities may also affect their ability to meet their
obligations. Payments of principal and interest on limited obligation securities
will depend on the economic condition of the facility or specific revenue source
from which revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions in the state. Any reduction
in the actual or perceived ability to meet obligations on the part of either an
issuer of an Ohio Municipal Security or a provider of credit enhancement for
such Ohio Municipal Security (including a reduction in the rating of its
outstanding securities) would likely affect adversely the market value and
marketability of that Ohio Municipal Security and could adversely affect the
values of other Ohio Municipal Securities as well.
WEST VIRGINIA MUNICIPAL SECURITIES
As used in the Prospectus and this Statement of Additional
Information, the term "West Virginia Municipal Securities" refers to debt
securities which are issued by or on behalf of West Virginia or its authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of counsel for the issuer, is exempt from federal
income tax and is generally exempt from West Virginia income tax.
Risk Factors Regarding Investments in West Virginia Municipal
Securities. Being invested primarily in West Virginia Municipal Securities, the
West Virginia
46
<PAGE> 906
Municipal Bond Fund is subject to the risks of West Virginia's economy and of
the financial condition of its state and local governments and their agencies.
West Virginia's economy is relatively stable. Coal mining,
chemicals and manufacturing make up an important part of that economy. The coal
industry, however, is under increased scrutiny which may affect the economic
feasibility of conducting mining operations in the future. State and local
governments continue to make concentrated efforts to encourage diversification
of the State's economy with some success. However, unemployment for the State
continues to exceed the national average.
In recent years, the State and local government have had adequate
financial resources. But, with little or no population growth, unemployment
statewide remaining above the national average, the continuing decline in school
enrollment, and an aging population, the government and school boards continue
to struggle to produce sufficient revenues to fund operations to support public
education.
NEW FINANCIAL PRODUCTS
New options and futures contracts and other financial products,
and various combinations options and futures contracts, continue to be developed
and certain of the Funds may invest in any such options, contracts and products
as may be developed to the extent consistent with each Fund's investment
objective, policies and restrictions and the regulatory requirements applicable
to investment companies.
These various products may be used to adjust the risk and return
characteristics of each Fund's investments. These various products may increase
or decrease exposure to security prices, interest rates, commodity prices, or
other factors that affect security values, regardless of the issuer's credit
risk. If market conditions do not perform consistent with expectations, the
performance of each Fund would be less favorable than it would have been if
these products were not used. In addition, losses may occur if counterparties
involved in transactions do not perform as promised. These products may expose
the Fund to potentially greater return as well as potentially greater risk of
loss than more traditional fixed income investments.
PERCS*
The Equity Funds may invest in Preferred Equity Redemption
Cumulative Stock ("PERCS") which is a form of convertible preferred stock that
actually has more of an equity component than it does fixed income
characteristics. These instruments permit companies to raise capital via a
surrogate for common equity. PERCS are preferred stock which convert to common
stock after a specified period of time, usually three years, and are considered
the equivalent of equity by the ratings agencies. Issuers pay holders a
substantially higher dividend yield than that on the underlying common, and in
exchange, the holder's appreciation is capped, usually at about 30 percent.
PERCS are callable at any time. The PERC is mandatorily convertible into common
stock, but is callable at any time at an initial call price that reflects a
substantial premium to the stock's issue price. PERCS offer a higher dividend
than that available on the common stock, but in exchange the investors agree to
the company placing a cap on the potential price appreciation. The call price
declines daily in an amount that reflects the incremental dividend that holders
enjoy. PERCS are listed on an exchange where the common stock is listed.
*PERCS is a registered trademark of Morgan Stanley, which does not
sponsor and is in no way affiliated with One Group.
PREFERRED STOCK
Preferred stock is a class of stock that generally pays dividends
at a specified rate and has preference over common stock in the payment of
dividends and liquidation. Preferred stock generally does not carry voting
rights. As with all equity securities, the price of preferred stock fluctuates
based on changes in a company's financial condition and on overall market and
economic conditions.
47
<PAGE> 907
REAL ESTATE INVESTMENT TRUSTS ("REITS")
Certain of the Funds may invest in equity interests or debt
obligations issued by REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interest. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
property that has appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Similar to investment companies, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Code. A Fund will indirectly bear its proportionate share of
expenses incurred by REITs in which a Fund invests in addition to the expenses
incurred directly by a Fund.
Investing in REITs involves certain unique risks in addition to
those risks associated with investing in the real estate industry in general.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemption from registration under the Act.
REITs (especially mortgage REITs) are also subject to interest
rate risks. When interest rates decline, the value of a REIT's investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of a REIT's investment in fixed rate obligations can be expected
to decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investment in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and may
be subject to more abrupt or erratic price movements than larger company
securities. Historically, small capitalization stocks, such as REITs, have been
more volatile in price than the larger capitalization stocks included in the S&P
Index of 500 Common Stocks.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, a Fund would acquire
securities from a seller, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price would
generally equal the price paid by the Fund plus interest negotiated on the basis
of current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller under a repurchase agreement will be
required to maintain the value of collateral held pursuant to the agreement at
not less than the repurchase price (including accrued interest).
If the seller were to default on its repurchase obligation or
become insolvent, the Fund holding such obligation would suffer a loss to the
extent that the proceeds from a sale of the underlying portfolio securities were
less than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Fund were delayed pending court action.
Additionally, there is no controlling legal precedent under U.S. law and there
may be no controlling legal precedents under the laws of certain foreign
jurisdictions confirming that a Fund would be entitled, as against a claim by
such seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although (with respect to repurchase agreements subject to U.S. law)
the Board of Trustees of the Trust believes that, under the regular procedures
normally in effect for custody of a Fund's securities subject to repurchase
agreements and under federal laws, a court of competent jurisdiction would rule
in favor of the Trust if presented with the question.
48
<PAGE> 908
Securities subject to repurchase agreements will be held by the Trust's
custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered by the SEC to be loans
by a Fund under the 1940 Act.
Repurchase Agreement Counterparties. For Funds other than the
International Funds, repurchase counterparties include Federal Reserve member
banks with assets in excess of $1 billion and registered broker dealers which
Banc One Investment Advisors or, in the case of the High Yield Bond Fund, the
High Yield Sub-Advisor deems creditworthy under guidelines approved by the Board
of Trustees. In the case of the International Funds, repurchase counterparties
include banks or foreign banks with total assets in excess of $1 billion or
broker-dealers which may or may not be registered, which Banc One Investment
Advisors, or in the case of the International Equity Index Fund, the
International Sub-Advisor, deems creditworthy under guidelines approved by the
Board of Trustees.
REVERSE REPURCHASE AGREEMENTS
Funds may borrow money for temporary purposes by entering into
reverse repurchase agreements. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually agreed-upon date and price. A Fund
would enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Fund entered into a reverse repurchase agreement, it would place in a
segregated custodial account assets, such as cash or liquid securities
consistent with the Fund's investment restrictions and having a value equal to
the repurchase price (including accrued interest), and would subsequently
monitor the account to ensure that such equivalent value was maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the price at which the Fund is obligated to
repurchase the securities. Reverse repurchase agreements are considered by the
SEC to be borrowings by a Fund under the 1940 Act.
RESTRICTED SECURITIES
Some of the Funds may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933 and other restricted securities. Section 4(2) commercial
paper is restricted as to disposition under federal securities law and is
generally sold to institutional investors, such as the Funds, who agree that
they are purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Funds through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Funds believe that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat restricted securities that meet the liquidity criteria
established by the Board of Trustees, including Section 4(2) commercial paper
and Rule 144A Securities, as determined by Banc One Investment Advisors, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a SEC Staff position set forth in the
adopting release for Rule 144A under the Securities Act of 1933 ("RULE 144A").
Rule 144A is a nonexclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for resale. The Funds believe that the Staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Trustees. The Trustees have directed Banc One Investment Advisors to
consider the following criteria in determining the liquidity of certain
restricted securities:
49
<PAGE> 909
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace
trades.
Certain Section 4(2) commercial paper programs cannot rely on Rule
144A because, among other things, they were established before the adoption of
the rule. However, the Trustees may determine for purposes of the Trust's
liquidity requirements that an issue of 4(2) commercial paper is liquid if the
following conditions, which are set forth in a 1994 SEC no-action letter, are
met:
o The 4(2) paper must not be traded flat or in default as to
principal or interest;
o The 4(2) paper must be rated in one of the two highest rating
categories by a least two NRSROs, or if only one NRSRO rates the security, by
that NRSRO, or if unrated, is determined by Banc One Investment Advisors or the
applicable Sub-Advisor to be of equivalent quality; and
o Banc One Investment Advisors or the applicable Sub-Advisor must
consider the trading market for the specific security, taking into account all
relevant factors, including but not limited, to whether the paper is the subject
of a commercial paper program that is administered by an issuing and paying
agent bank and for which there exists a dealer willing to make a market in that
paper, or is administered by a direct issuer pursuant to a direct placement
program; and
o Banc One Investment Advisors or the applicable Sub-Advisor shall
monitor the liquidity of the 4(2) commercial paper purchased and shall report to
the Board of Trustees promptly if any such securities are no longer determined
to be liquid if such determination causes a Fund to hold more than 15% (10% for
Money Market Funds) of its net assets in illiquid securities in order for the
Board of Trustees to consider what action, if any, should be taken on behalf of
One Group Mutual Funds, unless Banc One Investment Advisors or the applicable
Sub-Advisor is able to dispose of illiquid assets in an orderly manner in an
amount that reduces the Fund's holdings of illiquid assets to less than 15% (10%
for Money Market Funds) of its net assets; and
o Banc One Investment Advisors or the applicable Sub-Advisor shall
report to the Board of Trustees on the appropriateness of the purchase and
retention of liquid restricted securities under these Guidelines no less
frequently that quarterly.
SECURITIES LENDING
In order to generate additional income, each of the Funds, except
the Cash Management Money Market Funds, the U.S. Treasury Securities Money
Market Fund, the Municipal Money Market Fund, the Ohio Municipal Money Market
Fund, the Michigan Money Market Fund, the Treasury Prime Money Market Fund, the
U.S. Government Securities Money Market Fund, and the Funds of Funds, may lend
up to 33 1/3% of the securities in which they are invested pursuant to
agreements requiring that the loan be continuously secured by cash, securities
of the U.S. government or its agencies, shares of an investment trust or mutual
fund, letters of credit or any combination of cash, such securities, shares, or
letters of credit as collateral equal at all times to at least 100% of the
market value plus accrued interest on the securities lent. The Funds will
continue to receive interest on the securities lent while simultaneously seeking
to earn interest on the investment of cash collateral in U.S. government
securities, shares of an investment trust or mutual fund, or commercial paper,
repurchase agreements, variable and floating rate instruments, restricted
securities, asset-backed securities, and the other types of investments
permitted by the applicable Fund's prospectus. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There
50
<PAGE> 910
may be risks of delay in recovery of the securities or even loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans will only be made to borrowers deemed by Banc One Investment Advisors to
be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of Banc One Investment Advisors, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Loans are subject to termination by the Funds or the
borrower at any time, and are therefore, not considered to be illiquid
investments.
SHORT-TERM FUNDING AGREEMENTS
Some Funds may, in order to enhance yield, make limited
investments in short-term funding agreements issued by banks and highly rated
U.S. insurance companies. Short-term funding agreements issued by insurance
companies are sometimes referred to as Guaranteed Investment Contracts ("GICs"),
while those issued by banks are referred to as Bank Investment Contracts
("BICs"). Pursuant to such agreements, the Funds make cash contributions to a
deposit account at a bank or insurance company. The bank or insurance company
then credits to the Funds on a monthly basis guaranteed interest at either a
fixed, variable or floating rate. These contracts are general obligations of the
issuing bank or insurance company (although they may be the obligations of an
insurance company separate account) and are paid from the general assets of the
issuing entity.
The Funds will purchase short-term funding agreements only from
banks and insurance companies which, at the time of purchase, are rated in one
of the three highest rating categories and have assets of $1 billion or more.
Generally, there is no active secondary market in short-term funding agreements.
Therefore, short-term funding agreements may be considered by the Funds to be
illiquid investments. To the extent that a short-term funding agreement is
determined to be illiquid, such agreements will be acquired by the Funds only
if, at the time of purchase, no more than 15% of the Fund's net assets (10% of
the Money Market Fund's net assets) will be invested in short-term funding
agreements and other illiquid securities.
STRUCTURED INSTRUMENTS
Structured instruments are debt securities issued by agencies of
the U.S. government (such as Ginnie Mae, Fannie Mae, and Freddie Mac), banks,
corporations, and other business entities whose interest and/or principal
payments are indexed to certain specific foreign currency exchange rates,
interest rates, or one or more other reference indices. Structured instruments
frequently are assembled in the form of medium-term notes, but a variety of
forms are available and may be used in particular circumstances. Structured
instruments are commonly considered to be derivatives.
The terms of such structured instruments provide that their
principal and/or interest payments are adjusted upwards or downwards to reflect
changes in the reference index while the structured instruments are outstanding.
In addition, the reference index may be used in determining when the principal
is redeemed. As a result, the interest and/or principal payments that may be
made on a structured product may vary widely, depending on a variety of factors,
including the volatility of the reference index and the effect of changes in the
reference index on principal and/or interest payment.
While structured instruments may offer the potential for a
favorable rate of return from time to time, they also entail certain risks.
Structured instruments may be less liquid than other debt securities, and the
price of structured instruments may be more volatile. If the value of the
reference index changes in a manner other than that expected by Banc One
Investment Advisors or the applicable Sub-Advisor, principal and/or interest
payments on the structured instrument may be substantially less than expected.
In addition, although structured instruments may be sold in the form of a
corporate debt obligation, they may not have some of the protection against
counterparty default that may be available with respect to publicly traded debt
securities (i.e., the existence of a trust indenture). In that respect, the
risks of default associated with structured instruments may be similar to those
associated with swap contracts. See "Swaps, Caps and Floors."
51
<PAGE> 911
The Funds will invest only in structured securities that are
consistent with each Fund's investment objective, policies and restrictions and
Banc One Investment Advisors' or the applicable Sub-Advisor's outlook on market
conditions. In some cases, depending on the terms of the reference index, a
structured instrument may provide that the principal and/or interest payments
may be adjusted below zero; however, the Funds will not invest in structured
instruments if the terms of the structured instrument provide that the Funds may
be obligated to pay more than their initial investment in the structured
instrument, or to repay any interest or principal that has already been
collected or paid back.
Structured instruments that are registered under the federal
securities laws may be treated as liquid. In addition, many structured
instruments may not be registered under the federal securities laws. In that
event, a Fund's ability to resell such a structured instrument may be more
limited than its ability to resell other Fund securities. The Funds will treat
such instruments as illiquid, and will limit their investments in such
instruments to no more than 15% of each Fund's net assets, when combined with
all other illiquid investments of each Fund.
SWAPS, CAPS AND FLOORS
Certain of the Funds may enter into swaps, caps, and floors on
various securities (such as U.S. government securities), securities indexes,
interest rates, prepayment rates, foreign currencies or other financial
instruments or indexes, in order to protect the value of the Fund from interest
rate fluctuations and to hedge against fluctuations in the floating rate market
in which the Fund's investments are traded, for both hedging and non-hedging
purposes. While swaps, caps, and floors (sometimes hereinafter collectively
referred to as "SWAP CONTRACTS") are different from futures contracts (and
options on futures contracts) in that swap contracts are individually negotiated
with specific counterparties, the Funds will use swap contracts for purposes
similar to the purposes for which they use options, futures, and options on
futures. Those uses of swap contracts (i.e., risk management and hedging)
present the Funds with risks and opportunities similar to those associated with
options contracts, futures contracts, and options on futures. See "Futures
Contracts" and "Risk Factors in Futures Contracts."
The Funds may enter into these transactions to manage their
exposure to changing interest rates and other market factors. Some transactions
may reduce each Fund's exposure to market fluctuations while others may tend to
increase market exposure.
Swap contracts typically involve an exchange of obligations by two
sophisticated parties. For example, in an interest rate swap, the Fund may
exchange with another party their respective rights to receive interest, such as
an exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of respective rights to make or receive payments in
specified currencies. Mortgage swaps are similar to interest rate swaps in that
they represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages.
Caps and floors are variations on swaps. The purchase of a cap
entitles the purchaser to receive a principal amount from the party selling the
cap to the extent that a specified index exceeds a predetermined interest rate
or amount. The purchase of an interest rate floor entitles the purchaser to
receive payments on a notional principal amount from the party selling the floor
to the extent that a specified index falls below a predetermined interest rate
or amount. Caps and floors are similar in many respects to over-the-counter
options transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain
the obligation of the respective counterparties, and there is a risk that a
counterparty will be unable to meet its obligations under a particular swap
contract. If a counterparty defaults on a swap contract with a Fund, the Fund
may suffer a loss. To address this risk, each Fund will usually enter into
interest rate swaps on a net
52
<PAGE> 912
basis, which means that the two payment streams (one from the Fund to the
counterparty, one to the Fund from the counterparty) are netted out, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps do not involve the delivery of securities, other
underlying assets, or principal, except for the purposes of collateralization as
discussed below. Accordingly, the risk of loss with respect to interest rate
swaps entered into on a net basis would be limited to the net amount of the
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that a Fund is contractually entitled to
receive. In addition, the Fund may incur a market value adjustment on securities
held upon the early termination of the swap. To protect against losses related
to counterparty default, the Funds may enter into swaps that require transfers
of collateral for changes in market value. In contrast, currency swaps and other
types of swaps may involve the delivery of the entire principal value of one
designated currency or financial instrument in exchange for the other designated
currency or financial instrument. Therefore, the entire principal value of such
swaps may be subject to the risk that the other party will default on its
contractual delivery obligations.
In addition, because swap contracts are individually negotiated
and ordinarily non-transferable, there also may be circumstances in which it
would be impossible for a Fund to close out its obligations under the swap
contract prior to its maturity. Under such circumstances, the Fund might be able
to negotiate another swap contract with a different counterparty to offset the
risk associated with the first swap contract. Unless the Fund is able to
negotiate such an offsetting swap contract, however, the Fund could be subject
to continued adverse developments, even after Banc One Investment Advisors or
the applicable Sub-Advisor has determined that it would be prudent to close out
or offset the first swap contract.
The Funds (other than the High Yield Bond Fund) will not enter
into any mortgage swap, interest rate swap, cap or floor transaction unless the
unsecured commercial paper, senior debt, or the claims paying ability of the
other party thereto is rated in one of the top two rating categories by at least
one NRSRO, or if unrated, determined by Banc One Investment Advisors to be of
comparable quality.
The use of swaps involves investment techniques and risks
different from and potentially greater than those associated with ordinary Fund
securities transactions. If Banc One Investment Advisors or the applicable
Sub-Advisor is incorrect in its expectations of market values, interest rates,
or currency exchange rates, the investment performance of the Funds would be
less favorable than it would have been if this investment technique were not
used. In addition, in certain circumstances entry into a swap contract that
substantially eliminates risk of loss and the opportunity for gain in an
"appreciated financial position" will accelerate gain to the Funds.
The Staff of the SEC is presently considering its position with
respect to swaps, caps and floors as senior securities. Pending a determination
by the Staff, the Funds will either treat swaps, caps and floors as being
subject to their senior securities restrictions or will refrain from engaging in
swaps, caps and floors. Once the Staff has expressed a position with respect to
swaps, caps and floors, the Funds intend to engage in swaps, caps and floors, if
at all, in a manner consistent with such position. To the extent the net amount
of an interest rate or mortgage swap is held in a segregated account, consisting
of cash or liquid, high grade debt securities, the Funds and Banc One Investment
Advisors believe that swaps do not constitute senior securities under the
Investment Company Act of 1940 and, accordingly, will not treat them as being
subject to each Fund's borrowing restrictions. The net amount of the excess, if
any, of each Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Funds'
Custodian. Each of the Bond Funds generally will limit their investments in
swaps, caps and floors to 25% of its total assets.
53
<PAGE> 913
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.
54
<PAGE> 914
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations purchased by some of the Funds may carry
variable or floating rates of interest, may involve a conditional or
unconditional demand feature and may include variable amount master demand
notes.
VARIABLE AMOUNT MASTER DEMAND NOTES are demand notes that permit
the indebtedness to vary and provide for periodic adjustments in the interest
rate according to the terms of the instrument. Because master demand notes are
direct lending arrangements between a Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, a Fund may demand
payment of principal and accrued interest. While the notes are not typically
rated by credit rating agencies, issuers of variable amount master demand notes
(which are normally manufacturing, retail, financial, brokerage, investment
banking and other business concerns) must satisfy the same criteria as set forth
above for commercial paper. Banc One Advisers or the Sub-Advisor will consider
the earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand.
Some of the Funds subject to their investment objective policies
and restrictions, may acquire VARIABLE AND FLOATING RATE INSTRUMENTS. A variable
rate instrument is one whose terms provide for the adjustment of its interest
rate on set dates and which, upon such adjustment, can reasonably be expected to
have a market value that approximates its par value. Some of the Funds may
purchase EXTENDABLE COMMERCIAL NOTES. Extendable commercial notes are variable
rate notes which normally mature within a short period of time (e.g., 1 month)
but which may be extended by the issuer for a maximum maturity of thirteen
months.
A floating rate instrument is one whose terms provide for the
adjustment of its interest rate whenever a specified interest rate changes and
which, at any time, can reasonably be expected to have a market value that
approximates its par value. Floating rate instruments are frequently not rated
by credit rating agencies; however, unrated variable and floating rate
instruments purchased by a Fund will be determined by Banc One Investment
Advisors or the applicable Sub-Advisor under guidelines established by the
Trust's Board of Trustees to be of comparable quality at the time of purchase to
rated instruments eligible for purchase under the Fund's investment policies. In
making such determinations, Banc One Investment Advisors or the applicable
Sub-Advisor will consider the earning power, cash flow and other liquidity
ratios of the issuers of such instruments (such issuers include financial,
merchandising, bank holding and other companies) and will continuously monitor
their financial condition. There may be no active secondary market with respect
to a particular variable or floating rate instrument purchased by a Fund. The
absence of such an active secondary market, could make it difficult for the Fund
to dispose of the variable or floating rate instrument involved in the event the
issuer of the instrument defaulted on its payment obligations, and the Fund
could, for this or other reasons, suffer a loss to the extent of the default.
Variable or floating rate instruments may be secured by bank letters of credit
or other assets. A Fund will purchase a variable or floating rate instrument to
facilitate portfolio liquidity or to permit investment of the Fund's assets at a
favorable rate of return.
With respect to the Money Market Funds and the Institutional Money
Market Funds, variable or floating rate instruments with stated maturities of
more than 397 days may, under the Securities and Exchange Commission's amortized
cost rule, Rule 2a-7 under the 1940 Act, be deemed to have shorter maturities as
follows:
(1) Adjustable Rate Government Securities. A Government Security
which is a Variable Rate Security where the variable rate of interest is
readjusted no less frequently than every 762 days shall be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate. A Government Security which is a Floating Rate Security shall be
deemed to have a remaining maturity of one day.
55
<PAGE> 915
(2) Short-Term Variable Rate Securities. A Variable Rate Security,
the principal amount of which, in accordance with the terms of the security,
must unconditionally be paid in 397 calendar days or less shall be deemed to
have maturity equal to the earlier of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand.
(3) Long-Term Variable Rate Securities. A Variable Rate Security,
the principal amount of which is scheduled to be paid in more than 397 days,
that is subject to a Demand Feature shall be deemed to have a maturity equal to
the longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered through
demand.
(4) Short-Term Floating Rate Securities. A Floating Rate Security,
the principal amount of which, in accordance with the terms of the security,
must unconditionally be paid in 397 calendar days or less shall be deemed to
have a maturity of one day.
(5) Long-Term Floating Rate Securities. A Floating Rate Security,
the principal amount of which is scheduled to be paid in more than 397 days,
that is subject to a demand feature, shall be deemed to have a maturity equal to
the period remaining until the principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the
Fund is entitled to receive the principal amount of the note either at any time
on no more than thirty days' notice or at specified intervals not exceeding 397
calendar days and upon no more than 30 days notice.
LIMITATIONS ON THE USE OF VARIABLE AND FLOATING RATE NOTES.
Variable and floating rate instruments for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements providing for settlement more than seven
days after notice), exceeds 10% (with respect to the Money Market and
Institutional Money Market Funds) or 15% (with respect to all Funds, other than
the Money Market and Institutional Money Market Funds, which can purchase such
notes) of the Fund's net assets only if such instruments are subject to a demand
feature that will permit the Fund to demand payment of the principal within
seven days after demand by the Fund. There is no limit on the extent to which a
Fund may purchase demand instruments that are not illiquid. If not rated, such
instruments must be found by Banc One Investment Advisors or the Sub-Advisor,
under guidelines established by the Trust's Board of Trustees, to be of
comparable quality to instruments that are rated high quality. A rating may be
relied upon only if it is provided by a nationally recognized statistical rating
organization that is not affiliated with the issuer or guarantor of the
instruments. For a description of the rating symbols of S&P, Moody's, and Fitch
used in this paragraph, please read "Ratings of Portfolios Securities". The
above Funds may also invest in Canadian Commercial Paper which is commercial
paper issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation and in Europaper which is U.S. dollar denominated commercial paper
of a foreign issuer.
WARRANTS
Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to buy a proportionate amount of common
stock at a specified price, usually at a price that is higher than the market
price at the time of issuance of the warrant. The right may last for a period of
years or indefinitely.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Some Funds may purchase securities on a "when-issued" and forward
commitment basis. When a Fund agrees to purchase securities, the Fund's
custodian will set aside cash or liquid portfolio securities equal to the amount
of the commitment in a separate account. The Funds may purchase securities on a
when-issued basis when deemed by Banc One Investment Advisors or the applicable
Sub-Advisor to present attractive investment opportunities. When-issued
securities are purchased for
56
<PAGE> 916
delivery beyond the normal settlement date at a stated price and yield, thereby
involving the risk that the yield obtained will be less than that available in
the market at delivery. The Funds generally will not pay for such securities or
earn interest on them until received. Although the purchase of securities on a
when-issued basis is not considered to be leveraging, it has the effect of
leveraging. When Banc One Investment Advisors or the applicable Sub- Advisor
purchases a when-issued security, the Custodian will set aside cash or liquid
securities to satisfy the purchase commitment. In such a case, a Fund may be
required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of the
Fund's commitment. The Fund's net assets may fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. In addition, when a Fund engages in "when-issued"
transactions, it relies on the seller to consummate the trade. Failure of the
seller to do so may result in the Fund's incurring a loss or missing the
opportunity to obtain a price considered to be advantageous.
In a forward commitment transaction, the Funds contract to
purchase securities for a fixed price at a future date beyond customary
settlement time. The Funds are required to hold and maintain in a segregated
account until the settlement date, cash, U.S. government securities or liquid
high-grade debt obligations in an amount sufficient to meet the purchase price.
Alternatively, the Funds may enter into offsetting contracts for the forward
sale of other securities that they own. The purchase of securities on a
when-issued or forward commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
Limitations on the Use of When Issued Securities and Forward
Commitments. No Fund intends to purchase "when-issued" securities for
speculative purposes but only for the purpose of acquiring portfolio securities.
Because a Fund will set aside cash or liquid portfolio securities to satisfy its
purchase commitments in the manner described, the Fund's liquidity and the
ability of Banc One Investment Advisors and the Sub-Advisor to manage the Fund
might, as described in the Prospectuses, be affected in the event its
commitments to purchase when-issued securities ever exceeded 40% of the value of
its assets. Commitments to purchase when-issued securities will not, under
normal market conditions, exceed 25% of a Fund's total assets, and a commitment
will not exceed 90 days. A Fund may dispose of a when-issued security or forward
commitment prior to settlement if Banc One Investment Advisors or the applicable
Sub- Advisor deems it appropriate to do so.
RATING OF PORTFOLIO SECURITIES
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding and safety is just below risk-free U.S. Treasury
obligations.
57
<PAGE> 917
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest payments.
Standard & Poor's Corporation ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
B Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties which could
lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D In payment default. The D rating category is used when payments on an
obligation are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
Fitch's IBCA ,Inc. ("Fitch")
F1 Highest capacity for timely repayment. Those issues rated A1+ possess a
particularly strong credit feature.
58
<PAGE> 918
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
F3 Adequate capacity for timely repayment, but more susceptible to adverse
changes business, economic or financial conditions than for obligations
in higher categories.
B Capacity for timely repayment is susceptible to adverse changes in
business, economic or financial conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
Moody's
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
59
<PAGE> 919
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
60
<PAGE> 920
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.
61
<PAGE> 921
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.
62
<PAGE> 922
S & P
An insurer rated 'BBB' or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA EXTREMELY STRONG financial security characteristics. 'AAA' is the
highest Insurer Financial Strength Rating assigned by Standard &
Poor's.
AA VERY STRONG financial security characteristics, differing only slightly
from those rated higher.
A STRONG financial security characteristics, but Is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB GOOD financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
An insurer rated 'BB' or lower is regarded as having vulnerable characteristics
that may outweigh its strength. 'BB' indicates the least degree of vulnerability
within the range; 'CC' the highest.
BB MARGINAL financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B WEAK financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC VERY WEAK financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC EXTREMELY WEAK financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated 'R' has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR NOT RATED, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-)
Following ratings from 'AA' to 'CCC' show relative standing within the major
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are of the
best quality. They have strong protection from established cash
flows, superior liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of high quality.
Margins of protection are ample although not so large as in the
preceding group.
63
<PAGE> 923
MIG3 & VMIG3 Favorable quality. All security elements are accounted for, but
the undeniable strength of the preceding grades is lacking.
Liquidity and cash flow protection may be narrow and marketing
access for refinancing is likely to be less well established.
MIG4 & VMIG4 This denotes adequate quality protection commonly regarded as
required of an investment security is present and although not
distinctly or predominantly speculative, there is a specific
risk.
SG This denotes speculative quality. Our instruments in this
category each margins of protection.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
64
<PAGE> 924
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.
65
<PAGE> 925
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
BB,
B,
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
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.
66
<PAGE> 926
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligations.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
<PAGE> 927
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.
68
<PAGE> 928
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.
69
<PAGE> 929
INVESTMENT RESTRICTIONS
The following investment restrictions are FUNDAMENTAL and may be
changed with respect to a particular Fund only by a vote of a majority of the
outstanding Shares of that Fund. See "ADDITIONAL INFORMATION--Miscellaneous" in
this Statement of Additional Information.
Each of the Equity Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. With respect to One Group
Equity Index Fund, no more than 10% of the Fund's assets may be invested in
securities issued or guaranteed by the United States, its agencies or
instrumentalities. For purposes of these limitations, a security is considered
to be issued by the government entity whose assets and revenues guarantee or
back the security. With respect to private activity bonds or industrial
development bonds backed only by the assets and revenues of a non-governmental
user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the
total assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that: (i) this limitation does not apply to investments in the obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities and repurchase agreements involving such securities; (ii) with
respect to the Real Estate Fund, this limitation does not apply to investments
in the real estate industry; and (iii) with respect to the Technology Fund, this
limitation does not apply to the technology sector. For purposes of this
limitation (i) utilities will be divided according to their services (for
example, gas, gas transmission, electric and telephone will each be considered a
separate industry); and (ii) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of their parents.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
Each of the Bond Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. For purposes of these
limitations, a security is considered to be issued by the government entity
whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
2. Purchase any securities that would cause more than 25% of the
total assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in the obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities. For purposes of this limitation
(i) utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance
70
<PAGE> 930
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
Each of the Fund of Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, securities
of regulated investment companies, and, if consistent with a Fund's investment
objective and policies, repurchase agreements involving such securities) if as a
result more than 5% of the total assets of a Fund would be invested in the
securities of such issuer or a Fund would own more than 10% of the outstanding
voting securities of such issuer. This restriction applies to 75% of a Fund's
assets. For purposes of these limitations, a security is considered to be issued
by the government entity whose assets and revenues guarantee or back the
security. With respect to private activity bonds or industrial development bonds
backed only by the assets and revenues of a non-governmental user, such user
would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the
total assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, except for
investments in One Group funds, provided that this limitation does not apply to
investments in obligations issued or guaranteed by the U.S. government or its
agencies and instrumentalities and repurchase agreements involving such
services. For purposes of this limitation (i) utilities will be divided
according to their services (for example, gas, gas transmission, electric and
telephone will each be considered a separate industry); and (ii) wholly-owned
finance companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
Each of the Money Market Funds and the Institutional Prime Money
Market Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with the Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer,
provided, however, that a Fund may invest up to 25% of its total assets without
regard to this restriction as permitted by applicable law and also provided that
with respect to the Ohio Municipal Money Market Fund and the Michigan Municipal
Money Market Fund, as to 50% of such Fund's assets, the Fund may invest up to
25% of its assets in the securities of a single issuer. With respect to
remaining 50% of its total assets, the Ohio Municipal Money Market Fund and the
Michigan Municipal Money Market Fund may not purchase the securities of any
issuer if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer. For purposes of these limitations, a
security is considered to be issued by the government entity whose assets and
revenues guarantee or back the security. With respect to private activity bonds
or industrial development bonds backed only by the assets and revenues of a
nongovernmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the
total assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. With
respect to the Prime Money Market Fund and the Institutional Prime Money Market
Fund, (i) this limitation
71
<PAGE> 931
does not apply to investments in the obligations issued or guaranteed by the
U.S. government or its agencies and instrumentalities, domestic bank
certificates of deposit or bankers' acceptance and repurchase agreements
involving such securities; (ii) this limitation does not apply to securities
issued by companies in the financial services industry; (iii) wholly-owned
finance companies will be considered to be in the industries of their parents if
their activities are primarily related to financing the activities of their
parents; and (iv) utilities will be divided according to their services (for
example, gas, gas transmission, electric and telephone will each be considered a
separate industry.) With respect to the Prime Money Market Fund, the
Institutional Prime Money Market Fund, the Ohio Municipal Money Market Fund, the
Michigan Municipal Money Market Fund, and the Municipal Money Market Fund, this
limitation shall not apply to Municipal Securities or governmental guarantees of
Municipal Securities; and further provided, that for the purposes of this
limitation only, private activity bonds that are backed only by the assets and
revenues of a non-governmental user shall not be deemed to be Ohio Municipal
Securities for purposes of the Ohio Municipal Money Market Fund, nor Municipal
Securities for purposes of the Prime Money Market Fund, the Institutional Prime
Money Market Fund and the Municipal Money Market Fund.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
With respect to the Institutional Money Market Funds (except the
Institutional Prime Money Market Fund):
The Treasury Only Money Market Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and
other U.S. obligations issued or guaranteed by the U.S. Treasury.
2. Invest in any securities subject to repurchase agreements.
The Government Money Market Fund may not:
1. Purchase securities other than those issued or guaranteed by
the U.S. government or its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
Each of the Institutional Money Market Funds (except the
Institutional Prime Money Market Fund) may not:
1. Borrow money or issue senior securities, except that each Fund
may borrow from banks for temporary purposes in amounts up to 10% of the value
of the Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the respective Fund's total assets at the time of its borrowing.
2. Purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's net assets.
3. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities and, if
consistent with such Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of such issuer or the
Fund would own more than 10% of the outstanding voting securities of such
issuer; provided, however, that a Fund may invest up to 25% of its total assets
without regard to this restriction as permitted by applicable law. For purposes
of these limitations, a security is considered to be issued by the government
entity whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
72
<PAGE> 932
With respect to the Municipal Bond Funds:
The Intermediate Tax-Free Bond Fund and the Municipal Income Fund
may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. For purposes of these
limitations, a security is considered to be issued by the government entity
whose assets and revenues guarantee or back the security. With respect to
private activity bonds or industrial development bonds backed only by the assets
and revenues of a non-governmental user, such user would be considered the
issuer.
2. Purchase any securities that would cause more than 25% of the
total assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to Municipal Securities or governmental
guarantees of Municipal Securities, and with respect to the Municipal Income
Fund, housing authority obligations. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
The Tax-Free Bond Fund, the Short-Term Municipal Bond Fund, the
Arizona Municipal Bond Fund, the West Virginia Municipal Bond, the Louisiana
Municipal Bond Fund, the Ohio Municipal Bond Fund, the Kentucky Municipal Bond
Fund, and the Michigan Municipal Bond Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, and, if
consistent with a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 25% of the total
assets of a Fund would be invested in the securities of such issuer. This
restriction applies to 50% of a Fund's assets. With respect to the remaining 50%
of its total assets, a Fund may not purchase the securities of any issuer if as
a result more than 5% of the total assets of the Fund would be invested in the
securities of such Issuer. For purposes of these limitations, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities (i) that would cause more than 25% of
the total assets of a Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities and repurchase agreements involving such securities; and (ii)
this limitation does not apply to Municipal Securities or Ohio Municipal
Securities, Kentucky Municipal Securities, Arizona Municipal Securities, West
Virginia Municipal Securities, Louisiana Municipal Securities, and Michigan
Municipal Securities. For purposes of this limitation (i) utilities will be
divided according to their services (for example, gas, gas transmission,
electric and telephone will each be considered a separate industry); and (ii)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents. In addition, with respect to the Arizona Municipal
Bond Fund and the West Virginia Municipal Bond Fund, for purposes of this
limitation only, private activity bonds that are backed only by the assets and
revenues of a non-governmental issued shall not be deemed to be Municipal
Securities or Arizona Municipal Securities (for the Arizona Municipal Bond Fund)
or West Virginia Securities (for the West Virginia Municipal Bond Fund).
73
<PAGE> 933
None of the Municipal Bond Funds may:
1. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in this Prospectus and in the Statement of Additional Information.
None of the Funds may:
1. Purchase securities on margin or sell securities short except,
in the case of the Municipal Bond Funds, for use of short-term credit necessary
for clearance of purchases of portfolio securities.
2. Underwrite the securities of other issuers except to the extent
that a Fund may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities."
3. Purchase or sell commodities or commodity contracts (including
futures contracts), except that for bona fide hedging and other permissible
purposes: (i) the Equity, Bond and International Funds may purchase or sell
financial futures contracts and (except for the Treasury & Agency Fund) may
purchase call or put options on financial futures contracts, and (ii) the
International Equity Index Fund and Diversified International 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 Only Money Market and Government Money Market
Fund in marketable securities of companies engaged in such activities are not
hereby precluded).
5. Invest in any issuer for purposes of exercising control or
management.
6. Purchase securities of other investment companies except as
permitted by the 1940 Act and rules, regulations and applicable exemptive relief
thereunder.
7. Purchase or sell real estate (however, each Fund except the
Money Market Funds may, to the extent appropriate to its investment objective,
purchase securities secured by real estate or interests therein or securities
issued by companies investing in real estate or interests therein).
8. Borrow money or issue senior securities, except that each Fund
may borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of its borrowing. A Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
In addition, the U.S. Treasury Securities Money Market, the Prime
Money Market and the Institutional Money Market Funds (except for the Cash
Management Funds) may not:
1. Buy common stocks or voting securities.
In addition, the U.S. Treasury Securities Money Market Fund, the
Prime Money Market Fund and the Government Money Market Fund may not:
1. Buy state, municipal, or private activity bonds.
74
<PAGE> 934
The following investment restrictions are NON-FUNDAMENTAL except
as noted otherwise and therefore can be changed by the Board of Trustees without
prior shareholder approval.
No Fund may:
1. Invest in illiquid securities in an amount exceeding, in the
aggregate 15% of the Fund's net assets (10% of net assets for a Fund that is a
Money Market Fund or an Institutional Money Market Fund). An illiquid security
is a security which cannot be disposed of promptly (within seven days) and in
the usual course of business without a loss, and includes repurchase agreements
maturing in excess of seven days, time deposits with a withdrawal penalty,
non-negotiable instruments and instruments for which no market exists. (This
restriction is fundamental with respect to the Ohio Municipal Money Market
Fund.)
2. Acquire the securities of registered open-end investment
companies or registered unit investment trusts in reliance on Section
12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act, other than the Investor Growth Fund,
the Investor Growth & Income Fund, the Investor Conservative Growth Fund, the
Investor Balanced Fund, the Investor Aggressive Growth Fund, and the Investor
Fixed Income Fund.
The foregoing percentages apply at the time of purchase of a
security. Banc One Investment Advisors or the applicable Sub-Advisor shall
report to the Board of Trustees promptly if any of a Fund's investments are no
longer determined to be liquid or if the market value of Fund assets has changed
if such determination or change causes a Fund to hold more than 15% (10% in the
case of a Fund that is a Money Market Fund or an Institutional Money Market
Fund) of its net assets in illiquid securities in order for the Board of
Trustees to consider what action, if any, should be taken on behalf of the
Trust, unless Banc One Investment Advisors or the applicable Sub- Advisor is
able to dispose of illiquid assets in an orderly manner in an amount that
reduces the Fund's holdings of illiquid assets to less than 15% (or 10% in the
case of a Fund that is a Money Market Fund) of its net assets.
Additionally, although not a matter controlled by their
fundamental investment restrictions, so long as their shares are registered
under the securities laws of the State of Texas, the Prime Money Market Fund and
the Ohio Municipal Money Market Fund will: (i) limit their investments in other
investment companies to no more than 10% of each Funds total asset; (ii) invest
only in other investment companies with substantially similar investment
objectives; and (iii) invest only in other investment companies with charges and
fees substantially similar to those set forth in paragraph (3) and (4) of
Section 123.3 of the Texas State Statute, not to exceed .25% in 12b-1 and no
other commission or other remuneration is paid or given directly or indirectly
for soliciting any security holder in Texas.
In addition, the Intermediate Tax-Free Bond Fund will not invest
more than 25% of its assets in municipal securities that are related in such a
way that a political, economic or business development affecting one security
will also affect other municipal securities.
TEMPORARY DEFENSIVE POSITIONS.
To respond to unusual market conditions, the Funds may invest their assets in
cash or CASH EQUIVALENTS (see below) for temporary defensive purposes. These
investments may result in a lower yield than lower-quality or longer term
investments and may prevent the Funds from meeting their investment objectives.
The percentage of assets that a Fund may invest in cash or cash equivalents is
described in the applicable Fund's prospectus.
75
<PAGE> 935
Cash Equivalents are highly liquid, high quality instruments with maturities of
three months or less on the date they are purchased. They include securities
issued by the U.S. Government, its agencies and instrumentalities, repurchase
agreements (other than equity repurchase agreements), certificates of deposit,
bankers' acceptances, commercial paper (rated in one of the two highest rating
categories), variable rate master demand notes, and bank money market deposit
accounts.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes all securities whose maturities at the time of acquisition were one
year or less. Thus, for regulatory purposes, the portfolio turnovers with
respect to all of the Money Market Funds were zero for the period from the
commencement of their respective operations to June 30, 1999 and are expected
to remain zero.
76
<PAGE> 936
The portfolio turnover rates of the Funds for the fiscal years ended June 30,
1999 and 1998 were as follows:
ONE GROUP MUTUAL FUNDS PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
--------
FUND 1998 1999
- ---- ---- ----
<S> <C> <C>
Equity Income...............................................................14.64% 16.22%
Mid Cap Value..............................................................106.41% 115.65%
Mid Cap Growth.............................................................158.43% 141.46%
Equity Index.................................................................4.32% 5.37%
Large Cap Value.............................................................47.35% 40.69%
Balanced....................................................................46.04% 85.81%
International Equity Index...................................................9.90% 33.99%
Large Cap Growth...........................................................117.34% 86.34%
Short-Term Bond.............................................................56.99% 37.22%
Intermediate Tax-Free Bond.................................................109.03% 108.41%
Municipal Income............................................................69.76% 55.03%
Ohio Municipal Bond.........................................................10.49% 13.69%
Government Bond.............................................................91.49% 80.86%
Ultra Short-Term Bond.......................................................41.15% 38.70%
Kentucky Municipal Bond......................................................5.81% 6.30%
Arizona Municipal Bond......................................................20.89% 16.29%
W. Virginia Municipal Bond..................................................16.69% 15.24%
Louisiana Municipal Bond....................................................12.03% 19.67%
Diversified Equity..........................................................62.37% 50.82%
Small Cap Growth............................................................83.77% 127.83%
Investor Growth..............................................................4.05% 14.62%
Investor Growth & Income....................................................11.38% 17.87%
Investor Conservative Growth.................................................3.22% 9.73%
Investor Balanced............................................................9.71% 13.51%
High Yield Bond................................................................NA* 28.02%
Treasury & Agency...........................................................41.60% 76.73%
Small Cap Value Fund.........................................................NA** 50.90%##
Diversified Mid Cap..........................................................NA** 23.53%##
Diversified International....................................................NA** 2.96%##
Market Expansion Index.......................................................NA** 36.50%##
Bond ........................................................................NA** 10.89%##
Income Bond..................................................................NA** 20.55%##
Intermediate Bond............................................................NA** 9.24%##
Short-Term Municipal Bond....................................................NA** 74.84%##
Tax-Free Bond................................................................NA** 37.90%##
Michigan Municipal Bond......................................................NA** 10.60%##
Technology Fund..............................................................NA* NA#
Real Estate Fund.............................................................NA* NA#
</TABLE>
* As of June 30, 1998, the Fund had not commenced operations.
** Prior to March 1999, the Predecessor Fund had a fiscal year end of
December 31st. See the table on the next page for information on
portfolio turnover for the fiscal years ending December 31, 1998 and
1999.
# As of June 30, 1999, the Fund had not commenced operations
## In March, 1999, the Predecessor Fund changed its fiscal year end from
December 31st to June 30th. The Portfolio Turnover Rate is for the
period beginning January 1, 1999 and ending June 30, 1999.
77
<PAGE> 937
Some of the Funds listed above had portfolio turnover rates in
excess of 100%. This means that these Funds sold and replaced over 100% of their
investments. The high portfolio turnover rates for these Funds resulted from
various factors, including some or all of the following: investment strategies,
unusually high market volatility and significant growth of the Funds. Higher
portfolio turnover rates will likely result in higher transaction costs to the
Funds and may result in additional tax consequences to Shareholders. To the
extent portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may also be
affected by cash requirements for redemptions of Shares. Portfolio turnover will
not be a limiting factor in making portfolio decisions.
Prior to the consolidation with the One Group Mutual Funds, the
fiscal year end for the Predecessor Funds was December 31st. The portfolio
turnover rates of these Funds for the fiscal years ended December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------
FUND 1998 1997
- ---- ---- ----
<S> <C> <C>
Small Cap Value Fund........................................................ 42.39% 58.29%
Diversified Mid Cap......................................................... 26.89% 37.54%
Diversified International................................................... 8.50% 3.56%
Market Expansion Index...................................................... 20.18%* NA**
Bond ....................................................................... 34.69% 17.60%
Income Bond................................................................. 41.69% 38.70%
Intermediate Bond........................................................... 50.32% 31.66%
Short-Term Municipal Bond................................................... 32.23%*** NA**
Tax-Free Bond............................................................... 22.05% 32.08%
Michigan Municipal Bond..................................................... 23.33% 37.84%
</TABLE>
* Portfolio turnover rate for the period July 31, 1998 through December
31, 1998.
** As of December 31, 1997, the Fund had not commenced operations.
*** Portfolio turnover rate for the period May 4, 1998 through December 31,
1998. Not annualized.
ADDITIONAL TAX INFORMATION CONCERNING ALL FUNDS
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with One Group's other funds. Each Fund intends to
meet the requirements necessary to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). If the Funds so qualify, they will pay no federal income tax on the
earnings they distribute to shareholders and they will eliminate or reduce to a
nominal amount the federal income taxes to which they may be subject.
In order to qualify as a regulated investment company, each Fund
must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities, or foreign currencies
(to the extent such currency gains are directly related to a Fund's principal
business of investing in stock or securities, or options or futures with respect
to stock or securities) or other income (including gains from options, futures
or forward contracts) derived with respect to its business of investing in
stock, securities or currencies, and (2) diversify its holdings so that at the
end of each quarter of its taxable year (i) at least 50% of the market value of
the Fund's assets is represented by cash or cash items (including receivables),
U.S. government securities, securities of other regulated investment companies,
and other
78
<PAGE> 938
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. government
securities or the securities of other regulated investment companies) or of two
or more issuers that the Fund controls and that are engaged in the same,
similar, or related trades or businesses. These requirements may limit the range
of the Fund's investments. If a Fund qualifies as a regulated investment
company, it will not be subject to federal income tax on the part of its income
distributed to Shareholders, provided the Fund distributes during its taxable
year at least 90% of the sum of (a) its taxable net investment income (very
generally, dividends, interest, certain other income, and the excess, if any, of
net short-term capital gain over net long-term loss), and (b) its net tax-exempt
interest. Each Fund of the Trust intends to make sufficient distributions to
Shareholders to qualify for this special tax treatment.
If a Fund failed to qualify as a regulated investment company
receiving special tax treatment in any taxable year, the Fund would be subject
to tax on its taxable income at corporate rates, and all distributions from
earnings and profits, including any distributions of net tax-exempt income and
net long-term capital gains, would be taxable to Shareholders as ordinary
income. In addition, in order to requalify for taxation as a regulated
investment company, the Fund could be required to recognize unrealized gains,
pay substantial taxes and interest and make certain distributions.
Generally, regulated investment companies that do not distribute
in each calendar year an amount at least equal to the sum of (i) 98% of their
"ordinary income" (as defined) for the calendar year, (ii) 98% of their capital
gain net income (as defined) for the one-year period ending on October 31 of
such calendar year, and (iii) any undistributed amounts from the previous year,
are subject to a non-deductible excise tax equal to 4% of the undistributed
amounts. For purposes of the excise tax, a Fund is treated as having distributed
any amount on which it is subject to income tax for any taxable year ending in
such calendar year. Each Fund of the Trust intends to make sufficient
distributions to avoid liability for the excise tax.
Shareholders of the Funds will generally be subject to federal
income tax on distributions received from the Funds. Dividends that are
attributable to a Fund's net investment income will be taxed to shareholders as
ordinary income. Distributions of net capital gain (i.e., the excess, if any,
of net long-term capital gains over net short-term capital losses) that are
designated by a Fund as capital gain dividends will generally be taxable to a
Shareholder receiving such distributions as long-term capital gain (generally
taxed at a 20% tax rate for non-corporate Shareholders) regardless of how long
the Shareholder has held its shares. Distributions in excess of a Fund's current
and accumulated "earnings and profits" will be treated by a Shareholder
receiving such distributions as a return of capital to the extent of such
Shareholder's basis in its Shares in the Fund, and thereafter as capital gain.
A return of capital is not taxable, but reduces a Shareholder's basis in its
shares. Shareholders not subject to tax on their income generally will not be
required to pay tax on amounts distributed to them. Dividends and distributions
on a Fund's shares are generally subject to federal income tax as described
herein to the extent they do not exceed the Fund's realized income and gains,
even though such dividends and distributions may economically represent a return
of a particular shareholder's investment. Such distributions are likely to occur
in respect of shares purchased at a time when the Fund's net asset value
reflects gains that are either unrealized, or realized but not distributed.
The sale, exchange or redemption of Fund shares by a Shareholder
may give rise to a taxable gain or loss to that Shareholder. In general, any
gain or loss realized upon a taxable disposition of shares will be treated as
long-term capital gain or loss if the Shareholder has held the shares for
more than 12 months (generally taxed at a 20% tax rate for non-corporate
shareholders), and otherwise as short-term capital gain or loss. However, if
a Shareholder sells shares at a loss within six months of purchase, any loss
will be disallowed for Federal income tax purposes to the extent of any
exempt-interest dividends received on such shares In addition, any loss (not
already disallowed as provided in the preceding sentence) realized upon a
taxable disposition of shares held for six months or less
79
<PAGE> 939
will be treated as long-term to the extent of any long-term capital gain
distributions received by the Shareholder with respect to the shares. All or a
portion of any loss realized upon a taxable disposition of Fund shares will be
disallowed if other Fund shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.
Certain investment and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, swaps, short sales, foreign currencies, and foreign
securities will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale and short sale rules). In a given case,
these rules may accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains, convert short-term capital losses
into long-term capital losses, or otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing and character of
distributions to Shareholders and cause differences between a Fund's book income
and taxable income. Income earned as a result of these transactions would, in
general, not be eligible for the dividends-received deduction or for treatment
as exempt-interest dividends when distributed to Shareholders including the
Funds of Funds. The Fund will endeavor to make any available elections
pertaining to such transactions in a manner believed to be in the best interest
of the Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES,
TRS, TIGRS, and CATS), as defined in "Details About the Funds' Investment
Practices and Policies" in the Funds' Prospectuses, are sold at original issue
discount and thus do not make periodic cash interest payments. Similarly,
zero-coupon bonds do not make periodic interest payments. A Fund will be
required to include as part of its current income for tax purposes the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because each Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when Banc One Investment Advisors would not otherwise have
chosen to sell such securities and may result in a taxable gain or loss.
A Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any individual Shareholder who has provided to the Fund
either an incorrect tax identification number or no number at all, or who is
subject to withholding by the Internal Revenue Service for failure to report
properly payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the Shareholder's ultimate U.S. tax liability.
The Internal Revenue Service recently revised its regulations
affecting the application to foreign investors of the back-up withholding and
withholding tax rules described above. The new regulations will generally be
effective for payments made after December 31, 2000. In some circumstances, the
new rules will increase the certification and filing requirements imposed on
foreign investors in order to qualify for exemption from the 31% back-up
withholding tax and for reduced withholding tax rates under income tax treaties.
Foreign investors in a Fund should consult their tax advisors with respect to
the potential application of these new regulations.
The foregoing is only a summary of some of the important federal
tax considerations generally affecting purchasers of Shares of a Fund of the
Trust. Further tax information regarding the Tax-Advantaged Funds and the
International Funds is included in following sections of this Statement of
Additional Information. No attempt is made to present herein a complete
explanation of the federal income tax treatment of each Fund or its
Shareholders, and this discussion is not intended as a substitute for careful
tax planning. Accordingly, prospective purchasers of Shares of a Fund are urged
to consult their tax advisors with specific reference to their own tax
situation, including the potential application of state, local and (if
applicable) foreign taxes.
80
<PAGE> 940
The foregoing discussion and the discussion below regarding the
Tax-Advantaged Funds, the International Funds and the Funds of Funds are based
on tax laws and regulations which are in effect on the date of this Statement of
Additional Information; such laws and regulations may be changed by legislative,
judicial or administrative action, and such changes may be retroactive.
ADDITIONAL TAX INFORMATION CONCERNING THE TAX-ADVANTAGED FUNDS
The Code permits a regulated investment company which has
invested, at the close of each quarter of its taxable year, at least 50% of its
total assets in tax-free Municipal Securities and other securities the interest
on which is exempt from the regular federal income tax to pay exempt-interest
dividends to its Shareholders.
The policy of each Tax-Advantaged Fund is to distribute each year
as exempt-interest dividends substantially all the Fund's net exempt-interest
income. An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by a Tax-Advantaged Fund and designated as an
exempt-interest dividend in a written notice mailed to Shareholders after the
close of the Fund's taxable year, which does not exceed, in the aggregate, the
net interest income from Municipal Securities and other securities the interest
on which is exempt from the regular federal income tax received by the Fund
during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from a Tax-Advantaged Fund during
such year, regardless of the period for which the Shares were held.
Exempt-interest dividends may generally be treated by a
Tax-Advantaged Fund's Shareholders as items of interest excludable from their
gross income under Section 103(a) of the Code. However, each Shareholder of a
Tax-Free Fund is advised to consult his or her tax advisor with respect to
whether such Shareholder may be treated as a "SUBSTANTIAL USER" or a "RELATED
PERSON" to such user under Section 147(a) of the Code with respect to facilities
financed through any of the tax-exempt obligations held by the Fund.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business and (a)(i) whose gross revenues derived with respect to the facilities
financed by the issuance of bonds are more than 5% of the total revenues derived
by all users of such facilities or (ii) who occupies more than 5% of the usable
area of the facility or (b) for whom such facilities or a part thereof were
specifically constructed, reconstructed or acquired.
"RELATED PERSONS" includes certain related natural persons,
affiliated corporations, partners and partnerships.
Dividends attributable to interest on certain private activity
bonds issued after August 7, 1986 must be taken into account in determining
alternative minimum taxable income for purposes of determining liability (if
any) for the alternative minimum tax applicable to individuals and the
alternative minimum tax applicable to corporations. In the case of corporations,
all tax-exempt interest dividends will be taken into account in determining
adjusted current earnings for the purpose of computing the alternative minimum
tax imposed on corporations (as defined for federal income tax purposes).
Current Federal law limits the types and volume of bonds
qualifying for Federal income tax exemption of interest, which may have an
effect on the ability of the Funds to purchase sufficient amounts of tax exempt
securities to satisfy the Code's requirements for the payment of
"exempt-interest" dividends.
Each Tax-Advantaged Fund may at times purchase Municipal
Securities (or other securities the interest on which is exempt from the regular
federal income tax) at a discount from the price at which they were originally
issued. For federal income tax purposes, some or all of the market discount will
be included in the Fund's ordinary income and will be taxable to shareholders as
such when it is distributed to them.
81
<PAGE> 941
Each Tax-Advantaged Fund may acquire rights regarding specified
portfolio securities under puts. See "Futures and Options Trading." The policy
of each Tax-Free Fund is to limit its acquisition of puts to those under which
the Fund will be treated for federal income tax purposes as the owner of the
Municipal Securities acquired subject to the put and the interest on the
Municipal Securities will be tax-exempt to the Fund. Although the Internal
Revenue Service has issued a published ruling that provides some guidance
regarding the tax consequences of the purchase of puts, there is currently no
guidance available from the Internal Revenue Service that definitively
establishes the tax consequences of many of the types of puts that the Funds
could acquire under the 1940 Act. Therefore, although a Tax-Advantaged Fund will
only acquire a put after concluding that it will have the tax consequences
described above, the Internal Revenue Service could reach a different conclusion
from that of the Fund.
Following is a brief discussion of treatment of exempt-interest
dividends by certain states.
Arizona Taxes. Shareholders of the Arizona Municipal Bond Fund
will not be subject to Arizona income tax on exempt-interest dividends received
from the Fund to the extent that such dividends are attributable to interest on
tax-exempt obligations of the state of Arizona and its political subdivisions
("LOCAL OBLIGATIONS"). Interest from Local Obligations however, may be
includable in Federal gross income.
Kentucky Taxes. Fund shares are currently exempt from the Kentucky
tax on intangible property. The Kentucky Supreme Court recently held that
corporate shares are not subject to the Kentucky intangible property tax because
of an exemption for shares of certain corporations with in-state activities
which the Court held to violate the Commerce Clause of the U.S. Constitution.
The Kentucky Revenue Cabinet has announced that, in light of the ruling, it will
not, as a matter of policy, require that the Kentucky intangible property tax be
paid on any portion of the value of shares of any mutual fund. Previously the
Cabinet had required owners of shares of mutual funds to pay tax on the portion
of their share value representing underlying fund assets not exempt from the
tax. The Cabinet could change this policy in the future. The Kentucky General
Assembly could re-enact the intangible tax on corporate shares and other similar
securities without the exemption found objectionable by the Court. There is no
assurance that the Fund shares will remain free from the Kentucky intangible
property tax.
Michigan Taxes. Distributions received from the Michigan Municipal
Bond Fund are exempt from Michigan personal income tax to the extent they are
derived from interest on tax-exempt securities, under the current position
of the Michigan Department of Treasury. Such distributions, if received in
connection with a shareholder's business activity, may, however, be subject
to Michigan single business tax. For Michigan personal income tax and single
business tax purposes, Fund distributions attributable to any source other than
interest on tax-exempt securities will be fully taxable. Fund distributions may
be subject to the uniform city income tax imposed by certain Michigan cities.
West Virginia Taxes. Shareholders may reduce their West Virginia
adjusted gross income ("AGI") for that portion of the interest or dividends they
receive which represents interest or dividends of the Fund on obligations or
securities of any authority, commission or instrumentality of West Virginia that
is exempt from the West Virginia personal income tax by Federal or West Virginia
law. Shareholders may also reduce their West Virginia AGI for that portion of
interest or dividends received from the Fund derived from obligations of the
United States and from obligations or securities of some authorities,
commissions or instrumentalities of the United States.
However, shareholders cannot reduce their West Virginia AGI for
any portion of interest or dividends received from the Fund derived from income
on obligations of any state, or political subdivision thereof, other than West
Virginia, regardless of any Federal law exemption, such as that accorded
"exempt-interest dividends;" and they must increase their West Virginia AGI by
the amount of such interest or dividend income. Also, a shareholder must
increase his West Virginia AGI by interest on indebtedness incurred (directly or
indirectly) to purchase or hold shares of the Fund to the extent such interest
was deductible in determining Federal AGI. The sale, exchange, or redemption of
Fund shares is subject to the West Virginia income tax to the extent the gain or
loss therefrom affects the determination of the shareholder's Federal AGI.
82
<PAGE> 942
The foregoing is only a summary of some of the important tax
considerations generally affecting purchasers of Shares of a Tax-Advantaged
Fund. Additional tax information concerning all Funds of the Trust is contained
in the immediately preceding section of this Statement of Additional
Information. No attempt is made to present a complete explanation of the state
income tax treatment of each Tax-Advantaged Fund or its Shareholders, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, prospective purchasers of Shares of a Tax-Advantaged Fund are urged
to consult their tax advisors with specific reference to their own tax
situation, including the potential application of state, local and foreign
taxes.
ADDITIONAL TAX INFORMATION CONCERNING THE INTERNATIONAL FUNDS
Transactions of the International Funds in foreign currencies,
foreign currency denominated debt securities and certain foreign currency
options, future contracts and forward contracts (and similar instruments) may
result in ordinary income or loss to the Fund for federal income tax purposes
which will be taxable to the Shareholders as such when it is distributed to
them.
Gains from foreign currencies (including foreign currency options,
foreign currency futures and foreign currency forward contracts) will (under
regulations to be issued) constitute qualifying income for purposes of the 90%
test only to the extent that they are directly related to the trust's business
of investing in stock or securities.
Investment by the International Funds in certain "passive foreign
investment companies" could subject the Fund to a U.S. federal income tax or
other charge on proceeds from the sale of its investment in such a company or
other distributions from such a company, which tax cannot be eliminated by
making distributions to Shareholders of the International Funds. If the
International Funds elect to treat a passive foreign investment company as a
"qualified electing fund," different rules would apply, although the
International Funds do not expect to make such an election. Rather, the Funds
intend to avoid such tax or other charge by making an election to mark gains
(and to a limited extent, losses) from such investments to market annually.
The qualified electing fund and mark-to-market elections may have
the effect of accelerating the recognition of income (without the receipt of
cash) and increase the amount required to be distributed for the Fund to avoid
taxation. Making either of these elections therefore may require a Fund to
liquidate other investments (including when it is not advantageous to do so) to
meet its distribution requirement, which also may accelerate the recognition of
gain and affect a Fund's total return.
FOREIGN TAX CREDIT
If more than 50% of an International Fund's total assets at year
end consist of the debt and equity securities of foreign corporations, the Fund
may elect to permit its Shareholders who are U.S. citizens to claim a foreign
tax credit or deduction on their U.S. income tax returns for their pro rata
share of foreign taxes paid by the Fund. In that case, Shareholders will be
required to include in gross income their pro rata share of foreign taxes paid
by the Fund. Each Shareholder may then claim a foreign tax credit or a tax
deduction that would offset some or all of the increased tax liability.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the Shareholder's U.S. tax attributable to his or her total foreign
source taxable income. For this purpose, the source of the income to an
International Fund flows through to the Fund's Shareholders. In addition, no
credit will be allowed for foreign taxes paid in respect of any dividend on
stock paid or accrued after September 4, 1997 unless the stock was held (without
protection from risk of loss) for at least 16 days during the 30-day period
beginning 15 days before the ex-dividend date. For certain preferred stock the
holding period is 46 days during the 90-day period beginning 45 days before the
ex-dividend date. This
83
<PAGE> 943
means that (i) Shareholders not satisfying this holding period requirement may
not claim foreign tax credits in respect of their shares, and (ii) the Fund may
not "flow through" tax credits to Shareholders in respect of dividends on stock
that the Fund has not held for the requisite period. If the Fund makes this
election with respect to foreign tax credits it will notify Shareholders of
their proportionate share of foreign taxes paid, the portion of the distribution
that represents foreign source income, and any amount of such foreign taxes paid
which are not creditable because the Fund did not meet the holding period
requirement. Gains to the International Funds from the sale of securities
generally will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as ordinary income
derived from U.S. sources. With limited exceptions, the foreign tax credit is
allowed to offset only up to 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, Shareholders may be
unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the International Equity Index Fund.
The foregoing is only a general description of the treatment of
foreign source income or foreign taxes under the United States federal income
tax laws. Because the availability of a credit or deduction depends on the
particular circumstances of each Shareholder, Shareholders are advised to
consult their own tax advisors.
ADDITIONAL TAX INFORMATION CONCERNING THE FUNDS OF FUNDS
A Fund of Funds will not be able to offset gains realized by one
Fund in which such Fund of Funds invests against losses realized by another Fund
in which such Fund of Funds invests. The use of a fund-of-funds structure could
therefore affect the amount, timing and character of distributions to
shareholders.
Depending on a Fund of Fund's percentage ownership in an
underlying Fund, both before and after a redemption, a redemption of shares of
an underlying Fund by a Fund of Funds may cause the Fund of Funds to be treated
as not receiving capital gain income on the amount by which the distribution
exceeds the tax basis of the Fund of Funds in the shares of the underlying Fund,
but instead to be treated as receiving a dividend taxable as ordinary income on
the full amount of the distribution. This could cause shareholders of the Fund
of Funds to recognize higher amounts of ordinary income than if the shareholders
had held the shares of the underlying Funds directly.
Although each Fund of Funds may itself be entitled to a deduction
for foreign taxes paid by a Fund in which such Fund of Funds invests (see
"Additional Tax Information Concerning the International Funds"), the Fund of
Funds will not be able to pass any such credit or deduction through to its own
shareholders.
The foregoing is only a general description of the federal tax
consequences of a fund-of-funds structure. Accordingly, prospective purchasers
of Shares of a Fund of Funds are urged to consult their tax advisors with
specific reference to their own tax situation, including the potential
application of state, local and foreign taxes.
84
<PAGE> 944
VALUATION
VALUATION OF THE MONEY MARKET AND INSTITUTIONAL MONEY MARKET FUNDS
The Money Market and Institutional Money Market Funds have elected
to use the amortized cost method of valuation pursuant to Rule 2a-7 under the
1940 Act. This involves valuing an instrument at its cost initially and
thereafter assuming a constant amortization to maturity of any discounts or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. This method may result in periods during which value,
as determined by amortized cost, is higher or lower than the price each Fund
would receive if it sold the instrument. The value of securities in the Funds
can be expected to vary inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market and Institutional Money
Market Funds will maintain a dollar-weighted average portfolio maturity
appropriate to their objective of maintaining a stable net asset value per
Share, provided that no Fund will purchase any security with a remaining
maturity of more than 397 days (securities subject to repurchase agreements and
certain variable or floating rate instruments may bear longer maturities) nor
maintain a dollar-weighted, average portfolio maturity which exceeds 90 days.
The Trust's Board of Trustees has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and a Fund's
investment objective, to stabilize the net asset value per Share of the Money
Market Funds for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per Share of each
Fund calculated by using available market quotations deviates from $1.00 per
Share. In the event such deviation exceeds one half of one percent, the Rule
requires that the Board promptly consider what action, if any, should be
initiated. If the Trustees believe that the extent of any deviation from a
Fund's $1.00 amortized cost price per Share may result in material dilution or
other unfair results to new or existing investors, they will take such steps as
they consider appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include selling
portfolio instruments prior to maturity, shortening the average portfolio
maturity, withholding or reducing dividends, reducing the number of a Fund's
outstanding Shares without monetary consideration, or utilizing a net asset
value per Share determined by using available market quotations.
VALUATION OF THE EQUITY FUNDS, THE BOND FUNDS AND THE MUNICIPAL BOND FUNDS
Except as noted below, investments of the Equity Funds, Bond
Funds, and Municipal Bond Funds of the Trust in securities the principal market
for which is a securities exchange are valued at their market values based upon
the latest available sales price or, absent such a price, by reference to the
latest available bid and asked prices in the principal market in which such
securities are normally traded. Except as noted below, securities of the
International Funds, the principal market for which is a securities exchange,
are valued at the last available sale price, or in the case of U.K. securities,
where depending on which principal market the security trades, the quoted value
will be the last available sale price or the latest mid-market price.
Additionally, securities which trade in Germany, but are not on the national
electronic exchange, receive a Kassa price, which is a mid-day broker quote.
With regard to each of the above-mentioned Funds, securities the
principal market for which is not a securities exchange are valued at the mean
of their latest bid and ask quotations in such principal market. Securities and
other assets for which quotations either (1) are not readily available or (2) in
the case of the International Funds and the High Yield Bond Fund are determined
by Banc One Investment Advisors or the applicable Sub-Advisor to not accurately
reflect their value are valued at their fair value as determined in good faith
under consistently applied procedures established by and under the general
supervision of the Trustees of the Trust. Short-term securities are valued at
either amortized cost or original cost plus accrued interest, which approximates
current value. Mutual fund investments of the Funds of Funds will be valued at
the most recently calculated net asset value.
85
<PAGE> 945
The value of a foreign security is determined in its national
currency as of the close of trading on its principal market, which value is then
converted into its U.S. dollar equivalent using the mean of the latest foreign
exchange bid and ask price at the time of the close of the London Stock
Exchange. When an occurrence subsequent to the time a value of a foreign
security was so established is likely to have changed the value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Trustees of the Trust or their delegates.
Securities for which market quotations are readily available will
be valued on the basis of quotations provided by dealers in such securities or
furnished by a pricing service. Securities for which market quotations are not
readily available and other assets will be valued at fair value using methods
determined in good faith by Banc One Investment Advisors under the supervision
of the Trustees and may include yield equivalents or a pricing matrix.
ADDITIONAL INFORMATION REGARDING THE
CALCULATION OF PER SHARE NET ASSET VALUE
The net asset value of each Fund is determined and its Class I,
Class A, Class B, Class C, Class S and Service Class Shares are priced as of the
times specified in each Fund's Prospectus. The net asset value per share of each
Fund's Class I, Class A, Class B, Class C, Class S and Service Class Shares is
calculated by determining the value of the respective Class's proportional
interest in the securities and other assets of the Fund, less (i) such Class's
proportional share of general liabilities and (ii) the liabilities allocable
only to such Class, and dividing such amount by the number of Shares of the
Class outstanding. The net asset value of a Fund's Class I, Class A, Class B,
Class C, Class S and Service Class Shares may differ from each other due to the
expense of the Distribution and Shareholders Services Plan fee applicable to a
Fund's Class A, Class B, Class C, Class S and Service Class Shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
All of the classes of Shares in each Fund (other than Class S and
Service Class shares) are sold on a continuous basis by The One Group Services
Company (the "DISTRIBUTOR"), and the Distributor has agreed to use appropriate
efforts to solicit all purchase orders.
Class I Shares in a Fund may be purchased, through procedures
established by the Distributor, by institutional investors, including affiliates
of Bank One Corporation and any organization authorized to act in a fiduciary,
advisory, custodial or agency capacities. Class I Shares are not available to
Individual Retirement Accounts.
Class A, Class B and Class C Shares may be purchased by any
investor that does not meet the purchase eligibility criteria, described above,
with respect to Class I Shares. In addition to purchasing Class A, Class B and
Class C Shares directly from the Distributor, an investor may purchase Class A,
Class B and Class C Shares through a financial institution, such as a bank,
savings and loan association, insurance company (each a "SHAREHOLDER SERVICING
AGENT") that has established a Shareholder servicing agreement with the
Distributor, or through a broker-dealer that has established a dealer agreement
with the Distributor. Questions concerning the eligibility requirements for each
class of the Trust's Shares may be directed to the Distributor at
1-800-480-4111.
Class S Shares may be purchased by broker-dealers, other financial
intermediaries, banks and other depository institutions on behalf of clients
requiring additional services, such as reports and other information related to
maintenance of shareholders accounts.
Service Class Shares are available only in the Money Market Funds.
This class of shares is available to broker-dealers, other financial
intermediaries, banks and other depository institutions requiring special
administrative and accounting services (e.g., sweep processing).
86
<PAGE> 946
EXCHANGES.
The exchange privileges described herein may be exercised only in
those states where the Shares of the Fund or such other Fund may be legally
sold. All exchanges discussed herein are made at the net asset value of the
exchanged Shares, except as provided below. The Trust does not impose a charge
for processing exchanges of Shares. For Federal income tax purposes, an exchange
is treated as a sale of shares and generally results in a capital gain or loss.
Class I. Class I Shareholders of a Fund may exchange their Shares
for Class A Shares of the same Fund or for Class A Shares or Class I Shares of
another Fund of the Trust. Class A Shareholders may exchange their Shares for
Class I Shares of a Fund or for Class I or Class A Shares of another Fund or the
Trust, if the Shareholder is eligible to purchase such Shares.
Class A Shares. If a Shareholder seeks to exchange Class A Shares
of a Fund that does not impose a sales charge for Class A Shares of a Fund that
does, or the Fund being exchanged into has a higher sales charge, the
Shareholder will be required to pay a sales charge in the amount equal to the
difference between the sales charge applicable to the Fund into which the Shares
are being exchanged and any sales charge previously paid for the exchanged
Shares, including any sales charges incurred on any earlier exchanges of the
Shares (unless such sales charge is otherwise waived as provided above). The
exchange of Class I Shares for Class A Shares also will require payment of the
sales charge unless the sales charge is waived, as provided above. If a
Shareholder (no longer eligible to purchase Class I Shares) purchases Class A
Shares of a Fund, the Shareholder will be subject to Distribution and
Shareholder Services Plan Fees.
Class B Shares. Class B Shareholders of a Fund may exchange their
Shares for Class B Shares of any other Fund of the Trust on the basis of the net
asset value of the exchanged Class B Shares, without the payment of any
Contingent Deferred Sales Charge that might otherwise be due upon redemption of
the outstanding Class B Shares. The newly acquired Class B Shares will be
subject to the higher Contingent Deferred Sales Charge of either the Fund from
which the Shares were exchanged or the Fund into which the Shares were
exchanged. With respect to outstanding Class B Shares as to which previous
exchanges have taken place, "higher Contingent Deferred Sales Charge" shall mean
the higher of the Contingent Deferred Sales Charge applicable to either the Fund
the Shares are exchanging into or any other Fund from which the Shares
previously have been exchanged. For purposes of computing the Contingent
Deferred Sales Charge that may be payable upon a disposition of the newly
acquired Class B Shares, the holding period for outstanding Class B Shares of
the Fund from which the exchange was made is "tacked" to the holding period of
the newly acquired Class B Shares. For purposes of calculating the holding
period applicable to the newly acquired Class B Shares, the newly acquired Class
B Shares shall be deemed to have been issued on the date of receipt of the
Shareholder's order to purchase the outstanding Class B Shares of the Fund from
which the initial exchange was made.
Class C Shares. Class C Shareholders may not exchange their Class
C Shares for shares of any other class nor may shares of any other class be
exchanged for Class C Shares.
Service Class Shares. Service Class Shareholders may not exchange
their Service Class Shares for Shares of any other class, nor may Shares of any
other class be exchanged for Service Class Shares.
Class S. Shares. Class S Shares may not exchange their Class S
Shares for shares of any other class, nor may shares of any other class be
exchanged for Class S Shares.
Institutional Money Market Funds. Shares of the Institutional
Money Market Funds may be purchased by commercial and retail institutional
investors, including affiliates of Bank One Corporation, that have opened an
account with the Transfer Agent either directly or through a Shareholder
Servicing Agent, by persons whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds $1,000,000, or
by persons whose individual annual income, or joint annual income with that
person's spouse, at the time of his or her purchase exceeds $200,000.
87
<PAGE> 947
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.
88
<PAGE> 948
MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the
Board of Trustees of the Trust who were elected by the Shareholders of the
Trust. The Trustees are responsible for making major decisions about each Fund's
investment objectives and policies, but delegate the day-to-day administration
of the Funds to the officers of the Trust. There are currently eight Trustees,
all of whom, except John F. Finn, are not "interested persons" of the Trust
within the meaning of that term under the 1940 Act. The Trustees of the Trust,
their addresses, their ages, and principal occupations during the past five
years are set forth below.
<TABLE>
<CAPTION>
POSITION HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING THE PAST FIVE YEARS
- ---------------- --- -------------- --------------------------
<S> <C> <C> <C>
Peter C. Marshall 56 Trustee From November, 1993 to present,
DCI Marketing, Inc. President, DCI Marketing, Inc.
2727 W. Good Hope Road
Milwaukee, WI 53209
Charles I. Post 71 Trustee From July, 1986 to present, self
7615 4th Avenue West employed as a consultant.
Bradenton, FL 34209
Frederick W. Ruebeck 60 Trustee From June, 1988 to present,
Eli Lilly & Company Director of Investments, Eli
Lilly Corporate Center Lilly and Company.
307 East McCarty
Indianapolis, IN 46258
Robert A. Oden, Jr. 53 Trustee From 1995 to present, President,
Office of the President Kenyon College; from 1989 to 1995,
Ransom Hall Headmaster, The Hotchkiss School.
Kenyon College
Gambier, OH 43022
*John F. Finn 51 Trustee Since 1975, President of Gardner,
President Inc. (wholesale distributor to the
Gardner, Inc. outdoor power equipment industry).
1150 Chesapeake Avenue
Columbus, Ohio 43212
Marilyn McCoy 51 Trustee Vice President of Administration
Northwestern University and Planning, Northwestern
Office of the Vice President University (1985 to present).
Administration Planning Trustee of Pegasus Funds since
633 Clark St. Crown 2-112 1996.
Evanston, IL 60208
Julius L. Pallone 69 Trustee President, J.L. Pallone Associates
J.L. Pallone Associates (1994 to present) Trustee of
3000 Town Center Pegasus Funds since 1987.
Suite 732
Southfield, MI 48075
Donald L. Tuttle 65 Trustee Vice President (1995 to present)
Association of Management and Senior Vice President (1992 to
and Research 1995), Association for Investment
PO Box 3668 Management and Research, Trustee
560 Ray C. Hunt Drive of Pegasus Funds since 1993.
Charlottesville, VA 22903
</TABLE>
89
<PAGE> 949
* John F. Finn is an "interested person" as that term is defined in the
Investment Company Act of 1940.
The Trustees of the Trust receive fees and expenses for each
meeting of the Board of Trustees attended. No officer or employee of the
Distributor currently acts as a Trustee of the Trust.
The Compensation Table below sets forth the total compensation to
the Trustees from the Trust for the Trust's fiscal year ended June 30, 1999.
90
<PAGE> 950
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION ACCRUED AS PART OF BENEFITS UPON FROM THE FUND
POSITION FROM THE TRUST TRUST EXPENSES(2) RETIREMENT COMPLEX(3)
- -------- -------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C>
Peter C. Marshall, $49,750 N/A N/A $52,750
Chairman
Charles I. Post, $45,500 N/A N/A $48,500
Trustee
Frederick W. Ruebeck, $46,750(4) N/A N/A $49,750
Trustee
Robert A. Oden, Jr., $46,750 N/A N/A $49,750
Trustee
John F. Finn, $46,750(4) N/A N/A $49,750
Trustee
Marilyn McCoy $11,250(5) N/A N/A $12,000
Trustee
Julius L. Pallone $11,250(5) N/A N/A $12,000
Trustee
Donald L. Tuttle $11,250(6) N/A N/A $12,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended June 30, 1999.
(2) The Trustees may defer all or a part of their compensation payable by
the Trust pursuant to the Deferred Compensation Plan (the "PLAN").
Under the Plan, the Trustees may specify Class I shares of one or more
Funds of the Trust that will be used to measure the performance of a
Trustee's deferred compensation account. A Trustee's deferred
compensation account will be paid at such times as elected by the
Trustee subject to certain mandatory payment provisions in the Plan
(e.g., death of a Trustee.)
(3) "Fund Complex" comprises the funds of One Group Mutual Funds and the
portfolios of One Group(R) Investment Trust that were operational as of
June 30, 1999.
(4) Includes $35,000 of deferred compensation.
(5) Includes $11,250 of deferred compensation.
(6) Includes $5,625 of deferred compensation.
91
<PAGE> 951
The officers of the Trust receive no compensation directly from
the Trust for performing the duties of their offices. The officers of the Trust,
their addresses, their ages, and principal occupations during the past five
years are shown below.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING PAST 5 YEARS
- ---------------- --- -------------- -------------------
<S> <C> <C> <C>
Mark S. Redman 45 President, Treasurer From November, 1997 to
The One Group Services and Assistant Secretary present, President, The One
Company Group Services Company;
3435 Stelzer Road From June, 1995 to
Columbus, Ohio 43219 November, 1997, Officer,
The One Group Services
Company; From February,
1989 to present, employee
of BISYS Fund Services,
Inc. (FKA Winsbury Company)
James T. Gillespie 32 Vice President From September, 1998 to
BISYS Fund Services, present, employee, The One
Inc. Group Services Company;
3435 Stelzer Road From February, 1992 to
Columbus, Ohio 43219 September, 1998, employee,
BISYS Fund Services, Inc.
Bryan C. Haft 34 Vice President From January, 1999 to
BISYS Fund Services, present, employee, The One
Inc. Group Services Company;
3435 Stelzer Road From November, 1992 to
Columbus, Ohio 43219 January, 1999, employee,
BISYS Fund Services, Inc.
Charles L. Booth 39 Secretary From February, 1998, to
BISYS Fund Services, present, Chief Compliance
Inc. Officer and Vice President
3435 Stelzer Road Fund Compliance
Columbus, Ohio 43219 BISYS Fund Services, Inc.;
From April, 1988, to
February, 1998, employee,
BISYS Fund Services, Inc.
Alaina J. Metz 32 Assistant Secretary From June, 1995, to
BISYS Fund Services, present, Chief
Inc. Administrator,
3435 Stelzer Road Administration and
Columbus, Ohio 43219 Regulatory Services,
BISYS Fund Services, Inc.; from
May 1989 to June 1995, Supervisor,
Mutual Fund Legal
Department, Alliance
Capital Management.
</TABLE>
92
<PAGE> 952
INVESTMENT ADVISOR AND SUB-ADVISORS
BANC ONE INVESTMENT ADVISORS CORPORATION
Investment advisory services to each of the Trust's Funds are
provided by Banc One Investment Advisors. Banc One Investment Advisors makes the
investment decisions for the assets of the Funds (except for the High Yield Bond
Fund which is sub-advised by a Sub-Advisor). In addition, Banc One Investment
Advisors continuously reviews, supervises and administers the Funds' investment
program, subject to the supervision of, and policies established by, the
Trustees of the Trust. The Trust's Shares are not sponsored, endorsed or
guaranteed by, and do not constitute obligations or deposits of any bank
affiliate of Banc One Investment Advisors and are not insured by the FDIC or
issued or guaranteed by the U.S. government or any of its agencies.
Banc One Investment Advisors is an indirect, wholly-owned
subsidiary of Bank One Corporation, a bank holding company incorporated in the
state of Delaware. Bank One Corporation has affiliate banking organizations in
Arizona, Colorado, Delaware, Florida, Illinois, Indiana, Kentucky, Louisiana,
Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In addition,
Bank One Corporation has several affiliates that engage in data processing,
venture capital, investment and merchant banking, and other diversified services
including trust management, investment management, brokerage, equipment leasing,
mortgage banking, consumer finance, and insurance.
Banc One Investment Advisors represents a consolidation of the
investment advisory staffs of a number of bank affiliates of Bank One
Corporation, which have considerable experience in the management of open-end
management investment company portfolios, including One Group Mutual Funds
(formerly, One Group, The One Group and the Helmsman Fund) since 1985.
During the fiscal years ended June 30, 1999, 1998, and 1997, the
Funds of the Trust paid the following investment advisory fees to Banc One
Investment Advisors (except as noted above) and Banc One Investment Advisors
voluntarily waived investment advisory fees as follows:
93
<PAGE> 953
ONE GROUP MUTUAL FUND ADVISORY FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------
1999 1998 1997
---------------------- ------------------ -------------------
FUND NET WAIVED NET WAIVED NET WAIVED
- ---- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $18,197,198 $1,705,060 $ 9,337,795 $2,237,340 $5,992,323 $2,742,727
Prime Money Market $15,422,198 $1,501,456 $ 9,806,764 $1,675,435 $7,824,731 $1,899,772
Municipal Money Market $ 2,530,968 $ 827,569 $ 1,491,141 $ 596,454 $1,241,937 $ 593,593
Ohio Municipal Money Market $ 271,920 $ 68,725 $ 252,818 $ 60,211 $ 231,786 $ 36,034
Equity Income $ 7,397,328 $ 542,041 $ 6,571,128 -0- $4,104,562 $ 0
Mid Cap Value $ 6,439,398 $ 30,016 $ 4,758,742 -0- $4,129,523 $ 0
Mid Cap Growth $ 8,646,067 $ -0- $ 6,492,467 -0- $4,511,169 $ 0
Equity Index $ 2,540,532 $2,882,298 $ 992,672 $1,985,360 $ 547,238 $1,094,476
Large Cap Value $ 6,649,570 $ -0- $ 5,638,325 -0- $4,726,413 $ 0
Balanced $ 2,481,299 $ 411,428 $ 1,178,256 $ 191,626 $ 684,481 $ 142,861
International Equity Index $ 3,009,675 $ -0- $ 2,373,749 -0- $2,201,616 $ 837
Large Cap Growth $19,303,039 $ -0- $12,023,999 -0- $7,948,260 $ 0
Short-Term Bond $ 2,214,444 $1,937,618 $ 1,879,523 $1,700,459 $1,830,204 $1,830.204
Intermediate Tax-Free Bond $ 2,673,135 $1,481,010 $ 1,904,783 $1,025,646 $1,235,203 $ 776,825
Municipal Income $ 3,275,777 $ 877,859 $ 2,184,870 $ 624,243 $1,314,694 $ 387,974
Ohio Municipal Bond $ 722,143 $ 606,278 $ 544,952 $ 517,943 $ 389,001 $ 391,781
Government Bond $ 4,744,608 $ -0- $ 3,714,960 $ 80,216 $3,098,420 $ 194,800
Ultra Short-Term Bond $ 577,502 $ 789,477 $ 424,770 $ 699,133 $ 117,314 $ 342,966
Treasury Only Money Market $ 677,936 $ -0- $ 518,513 -0- $ 385,087 $ 0
Government Money Market $ 2,782,098 $ -0- $ 1,735,256 -0- $ 848,690 $ 0
Kentucky Municipal Bond $ 523,045 $ 130,764 $ 469,392 $ 117,349 $ 270,459 $ 78,137
Institutional Prime Money
Market $ -0- $ 1,671 NA## NA## NA# NA#
Tax-Exempt Money Market $ NA### $ NA### NA## NA## NA# NA#
Arizona Municipal Bond $ 999,215 $ 104,016 $ 1,007,240 $ 154,639 $ 390,737+++ $ 126,415+++
W. Virginia Municipal Bond $ 419,312 $ 90,662 $ 365,585 $ 103,485 $ 121,278+++ $ 66,525+++
Louisiana Municipal Bond $ 746,009 $ 423,067 $ 572,161 $ 355,668 $ 683,535 $ 394,121
Diversified Equity $ 8,977,465 $ -0- $ 4,485,408 -0- $2,309,475 $ 69,333
Small Cap Growth $ 986,900 $ 4,830 $ 902,099 -0- $ 699,896 $ 30,410
High Yield Bond $ 228,845 $ 134,906 NA## NA## NA# NA#
Investor Growth $ 68,885 $ 47,015 $ 35,565 $ 21,362 $ 1,552 $ 6,244++++
Investor Growth & Income $ 190,454 $ -0- $ 49,435 $ 17,732 $ 2,046 $ 8,237++++
Investor Conservative Growth $ 37,255 $ 28,268 $ 4,622 $ 18,489 $ 683 $ 2,750++++
Investor Balanced $ 153,645 $ -0- $ 53,241 $ 11,387 $ 3,107 $ 12,503++++
Treasury & Agency $ 404,427 $ 404,433 $ 232,442 $ 232,443 $ 99,224 $ 99,225+++
Small Cap Value $ 443,867** $ 87,675** NA NA NA NA
Diversified Mid Cap $ 1,978,567** $ 417,680** NA NA NA NA
Diversified International $ 1,352,519** $ 54,445** NA NA NA NA
Market Expansion Index $ -0-** $ 7,979** NA NA NA NA
Bond $ 1,664,679** $ 648,205** NA NA NA NA
Income Bond $ 1,284,532** $ 678,174** NA NA NA NA
Intermediate Bond $ 1,154,030** $ 890,093** NA NA NA NA
Short-Term Municipal Bond $ 103,108** $ 86,282** NA NA NA NA
Tax-Free Bond $ 939,456** $ 129,437** NA NA NA NA
Michigan Municipal Bond $ 359,864** $ 49,808**
Michigan Municipal Money
Market $ 103,442** $ 51,994** NA NA NA NA
Cash Management Money
Market $ 993,338** $ 317,402** NA NA NA NA
Treasury Cash Management
Money Market $ 151,668** $ 96,510** NA NA NA NA
Treasury Prime Cash
Management Money Market $ 199,693** $ 104,284** NA NA NA NA
U.S. Government Securities
Cash Management Money
Market $ 667,615** $ 118,000** NA NA NA NA
Municipal Cash Management
Money Market $ 200,734** $ 117,899** NA NA NA NA
</TABLE>
94
<PAGE> 954
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Technology NA### NA### NA## NA## NA# NA#
Real Estate Fund NA### NA### NA## NA## NA# NA#
U.S. Government Securities Money Market NA### NA### NA## NA## NA# NA#
Treasury Prime Money Market NA### NA### NA## NA## NA# NA#
</TABLE>
### As of June 30, 1999, the Fund had not commenced operations.
## As of June 30, 1998, the Fund had not commenced operations.
# As of June 30, 1997, the Fund had not commenced operations.
* Fees for the period from November 13, 1998 to June 30, 1999
** Fee for the period from the consolidation with the Pegasus
Funds to June 30, 1999.
+++ Fees for the period from January 20, 1997 to June 30, 1997.
++++ Fees for the period from December 10, 1996 to June 30, 1997.
For the period beginning November 1, 1999 and ending October
31,2000, Banc One Investment Advisors and The One Group Services Company have
agreed to waive fees and/or reimburse expenses to limit total annual fund
operating expenses as follows for the Funds listed below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Small Cap Growth 1.30% 2.05% 2.05% 1.05%
- ---------------------------------------------------------------------------------------------------------
2. Small Cap Value 1.19% 1.94% 1.94% .94%
- ---------------------------------------------------------------------------------------------------------
3. Mid Cap Growth 1.25% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
4. Mid Cap Value 1.21% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
5. Diversified Mid Cap 1.11% 1.86% 1.86% .86%
- ---------------------------------------------------------------------------------------------------------
6. Large Cap Growth 1.19% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
7. Large Cap Value 1.23% 1.98% 1.98% .98%
- ---------------------------------------------------------------------------------------------------------
8. Equity Income 1.23% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
9. Diversified Equity 1.21% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
10. Balanced 1.15% 1.90% 1.90% .90%
- ---------------------------------------------------------------------------------------------------------
11. Equity Index .65% 1.40% 1.40% .40%
- ---------------------------------------------------------------------------------------------------------
12. Market Expansion Index .82% 1.57% 1.57% .57%
- ---------------------------------------------------------------------------------------------------------
13. International Equity
- ---------------------------------------------------------------------------------------------------------
Index 1.20% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------
14. Diversified International 1.30% 2.05% 2.05% 1.05%
- ---------------------------------------------------------------------------------------------------------
15. Technology 1.55% 2.30% 2.30% 1.30%
- ---------------------------------------------------------------------------------------------------------
16. Real Estate 1.35% 2.10% 2.10% 1.10%
- ---------------------------------------------------------------------------------------------------------
17. Ultra Short-Term Bond .75% 1.25% 1.25% .50%
- ---------------------------------------------------------------------------------------------------------
18. Short-Term Bond .80% 1.30% 1.30% .55%
- ---------------------------------------------------------------------------------------------------------
19. Intermediate Bond .83% 1.48% 1.48% .58%
- ---------------------------------------------------------------------------------------------------------
20. Bond .85% 1.50% 1.50% .60%
- ---------------------------------------------------------------------------------------------------------
21. Income Bond .92% 1.57% 1.57% .67%
- ---------------------------------------------------------------------------------------------------------
22. Government Bond .90% 1.55% 1.55% N/A
- ---------------------------------------------------------------------------------------------------------
23. Treasury & Agency .70% 1.20% 1.20% .45%
- ---------------------------------------------------------------------------------------------------------
24. High Yield Bond 1.15% 1.80% 1.80% .90%
- ---------------------------------------------------------------------------------------------------------
25. Short-Term Municipal Bond .80% 1.45% 1.45% .55%
- ---------------------------------------------------------------------------------------------------------
26. Intermediate Tax-Free .85% 1.60% 1.60% .60%
- ---------------------------------------------------------------------------------------------------------
27. Tax-Free Bond .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
28. Municipal Income .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
29. Arizona Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
30. Kentucky Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
31. Louisiana Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
32. Michigan Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
95
<PAGE> 955
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
33. Ohio Municipal Bond .87% 1.52% 1.52% .62%
- ---------------------------------------------------------------------------------------------------------
34. West Virginia Municipal Bond .90% 1.55% 1.55% .65%
- ---------------------------------------------------------------------------------------------------------
35. Investor Growth .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
36. Investor Growth & Income .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
37. Investor Balanced .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
38. Investor Conservative Growth .45% 1.20% 1.20% .20%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET AND INSTITUTIONAL MONEY MARKET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FUND Class A Class B Class C Service Class Class S Class I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
39. CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
40. TREASURY
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
41. TREASURY
PRIME CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
42. U.S.
GOVERNMENT
SECURITIES
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
42. MUNICIPAL
CASH
MANAGEMENT
MONEY MARKET .60% NA NA NA NA .35%
- ------------------------------------------------------------------------------------------------------------------------------------
44. PRIME
MONEY MARKET .77% 1.52% 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
45. U.S.
TREASURY
SECURITIES
MONEY MARKET .77% 1.52% 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
46. MUNICIPAL
MONEY MARKET .72% NA 1.47% 1.02% NA .47%
- ------------------------------------------------------------------------------------------------------------------------------------
47. MICHIGAN
MUNICIPAL
MONEY MARKET .75% NA 1.50% 1.05% NA .50%
- ------------------------------------------------------------------------------------------------------------------------------------
48. OHIO
MUNICIPAL
MONEY MARKET .70% NA 1.45% 1.00% NA .45%
- ------------------------------------------------------------------------------------------------------------------------------------
49. TREASURY
PRIME MONEY
MARKET .77% NA 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
50. U.S.
GOVERNMENT
SECURITIES
MONEY MARKET .77% NA 1.52% 1.07% NA .52%
- ------------------------------------------------------------------------------------------------------------------------------------
51.
INSTITUTIONAL
PRIME MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
52. TREASURY
ONLY MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
53. GOVERNMENT
MONEY MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
54. TAX-
EXEMPT MONEY
MARKET NA NA NA NA .35% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
96
<PAGE> 956
All investment advisory services are provided to the Funds by Banc
One Investment Advisors pursuant to an investment advisory agreement dated
January 11, 1993 (the "INVESTMENT ADVISORY AGREEMENT"). The Investment Advisory
Agreement (and the High Yield Sub-Investment Advisory Agreement described
immediately following, collectively, the "ADVISORY AND SUB-ADVISORY AGREEMENTS")
will continue in effect as to a particular Fund from year to year, if such
continuance is approved at least annually by the Trust's Board of Trustees or by
vote of a majority of the outstanding Shares of such Fund (as defined under
"ADDITIONAL INFORMATION--Miscellaneous" in this Statement of Additional
Information), and a majority of the Trustees who are not parties to the
respective investment advisory agreements or interested persons (as defined in
the Investment Company Act of 1940) of any party to the respective investment
advisory agreements by votes cast in person at a meeting called for such
purpose. The Advisory and Sub-Advisory Agreements were renewed by the Trust's
Board of Trustees at their quarterly meeting on August 19, 1999. The Advisory
and Sub-Advisory Agreements may be terminated as to a particular Fund at any
time on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding Shares of that Fund, or by the Fund's Advisor or
Sub-Advisor as the case may be. The Advisory and Sub-Advisory Agreements also
terminate automatically in the event of any assignment, as defined in the 1940
Act.
The Advisory and Sub-Advisory Agreements each provide that the
respective Advisor or Sub-Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
performance of the respective investment advisory agreements, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of Banc One Investment Advisors or
Sub-Advisor in the performance of its duties, or from reckless disregard by it
of its duties and obligations thereunder.
Prior to the consolidation with the Funds, First Chicago NBD
Investment Management Company ("FCNIMCO") provided investment management
services to the Predecessors Funds of the Small Cap Value Fund, the Diversified
Mid Cap Fund, the Diversified International Fund, the Market Expansion Index
Fund, the Bond Fund, the Income Bond Fund, the Intermediate Bond Fund, the
Short-Term Municipal Bond Fund, the Tax-Free Bond Fund, the Michigan Municipal
Bond Fund, the Michigan Municipal Money Market Fund, and the Cash Management
Funds. During a portion of the year ended December 31, 1996, investment advisory
services were provided to the Small Cap Value Fund, the Diversified Mid Cap
Fund, the Diversified International Fund, the Market Expansion Index Fund, the
Bond Fund, the Income Bond Fund, the Intermediate Bond Fund, the Short-Term
Municipal Bond Fund, the Tax-Free Bond Fund, the Michigan Municipal Bond Fund,
and the Michigan Municipal Money Market Fund by NBD Bank.
Prior to the consolidation with the Funds, the fiscal year end for
the Predecessor Funds was December 31st. During the fiscal years ended December
31, 1998, 1997, and 1996, these Funds of the Trust paid the following investment
advisory fees to FCNIMCO and FCNIMCO voluntarily waived investment advisory fees
as follows.
97
<PAGE> 957
PREDECESSOR FUNDS' ADVISORY FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
1999(1) 1998 1997 1996
------- ---- ---- ----
FUND NET WAIVED NET WAIVED NET WAIVED NET WAIVED
- ---- --- ------ --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value $ 425,933 $ 17,325 $2,003,921 0 $1,283,658 0 $ 349,224 *** $ 56,427 ***
Diversified Mid
Cap $ 930,900 $ 0 $6,832,757 0 $5,355,678 0 $1,467,224 # 0
Diversified
International $ 919,346 $ 11,441 $4,577,670 0 $3,752,409 0 $1,179,691 ## $ 26,973 ##
Market Expansion
Index $ 0.00 $ 19,020 0 $ 45,584 NA* NA* NA** NA**
Bond $1,221,570 $101,107 $5,674,695 0 $4,089,788 0 $1,092,756 # $ 49,503 #
Income Bond $ 329,113 $ 26,702 $ 827,079 0 $ 562,165 0 $ 265,891 # $ 16,303 #
Intermediate Bond $ 575,602 $ 9,954 $2,349,025 0 $1,890,923 0 $ 626,682 *** $ 49,186 ***
Short-Term
Municipal Bond $ 87,893 $ 18,717 $ 144,978 $ 41,317 NA* NA* NA** NA**
Tax-Free Bond $ 783,772 $ 0.00 $2,358,313 0 $1,524,196 0 $ 531,933 ### $108,706 ###
Michigan Municipal
Bond $ 286,916 $ 0.00 $ 686,184 $ 13,410 $ 228,576 $ 43,158 $ 66,088 # $ 11,150 #
Michigan Municipal
Money Market $ 93,711 $ 22,005 $ 327,693 $ 36,792 $ 335,355 $ 44,602 $ 696,445 + $ 37,403 +
Cash Management
Money Market $ 940,792 $313,597 $3,402,847 $907,915 $1,642,225 $279,533 $ 398,138 ++ $222,088 ++
Treasury Cash
Management
Money Market $ 117,909 $ 63,489 $ 498,263 $136,100 $ 99,821 $ 33,327 NA** NA**
Treasury Prime
Cash Management
Money Market $ 176,745 $ 87,716 $ 592,066 $207,054 $ 404,248 $105,789 $ 123,521 ++ $145,816 ++
U.S. Government
Securities Cash
Management Money
Market $ 645,999 $113,999 $2,465,211 $295,457 $1,369,324 $ 88,360 $ 325,009 ++ $297,097 ++
Municipal Cash
Management
Money Market $ 236,376 $ 57,101 $ 804,693 $179,890 $ 107,285 $ 40,982 NA** NA**
</TABLE>
* As of the end of the fiscal year ended December 31, 1997, the Funds had
not commenced operations.
** As of the end of the fiscal year ended December 31, 1996, the Funds had
not commenced operations.
*** Fees for the period beginning September 21, 1996 to December 31, 1996.
# Fees for the period beginning September 23, 1996 to December 31, 1996.
## Fees for the period beginning August 24, 1996 to December 31, 1996.
### Fees for the period beginning September 14, 1996 to December 31, 1996.
+ Fees for the period beginning September 16, 1996 to December 31, 1996.
++ Fees for the period beginning July 13, 1996 to December 31, 1996.
(1) For the period beginning January 1, 1999 to consolidation with the
Pegasus Funds.
98
<PAGE> 958
For the period beginning January 1, 1996 and ending on the date specified below,
the Predecessor Funds paid FCNIMCO or NBD and FCNIMCO or NBD waived the
investment advisory fees indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR 1996
----------------
NBD FCNIMCO
--- -------
FUND NET WAIVED NET WAIVED END DATE
- ---- --- ------ --- ------ --------
<S> <C> <C> <C> <C> <C>
Small Cap Value NA NA $199,276 $147,469 September 21, 1996
Diversified Mid Cap $3,397,900 0 NA NA September 23, 1996
Diversified International $ 594,989 0 NA NA August 24, 1996
Market Expansion Index NA* NA* NA* NA* NA*
Bond $2,021,339 0 NA NA August 24, 1996
Income Bond NA NA $355,241 $183,139 September 23, 1996
Intermediate Bond $1,539,059 0 NA NA September 21, 1996
Short-Term Municipal Bond NA* NA* NA* NA* NA*
Tax-Free Bond NA NA $186,988 $273,829 September 14, 1996
Michigan Municipal Bond $ 196,723 $34,535 NA NA September 23, 1996
Michigan Municipal Money
Market $ 437,785 0 NA NA September 15, 1996
Cash Management Money
Market NA NA $311,040 $176,053 July 13, 1996
Treasury Cash Management
Money Market NA* NA* NA* NA* NA*
Treasury Prime Cash
Management Money Market NA NA $ 73,377 $102,644 July 13, 1996
U.S. Government Securities
Cash Management Money
Market NA NA $383,484 $139,491 July 13, 1996
Municipal Cash Management
Money Market NA* NA* NA* NA* NA*
</TABLE>
* As of the end of the fiscal year ended December 31, 1996, the Funds had
not commenced operations.
INDEPENDENCE INTERNATIONAL ASSOCIATES, INC.
Independence International Associates, Inc. ("INDEPENDENCE INTERNATIONAL")
served as investment Sub-Advisor to the International Equity Index Fund through
October 31, 1999 pursuant to an agreement (the "INTERNATIONAL SUB-INVESTMENT
ADVISORY AGREEMENT") with Banc One Investment Advisors dated January 11, 1993.
Independence International is a wholly-owned subsidiary of John Hancock Asset
Management, Inc. and an indirect, wholly-owned subsidiary of John Hancock Mutual
Life Insurance Company. Boston International Advisors, Inc., the predecessor of
Independence International, received $315,098 in sub-advisory fees from Banc One
Investment Advisors for the fiscal year ended June 30, 1997; and $416,939 in
sub-advisory fees from Banc One Investment Advisors for the fiscal year ended
June 30, 1998; and $494,805 in sub-advisory fees from Banc One Investment
Advisors for the fiscal year ended June 30, 1999.
BANC ONE HIGH YIELD PARTNERS, LLC
Banc One High Yield Partners, LLC serves as investment Sub-Advisor to the High
Yield Bond Fund pursuant to an agreement with Banc One Investment Advisors (the
"HIGH YIELD INVESTMENT ADVISORY AGREEMENT"). The Sub-Advisor was formed in June,
1998 to provide investment advisory services related to high yield, high risk
assets to various clients, including the Fund. The Sub-Advisor is controlled by
Banc One Investment Advisors and Pacholder Associates, Inc., an investment
advisory firm which specializes in high yield, high risk, fixed income
securities. For its services, the Sub-Advisor is entitled to a fee, which is
calculated daily and paid monthly by Banc One Investment Advisors, equal to .70%
of the Fund's average daily net assets. For the fiscal year ended June 30, 1999,
Banc One Investment Advisors Corporation paid the Sub-Advisor $229,388.38 in
sub-advisory fees.
99
<PAGE> 959
GLASS-STEAGALL ACT
In 1971, the United States Supreme Court held in Investment Company Institute v.
-------------------------------
Camp that the federal statute commonly referred to as the Glass-Steagall Act
- ----
prohibits a national bank from operating a Fund for the collective investment of
managing agency accounts. Subsequently, the Board of Governors of the Federal
Reserve System (the "BOARD") issued a regulation and interpretation to the
effect that the Glass-Steagall Act and such decision: (a) forbid a bank holding
company registered under the Federal Bank Holding Company Act of 1956 (the
"HOLDING COMPANY ACT") or any non-bank affiliate thereof from sponsoring,
organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its Shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment advisor, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
---------------------------------------------------
Investment Company Institute that the Board did not exceed its authority under
- ----------------------------
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisors to registered closed-end investment companies. In the Board
-----
of Governors case, the Supreme Court also stated that if a national bank
- ------------
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisors to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
In the Investment Advisory Agreement with the Trust, Banc One Investment
Advisors has represented to the Trust that it possesses the legal authority to
perform the investment advisory services contemplated by the agreement and
described in the Prospectuses and this Statement of Additional Information
without violation of applicable statutes and regulations. Future changes in
either federal or state statutes and regulations relating to the permissible
activities of banks or bank holding companies and the subsidiaries or affiliates
of those entities, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent or
restrict Banc One Investment Advisors from continuing to perform such services
for the Trust. Depending upon the nature of any changes in the services which
could be provided by Banc One Investment Advisors, the Board of Trustees of the
Trust would review the Trust's relationship with Banc One Investment Advisors
and consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of Bank One Corporation subsidiary banks or
their correspondent banks in connection with customer purchases of Shares of the
Trust, these banks might be required to alter materially or discontinue the
services offered by them to customers. It is not anticipated, however, that any
change in the Trust's method of operations would affect its net asset value per
Share or result in financial losses to any customer.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory and Sub-Advisory Agreements, Banc One Investment
Advisors and the applicable Sub-Advisor determine, subject to the general
supervision of the Board of Trustees of the Trust and in accordance with each
Fund's investment objective and restrictions, which securities are to be
purchased and sold by each such Fund and which brokers are to be eligible to
execute its portfolio transactions. Purchases and sales of portfolio securities
with respect to the Money Market Funds, the Bond Funds, the Funds of Funds and
(to a varying degree) the Balanced Fund usually are principal transactions in
which portfolio securities are purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from underwriters of
portfolio securities generally include (but not in the case of mutual fund
shares purchased by the Funds of Funds) a commission or concession paid by the
issuer to the underwriter and purchases from dealers serving as market makers
may include the spread between the bid and asked price. Transactions on stock
exchanges (other than certain foreign stock exchanges) involve the payment
100
<PAGE> 960
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 Sub-Advisor with respect to
the Funds each serves based on their best judgment and in a manner deemed fair
and reasonable to Shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, dealers who provide supplemental investment research to Banc One
Investment Advisors or the 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.
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.
101
<PAGE> 961
In the fiscal years ended June 30, 1999, 1998, and 1997, each of the Funds of
the Trust (except for the Funds identified below as having fiscal years
previously ending December 31st) that paid brokerage commissions and the amounts
paid for each year were as follows:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEAR ENDED JUNE 30,
--------------------------
FUND 1999 1998 1997
- ---- ---- ---- ----
<S> <C> <C> <C>
Equity Income $ 604,450.70 $ 331,556 $ 395,450
Mid Cap Value $ 71,045.93 $1,541,217 $1,570,859
Mid Cap Growth $ 765,709.34 $2,455,346 $3,199,337
Equity Index $2,669,088.50 $ 72,702 $ 162,178
Large Cap Value $ 336,443.05 $ 722,191 $1,378,450
Balanced $1,864,689.68 $ 154,837 $ 194,187
International Equity Index $ 69,164.97 $ 514,660 $ 349,010
Large Cap Growth $4,726,208.53 $2,935,851 $1,285,883
Small Cap Growth $ 88,795.96 $ 180,460 $ 194,127
Diversified Equity $ 297,245.14 $ 763,394 $1,005,409
Small Cap Value $ 30,414.70 NA* NA*
Diversified Mid Cap $ 74,794.39 NA* NA*
Diversified International $ 10,432.31 NA* NA*
Market Expansion Index $ 1,959.36 NA* NA*
</TABLE>
* Prior to the consolidation in March, 1999, the Fund had a fiscal year
ending December 31st.
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FISCAL YEAR ENDED DECEMBER 31,
------------------------------
FUND 1998 1997 1996
- ---- ---- ---- ----
<S> <C> <C> <C>
Small Cap Value $379,752 $280,426 $114,320
Diversified Mid Cap $803,740 $698,038 $621,056
Diversified International $288,664 $225,448 $358,776
Market Expansion Index $ 5,850 NA* NA*
</TABLE>
* As December 31, 1997 and 1998, the Fund had not commenced operations.
As of June 30, 1999, certain Funds owned securities of their regular broker
dealers (or parents) as shown below:
<TABLE>
<CAPTION>
FUND NAME OF BROKER-DEALER VALUE OF SECURITIES OWNED
- ---- --------------------- -------------------------
(Amounts in Thousands)
<S> <C> <C>
PRIME MONEY MARKET
BEAR STERNS CO., INC. $ 53,000
CREDIT SUISSE FIRST BOSTON, GEURNSSEY $ 39,935
LEHMAN BROTHERS $ 269,741
TOTAL $ 362,676
US TREASURY SECURITIES
DONALDSON, LUFKIN & JENRETTE $ 351,000
MORGAN STANLEY & CO., INC. $ 350,000
SMITH BARNEY $ 355,000
BARCLAYS DE ZOETTE WEDD $ 350,000
DEUTSCHE MORGAN GRENFELL $ 200,000
GOLDMAN SACHS $ 380,000
J.P. MORGAN SECURITIES, INC. $ 350,000
LEHMAN BROTHERS $ 345,000
SOCIETE GENERALE $1,450,000
TOTAL $4,131,000
EQUITY INCOME
BEAR STERNS CO., INC. $ 1,938
MERRILL LYNCH $ 5,814
SMITH BARNEY $ 743
J.P. MORGAN SECURITIES, INC. $ 12,096
LEHMAN BROTHERS $ 5,965
GOLDMAN SACHS $ 4,846
TOTAL $ 31,402
INCOME BOND
MERRILL LYNCH $ 60,597
MORGAN STANLEY & CO., INC. $ 6,389
BEAR STERNS CO., INC. $ 19,175
PAINE WEBER $ 28,727
J.P. MORGAN SECURITIES, INC. $ 13,994
TOTAL $ 128,882
MID CAP VALUE
BEAR STERNS CO., INC. $ 1,813
MERRILL LYNCH $ 5,438
SMITH BARNEY $ 695
GOLDMAN SACHS $ 4,532
LEHMAN BROTHERS $ 5,665
J.P. MORGAN SECURITIES, INC. $ 2,115
TOTAL $ 20,258
MID CAP GROWTH
BEAR STERNS CO., INC. $ 8,645
MERRILL LYNCH $ 25,934
SMITH BARNEY $ 3,314
J.P. MORGAN SECURITIES, INC. $ 10,086
LEHMAN BROTHERS $ 27,014
GOLDMAN SACHS $ 23,868
TOTAL $ 98,861
SHORT-TERM BOND
MORGAN STANLEY & CO., INC. $ 1,034
MERRILL LYNCH $ 27,012
BEAR STERNS CO., INC. $ 6,752
SMITH BARNEY $ 3,376
J.P. MORGAN SECURITIES, INC. $ 6,752
GOLDMAN SACHS $ 10,129
PAINE WEBER $ 13,861
LEHMAN BROTHERS $ 6,120
TOTAL $ 75,036
EQUITY INDEX
BEAR STERNS CO., INC. $ 6,425
MERRILL LYNCH $ 22,344
SMITH BARNEY $ 1,852
LEHMAN BROTHERS $ 27,051
J.P. MORGAN SECURITIES, INC. $ 12,546
GOLDMAN SACHS $ 12,077
TOTAL $ 82,295
LARGE CAP VALUE
BEAR STERNS CO., INC. $ 8,304
MERRILL LYNCH $ 2,825
SMITH BARNEY $ 361
GOLDMAN SACHS $ 11,176
MORGAN STANLEY & CO., INC. $ 12,813
J.P. MORGAN SECURITIES, INC. $ 1,099
LEHMAN BROTHERS $ 2,942
TOTAL $ 39,520
INTERNATIONAL EQUITY INDEX
LEHMAN BROTHERS $ 123,686
TOTAL $ 123,686
GOVERNMENT MONEY MARKET
DONALDSON, LUFKIN & JENERETTE $ 94,000
BARCLAYS DE ZOETTE WEDD $ 119,000
GOLDMAN SACHS $ 605,938
J.P. MORGAN SECURITIES, INC. $ 750,000
LEHMAN BROTHERS $ 149,000
WESTDEUTSCHE LANDESBANK $ 50,000
TOTAL $1,767,938
BALANCED FUND
BEAR, STERNS $ 1,774
MERRILL LYNCH $ 5,323
SMITH BARNEY $ 680
J.P. MORGAN SECURITIES, INC. $ 2,070
GOLDMAN SACHS $ 4,764
LEHMAN BROTHERS $ 4,066
TOTAL $ 18,677
GOVERNMENT BOND
BEAR, STERNS $ 26,162
LEHMAN BROTHERS $ 11,540
TOTAL $ 37,704
ULTRA SHORT-TERM BOND
MERRILL LYNCH $ 6,624
SMITH BARNEY $ 3,980
MORGAN STANLEY & CO., INC. $ 569
TOTAL $ 11,173
INTERMEDIATE BOND FUND
MERRILL LYNCH $ 56,778
BEAR, STERNS $ 13,720
SMITH BARNEY $ 6,860
GOLDMAN SACHS $ 20,580
LEHMAN BROTHERS $ 12,434
J.P. MORGAN SECURITIES, INC. $ 13,720
PAINE WEBER $ 27,439
TOTAL $ 151,531
LARGE CAP GROWTH FUND
MERRILL LYNCH $ 11,546
BEAR, STERNS $ 3,849
SMITH BARNEY $ 1,475
GOLDMAN SACHS $ 9,622
LEHMAN BROTHERS $ 12,027
TOTAL $ 38,519
SMALL CAP GROWTH
MERRILL LYNCH $ 1,349
BEAR, STERNS $ 465
SMITH BARNEY $ 178
J.P. MORGAN SECURITIES, INC. $ 542
LEHMAN BROTHERS $ 1,065
GOLDMAN SACHS $ 1,162
TOTAL $ 4,806
DIVERSIFIED EQUITY INCOME
MERRILL LYNCH $ 3,734
BEAR, STERNS $ 11,201
SMITH BARNEY $ 1,431
MORGAN STANLEY & CO., INC. $ 27,214
J.P. MORGAN SECURITIES, INC. $ 4,356
GOLDMAN SACHS $ 9,334
LEHMAN BROTHERS $ 8,555
TOTAL $ 65,825
INSTITUTIONAL PRIME
GOLDMAN SACHS $ 1,949
TOTAL $ 1,949
TREASURY & AGENCY
BEAR STERNS $ 23,838
LEHMAN BROTHERS $ 10,513
TOTAL $ 34,351
HIGH YIELD BOND
MERRILL LYNCH $ 1,612
BEAR, STERNS $ 404
SMITH BARNEY $ 202
LEHMAN BROTHERS $ 366
J.P. MORGAN SECURITIES, INC. $ 404
PAINE WEBER $ 807
TOTAL $ 3,795
U.S. GOVERNMENT CASH MGMT MM
DONALDSON, LUFKIN & JENERETTE $ 406,000
BARCLAYS DE ZOETTE WEDD $ 81,000
GOLDMAN SACHS $ 81,000
LEHMAN BROTHERS $ 81,000
WESTDEUTSCHE LANDESBANK $ 81,000
TOTAL $ 730,000
SMALL CAP VALUE FUND
MERRILL LYNCH $ 346
BEAR, STERNS $ 115
SMITH BARNEY $ 44
LEHMAN BROTHERS $ 361
J.P. MORGAN SECURITIES, INC. $ 134
GOLDMAN SACHS $ 228
TOTAL $ 1,288
DIVERSIFIED MID CAP FUND
BEAR STERNS $ 1,818
MERRILL LYNCH $ 5,454
SMITH BARNEY $ 697
J.P. MORGAN SECURITIES, INC. $ 2,121
GOLDMAN SACHS $ 4,545
LEHMAN BROTHERS $ 4,166
TOTAL $ 18,801
MARKET EXPANSION
JEFFRIES, INC. $ 15
BEAR STERNS $ 77
MERRILL LYNCH $ 230
SMITH BARNEY $ 29
TOTAL $ 351
BOND FUND
MERRILL LYNCH $ 68,051
MORGAN STANLEY & CO., INC. $ 937
BEAR STERNS $ 7,565
SMITH BARNEY $ 7,565
TOTAL $ 84,118
</TABLE>
Investment decisions for each Fund of the Trust are made independently from
those for the other Funds or any other investment company or account managed by
Banc One Investment Advisors or the applicable Sub-Advisor. Any such other
investment company or account may also invest in the same securities as the
Trust. When a purchase or sale of the same security is made at substantially the
same time on behalf of a given Fund and another Fund, investment company or
account (or, in the case of the International Equity Index Fund, another
account), the transaction will be averaged as to price, and available
investments allocated as to amount, in a manner which Banc One Investment
Advisors or the applicable Sub-Advisor of the given Fund believes to be
equitable to the Fund(s) and such other investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained by a Fund. To the extent
permitted by law, Banc One Investment Advisors and the applicable Sub-Advisor
may aggregate the securities to be sold or purchased by it for a Fund with those
to be sold or purchased by it for other Funds or for other investment companies
or accounts in order to obtain best execution. As provided by the Investment
Advisory and Sub-Advisory Agreements, in making investment recommendations for
the Trust, Banc One Investment Advisors and the applicable Sub-Advisor will not
inquire or take into consideration whether an issuer of securities proposed for
purchase or sale by the Trust is a customer of Banc One Investment Advisors or
the applicable Sub-Advisor or their parents or subsidiaries or affiliates and,
in dealing with its commercial customers, Banc One Investment Advisors and the
applicable Sub-Advisor and their respective parent, subsidiaries, and affiliates
will not inquire or take into consideration whether securities of such customers
are held by the Trust.
102
<PAGE> 962
ADMINISTRATOR
The One Group Services Company serves as Administrator (the "ADMINISTRATOR") to
each Fund of the Trust pursuant to a Management and Administration Agreement
with the Trust (the "ADMINISTRATION AGREEMENT"). The Board of Trustees of the
Trust approved The One Group Services Company as the sole Administrator for each
Fund beginning December 1, 1995. The Administrator assists in supervising all
operations of each Fund to which it serves as Administrator (other than those
performed under the respective investment advisory agreements and Custodian and
Transfer Agency Agreements for that Fund).
Under the Administration Agreement, the Administrator has agreed to price the
portfolio securities of each Fund it serves and to compute the net asset value
and net income of such Funds on a daily basis, to maintain office facilities for
the Trust, to maintain each such Fund's financial accounts and records, and to
furnish the Trust statistical and research data, data processing, clerical,
accounting, and bookkeeping services, and certain other services required by the
Trust with respect to each such Fund. The Administrator prepares annual and
semi-annual reports to the SEC, prepares federal and State tax returns, prepares
filings with State securities commissions, and generally assists in all aspects
of the Trust's operations other than those performed under the investment
advisory agreements, and Custodian and Transfer Agency Agreements. Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
Banc One Investment Advisors also serves as Sub-Administrator to each Fund of
the Trust, pursuant to an agreement between the Administrator and Banc One
Investment Advisors. Pursuant to this agreement, Banc One Investment Advisors
performs many of the Administrator's duties, for which Banc One Investment
Advisors receives a fee paid by the Administrator.
103
<PAGE> 963
The Trust paid fees for administrative services to The One Group Services
Company as Administrator for the fiscal years ended June 30, 1999, 1998, and
1997 as follows:
<TABLE>
<CAPTION>
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES -- NET
-------------------------------------------------
FISCAL YEAR ENDED
JUNE 30, 1999
THE ONE GROUP BANC ONE BISYS
SERVICES COMPANY INVESTMENT ADVISORS** FUND SERVICES***
--------------------------- ---------------------------- ---------------------------
FUND NET(000's) WAIVED(000's) NET(000's) WAIVED(000's) NET(000's) WAIVED(000's)
- ---- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $5,816 $ -- $3,412 $ -- $ 7 $ --
Prime Money Market $4,477 $ 361 $3,007 $ -- $ 23 $ --
Municipal Money Market $ 836 $ 142 $ 578 $ -- $ 5 $ --
Ohio Municipal Money Market $ 33 $ 83 $ 69 $ -- $ -- $ --
Equity Income $ 890 $ 207 $ 644 $ -- $ 3 $ --
Mid Cap Value $ 894 $ -- $ 525 $ -- $ 3 $ --
Mid Cap Growth $1,195 $ -- $ 701 $ -- $ -- $ --
Equity Index $ 822 $1,026 $1,085 $ -- $ 7 $ --
Large Cap Value $ 919 $ -- $ 539 $ -- $ -- $ --
Balanced $ 432 $ 23 $ 267 $ -- $ -- $ --
International Equity Index $ 652 $ -- $ 382 $ -- $ -- $ --
Large Cap Growth $2,732 $ -- $1,605 $ -- $ 7 $ --
Short-Term Bond $ 708 $ -- $ 415 $ -- $ 2 $ --
Intermediate Tax-Free Bond $ 680 $ 27 $ 415 $ -- $ 3 $ --
Municipal Income $ 944 $ -- $ 554 $ -- $ -- $ --
Ohio Municipal Bond $ 227 $ -- $ 133 $ -- $ -- $ --
Government Bond $ 738 $ 342 $ 633 $ -- $ -- $ --
Ultra Short-Term Bond $ -- $ 254 $ 5 $ 144 $ -- $ --
Treasury Only Money Market $ -- $ -- $ 424 $ -- $ -- $ --
Government Money Market $ -- $ -- $1,739 $ -- $ -- $ --
Tax-Exempt Money Market $ N/A $ N/A N/A $ N/A $ -- $ --
Arizona Municipal Bond $ 208 $ 43 $ 147 $ -- $ -- $ --
Kentucky Municipal Bond $ 131 $ 18 $ 87 $ -- $ -- $ --
W. Virginia Municipal Bond $ 91 $ 25 $ 68 $ -- $ -- $ --
Louisiana Municipal Bond $ 156 $ 44 $ 117 $ -- $ -- $ --
Diversified Equity $1,258 $ -- $ 740 $ -- $ 10 $ --
Small Cap Growth $ 101 $ 36 $ 80 $ -- $ -- $ --
High Yield Bond $ 32 $ -- $ 46 $ -- $ 1 $ --
Investor Growth $ 12 $ 265 $ -- $ -- $ -- $ --
Investor Growth & Income $ 93 $ 276 $ -- $ -- $ 2 $ --
Investor Conservative Growth $ -- $ 136 $ -- $ -- $ -- $ --
Investor Balanced $ 125 $ 182 $ -- $ -- $ 1 $ --
Treasury & Agency $ 20 $ 187 $ 121 $ -- $ -- $ --
Small Cap Value $ 58# $ 8# $ 130 $ -- $ 7 $ --
Diversified Mid Cap $ 279# $ --# $ 565 $ -- $ 31 $ --
Diversified International $ 143# $ 18# $ 279 $ -- $ 16 $ --
Market Expansion Index $ 2# $ 4# $ 12 $ -- $ 1 $ --
Bond $ 351# $ 43# $ 663 $ -- $ 39 $ --
Income Bond $ 264# $ --# $ 353 $ -- $ 10 $ --
Intermediate Bond $ 232# $ --# $ 464 $ -- $ 17 $ --
Short-Term Municipal Bond $ 25# $ 4# $ 59 $ -- $ 3 $ --
Tax-Free Bond $ 171# $ 25# $ 421 $ -- $ 23 $ --
Michigan Municipal Bond $ 66# $ 8# $ 157 $ -- $ 8 $ --
Michigan Municipal Money Market $ 49## $ 6# $ 90 $ -- $ 5 $ --
Cash Management Money Market $ 424## $ 72## $1,238 $ -- $ 43 $ --
Treasury Cash Management Money Market $ 88## $ 14## $ 198 $ -- $ 6 $ --
Treasury Prime Cash Management Money Market $ 102## $ 17## $ 270 $ -- $ 9 $ --
U.S. Government Securities Cash Management
Money Market $ 251## $ 43## $ 748 $ -- $ 11 $ --
Municipal Cash Management Money Market $ 81## $ 25## $ 298 $ -- $ 11 $ --
Institutional Prime Money Market $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
* As of June 30, 1999, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
*** For the period from January 1, 1999 until consolidation with the
Pegasus Funds, pursuant to the Co-Administration Agreement between the
Predecessor Funds, First Chicago NBD Investment Management Company, and
BISYS Fund Services LP.
# For the period from March 22, 1999 to June 30, 1999.
## For the period from March 29, 1999 to June 30, 1999.
104
<PAGE> 964
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1998
THE ONE GROUP BANC ONE
SERVICE COMPANY INVESTMENT ADVISORS**
--------------- ---------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $2,892,564 $ 570,303 $1,953,193 $ 0
Prime Money Market $2,909,462 $ 499,662 $1,964,556 $ 0
Municipal Money Market $ 545,873 $ 67,499 $ 363,608 $ 0
Ohio Municipal Money Market $ 57,990 $ 71,908 $ 39,212 $ 0
Equity Income $ 866,925 $ 0 $ 585,415 $ 0
Mid Cap Value $ 627,733 $ 0 $ 424,072 $ 0
Mid Cap Growth $ 856,657 $ 0 $ 578,193 $ 0
Equity Index $ 593,918 $ 631,314 $ 398,167 $ 0
Large Cap Value $ 743,765 $ 0 $ 502,444 $ 0
Balanced $ 93,135 $ 188,687 $ 62,825 $ 0
International Equity Index $ 495,338 $ 0 $ 334,504 $ 0
Large Cap Growth $1,589,738 $ 0 $1,070,862 $ 0
Short-Term Bond $ 582,384 $ 0 $ 393,556 $ 0
Intermediate Tax-Free Bond $ 476,747 $ 0 $ 322,115 $ 0
Municipal Income $ 609,675 $ 0 $ 411,186 $ 0
Ohio Municipal Bond $ 172,939 $ 0 $ 116,807 $ 0
Government Bond $ 628,220 $ 326,624 $ 424,114 $ 0
Ultra Short-Term Bond $ 0 $ 334,196 $ 0 $ 0
Treasury Only Money Market $ 0 $ 0 $ 321,862 $ 0
Government Money Market $ 0 $ 0 $1,084,467 $ 0
Institutional Prime Money
Market NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 235,850 $ 27,440 $ 159,048 $ 0
Kentucky Municipal Bond $ 127,280 $ 0 $ 85,987 $ 0
W. Virginia Municipal Bond $ 87,100 $ 24,557$ 58,836$0
Louisiana Municipal Bond $ 150,915 $ 0 $ 102,041 $ 0
Diversified Equity $ 591,870 $ 0 $ 399,405 $ 0
Small Cap Growth $ 96,910 $ 37,328 $ 65,129 $ 0
High Yield Bond NA* NA* NA* NA*
Investor Growth $ 0 $ 113,852 $ 0 $ 0
Investor Growth & Income $ 0 $ 134,333 $ 0 $ 0
Investor Conservative Growth $ 0 $ 46,223 $ 0 $ 0
Investor Balanced $ 0 $ 129,257 $ 0 $ 0
Treasury & Agency $ 41,644 $ 120,468 $ 27,972 $ 0
</TABLE>
* As of June 30, 1998, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
105
<PAGE> 965
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30, 1997
THE ONE GROUP BANC ONE
SERVICE COMPANY INVESTMENT ADVISORS**
--------------- ---------------------
FUND NET WAIVED NET WAIVED
- ---- --- ------ --- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $4,041,160 $ 52,457 $ 0 $ 0
Money Market
Prime Money Market $4,325,620 $ 268,513 $1,666,976 $ 0
Municipal Money Market $ 821,921 $ 45,236 $ 314,733 $ 0
Ohio Municipal Money Market $ 168,236 $ 79,377 $ 107,188 $ 0
Equity Income $ 916,621 $ 0 $ 332,802 $ 0
Mid Cap Value $ 922,753 $ 0 $ 334,826 $ 0
Mid Cap Growth $1,007,999 $ 0 $ 365,770 $ 0
Equity Index $ 329,84 $ 574,004 $ 328,342 $ 0
Large Cap Value $1,056,104 $ 0 $ 383,222 $ 0
Balanced $ 94,269 $ 116,194 $ 76,370 $ 0
International Equity Index $ 662,008 $ 0 $ 240,084 $ 0
Large Cap Growth $1,775,503 $ 0 $ 644,453 $ 0
Short-Term Bond $1,008,923 $ 0 $ 366,010 $ 0
Intermediate Tax-Free Bond $ 554,163 $ 0 $ 201,205 $ 0
Municipal Income $ 609,095 $ 16,541 $ 227,031 $ 0
Ohio Municipal Bond $ 213,314 $ 1,857 $ 78,076 $ 0
Government Bond $ 990,039 $ 220,036 $ 439,098 $ 0
Ultra Short-Term Bond $ 60,695 $ 95,720 $ 50,007 $ 0
Treasury Only Money Market $ 240,680 $ 0 $ 240,061 $ 0
Government Money Market $ 530,431 $ 0 $ 530,415 $ 0
Institutional Prime NA* NA* NA* NA*
Money Market
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 140,206 $ 49,819 $ 69,221 $ 0
Kentucky Municipal Bond $ 127,957 $ 0 $ 46,478 $ 0
W. Virginia Municipal Bond $ 58,427 $ 10,580 $ 25,040 $ 0
Louisiana Municipal Bond $ 297,050 $ 0 $ 107,762 $ 0
Diversified Equity $ 531,250 $ 0 $ 192,876 $ 0
Small Cap Growth $ 92,752 $ 70,432 $ 59,214 $ 0
High Yield Bond NA* NA* NA* NA*
Investor Growth $ 15,583 $ 0 $ 0 $ 0
Investor Growth & Income $ 0 $ 20,566 $ 0 $ 0
Investor Conservative Growth $ 0 $ 6,866 $ 0 $ 0
Investor Balanced $ 0 $ 31,220 $ 0 $ 0
Treasury & Agency $ 13,891 $ 68,143 $ 29,765 $ 0
</TABLE>
* As of June 30, 1997, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
106
<PAGE> 966
Prior to the consolidation 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*
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1998
FUND BISYS FCNIMCO
- ---- ----- -------
<S> <C> <C>
Small Cap Value $ 39,395 $ 390,017
Diversified Mid Cap $ 156,709 $1,551,480
Diversified International $ 78,747 $ 779,566
Market Expansion Index $ 1,366 $ 13,704
Bond $ 194,675 $1,933,336
Income Bond $ 28,474 $ 281,681
Intermediate Bond $ 81,371 $ 799,513
Short-Term Municipal Bond $ 6,375 $ 63,485
Tax-Free Bond $ 80,968 $ 803,400
Michigan Municipal Bond $ 23,985 $ 238,363
Michigan Municipal Money Market $ 16,724 $ 165,519
Cash Management Money Market $ 296,691 $2,936,381
Treasury Cash Management Money Market $ 43,660 $ 432,112
Treasury Prime Cash Management Money Market $ 55,000 $ 544,340
U.S. Government Securities Cash Management
Money Market $ 189,760 $1,878,075
Municipal Cash Management Money Market $ 67,765 $ 670,673
</TABLE>
* Fees for administration were not waived during the fiscal year ended
December 31, 1998.
Under the terms of an Administration Agreement dated as of April 12,
1996, FCNIMCO and BISYS were entitled jointly to a monthly administration fee at
an annual rate of .15% of each Fund's average daily net assets. For the fiscal
year ended December 31, 1997, the Predecessor Funds paid FCNIMCO as agent for
the co-administrators, the following administration fees:
107
<PAGE> 967
PREDECESSOR FUNDS -- ADMINISTRATION FEES*
FISCAL YEAR ENDED DECEMBER 31, 1997
FUND FCNIMCO
- ---- -------
Small Cap Value $ 275,070
Diversified Mid Cap $1,338,920
Diversified International $ 703,577
Market Expansion Index NA**
Bond $1,533,671
Income Bond $ 210,812
Intermediate Bond $ 709,096
Short-Term Municipal Bond NA**
Tax-Free Bond $ 571,573
Michigan Municipal Bond $ 101,900
Michigan Municipal Money Market $ 189,978
Cash Management Money Market $1,441,319
Treasury Cash Management Money Market $ 99,861
Treasury Prime Cash Management Money Market $ 382,527
U.S. Government Securities $1,093,263
Cash Management Money Market Municipal Cash Management $ 111,200
Money Market
* Fees for administration were not waived during the fiscal year ended
December 31, 1997.
** As of December 31, 1997, the Funds had not commenced operation.
108
<PAGE> 968
Under the terms of an Administration Agreement dated as of April 12,
1996, FCNIMCO and BISYS were entitled jointly to a monthly administration fee at
an annual rate of .15% of each Fund's average daily net assets. Beginning on the
dates indicated below and ending on December 31, 1996, the Predecessor Funds
paid FCNIMCO as agent for the co-administrators, the following administration
fees:
PREDECESSOR FUNDS -- ADMINISTRATION FEES*
FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FUND BEGINNING DATE FCNIMCO
- ---- -------------- -------
<S> <C> <C>
Small Cap Value September 21, 1996 $ 86,925
Diversified Mid Cap September 23, 1996 $366,806
Diversified International August 24, 1996 $226,250
Market Expansion Index NA** NA**
Bond August 24, 1996 $416,965
Income Bond September 23, 1996 $105,823
Intermediate Bond September 21, 1996 $ 34,354
Short-Term Municipal Bond NA** NA**
Tax-Free Bond September 14, 1996 $233,974
Michigan Municipal Bond September 23, 1996 $ 28,964
Michigan Municipal Money Market September 16, 1996 $ 66,924***
Cash Management Money Market July 13, 1996 $465,170
Treasury Cash Management
Money Market NA** NA**
Treasury Prime Cash Management
Money Market July 13, 1996 $202,003
U.S. Government Securities
Cash Management Money Market July 13, 1996 $466,617
Municipal Cash Management
Money Market NA** NA**
</TABLE>
* Fees for administration were not waived during the fiscal year ended
December 31, 1996.
** As of December 31, 1996, the Funds had not commenced operation.
*** Prior to September 16, 1996, NBD provided administrative services to
the Michigan Municipal Money Market Fund as a part of the previous
investment advisory agreement. No separate administration fees were
incurred.
For the period from January 1, 1996 through July 13, 1996, the predecessors to
the Pegasus Cash Management Fund, the Pegasus Treasury Prime Cash Management
Fund, and the Pegasus U.S. Government Securities Cash Management Fund paid
FCNIMCO administration fees of $363,320, $132,016 and $392,231, respectively.
Unless sooner terminated, the Administration Agreement between the
Trust and The One Group Services Company will continue in effect through
November 30, 2000. The Administration Agreement thereafter shall be renewed
automatically for successive one year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least sixty days prior
to the expiration of the then-current term. The Administration Agreement will be
reviewed and ratified at least annually by the Trust's Board of Trustees,
provided that the Administration Agreement is also reviewed and ratified by the
majority of the Trust's Trustees who are not parties to the Administration
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Administration Agreement, by vote cast in person at a meeting called for the
purpose of reviewing and ratifying the Administration Agreement. The
Administration Agreement may be terminated with respect to a particular Fund
only upon mutual agreement of the parties to the Administration Agreement and
for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than sixty days' notice by the Trust's Board of Trustees or
by The One Group Services Company.
109
<PAGE> 969
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith, or negligence in
the performance of its duties, or from the reckless disregard by it of its
obligations and duties thereunder.
DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly owned subsidiary of the BISYS Group, serves as Distributor to each Fund
of the Trust pursuant to its Distribution Agreement with the Trust (the
"DISTRIBUTION AGREEMENT"). The Board of Trustees of the Trust approved The One
Group Services Company as the sole Distributor beginning November 1, 1995.
Unless otherwise terminated, the Distribution Agreement will continue in effect
until October 31, 2000 and will continue from year to year if approved at least
annually (i) by the Trust's Board of Trustees or by the vote of a majority of
the outstanding Shares of the Funds (see "ADDITIONAL INFORMATION--
Miscellaneous," in this Statement of Additional Information) that are parties to
the Distribution Agreement, and (ii) by the vote of a majority of the Trustees
of the Trust who are not parties to the Distribution Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The agreement may be terminated in the event of its
assignment, as defined in the 1940 Act. The One Group Services Company is a
broker-dealer registered with the Securities and Exchange Commission, and is a
member of the National Association of Securities Dealers, Inc.
DISTRIBUTION PLAN
The operation and fees with respect to Class A Shares, Class B Shares, Class C
Shares, and Service Class Shares of the Trust payable under the Trust's
Distribution and Shareholder Services Plans, to which Class A Shares, Class B
Shares, Class C Shares, and Service Class Shares of each Fund of the Trust are
subject, are described in each such Fund's Prospectuses and in the Multiple
Class Plan.
The Distribution and Shareholder Services Plan with respect to Class A Shares
(the "Distribution Plan") was initially approved on July 28, 1989 by the Trust's
Board of Trustees, including a majority of the Trustees who are not interested
persons of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the Distribution Plan (the "INDEPENDENT
TRUSTEES"). The Distribution Plan originally applied to the single class of
Shares of each Fund of the Trust that existed prior to the offering of the
Funds' Shares as five separate classes. An amendment to the Distribution Plan
was approved by the Independent Trustees on October 21, 1991, and became
effective on February 7, 1992. Such amendment limited fees under the
Distribution Plan only to the Class A Shares of each Fund. The Distribution Plan
was amended again on February 11, 1993 in order to make Retirement Class Shares
(now the Service Class Shares) subject to distribution fees. The Distribution
Plan was further amended on February 29, 1996, to eliminate certain "defensive"
provisions of the Distribution Plan. A Distribution and Shareholder Services
Plan (the "CDSC PLAN") for Class B and Class C Shares was initially approved on
August 12, 1993 by the Independent Trustees. The CDSC Plan was re-executed on
December 13, 1995 and amended on February 20, 1997. Prior to February 7, 1992,
distribution fees were waived with respect to every Fund of the Trust except the
U.S. Treasury Securities Money Market Fund and the Prime Money Market Fund.
110
<PAGE> 970
During the fiscal year ending June 30, 1999, the distribution fees paid by the
Class A, Class B, Class C and Service Class Shares (formerly Retirement Class
Shares) of the Trust to The One Group Services Company were as follows:
<TABLE>
<CAPTION>
SERVICE
FUND DISTRIBUTOR CLASS A (000's) CLASS B (000's) CLASS C(000's) CLASS (000's)
- ---- ----------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market One Group Ser. $3,964 $ 7 $ 2 0
Prime Money Market One Group Ser. $3,137 70 0 0
Municipal Money Market One Group Ser. $ 541 $ 0 $ 0 0
Ohio Municipal Money Market One Group Ser. $ 101 $ 0 $ 0 0
Equity Income One Group Ser. $ 301 $1,759 $ 8 0
Mid Cap Value One Group Ser. $ 155 $ 379 $ --(a) 0
Mid Cap Growth One Group Ser. $ 292 $1,086 $ 55 0
Equity Index One Group Ser. $ 936 $4,135 $231 0
Large Cap Value One Group Ser. $ 49 $ 187 $ --(a) 0
Balanced One Group Ser. $ 159 $1,640 $ 0 0
International Equity Index One Group Ser. $ 78 $ 146 $ 7 0
Large Cap Growth One Group Ser. $ 712 $4,013 $ 28 0
Short-Term Bond One Group Ser. $ 46 $ 39 $ 0 0
Intermediate Tax-Free Bond One Group Ser. $ 53 $ 67 $ 0 0
Municipal Income One Group Ser. $ 370 $ 699 $ 54 0
Ohio Municipal Bond One Group Ser. $ 55 $ 345 $ 0 0
Government Bond One Group Ser. $ 96 $ 356 $ 1 0
Ultra Short-Term Bond One Group Ser. $ 58 $ 42 $ 0 0
Treasury Only Money Market One Group Ser. $ 0 $ 0 $ 0 0
Government Money Market One Group Ser. $ 0 $ 0 $ 0 0
Institutional Prime Money Market One Group Ser. $ 0 $ 0 $ 0 0
Kentucky Municipal Bond One Group Ser. $ 22 $ 98 $ 0 0
Tax-Exempt Money Market* One Group Ser. N/A N/A N/A N/A
Arizona Municipal Bond One Group Ser. $ 4 $ 3 $ 0 0
W. Virginia Municipal Bond One Group Ser. $ 11 $ 52 $ 0 0
Louisiana Municipal Bond One Group Ser. $ 196 $ 80 $ 0 0
Diversified Equity One Group Ser. $ 390 $ 357 $ 35 0
Small Cap Growth One Group Ser. $ 46 $ 88 $ 1 0
High Yield Bond One Group Ser. $ 6 $ 5 $ --(a) 0
Investor Growth One Group Ser. $ 175 $1,076 $116 0
Investor Growth & Income One Group Ser. $ 257 $1,395 $ 98 0
Investor Conservative Growth One Group Ser. $ 50 $ 767 $ 55 0
Investor Balanced One Group Ser. $ 211 $1,342 $100 0
Treasury & Agency One Group Ser. $ 170 $ 382 $ 0 0
Small Cap Value** One Group Ser. $ 34 $ 16 $ --(a) 0
Diversified Mid Cap** One Group Ser. $ 306 $ 31 $ --(a) 0
Diversified International** One Group Ser. $ 48 $ 12 $ --(a) 0
Market Expansion Index** One Group Ser. $ --(a) $ 1 $ --(a) 0
Bond** One Group Ser. $ 256 $ 48 $ --(a) 0
Income Bond** One Group Ser. $ 30 $ 44 $ 0 0
Intermediate Bond** One Group Ser. $ 126 $ 89 $ 34 0
Short-Term Municipal Bond** One Group Ser. $ 1 $ --(a) $ 0 0
Tax-Free Bond** One Group Ser. $ 50 $ 9 $ 0 0
Michigan Municipal Bond** One Group Ser. $ 27 $ 16 $ 0 0
Michigan Municipal Money Market** One Group Ser. $ 87 $ 0 $ 0 0
Cash Management Money Market*** One Group Ser. $ 905 $ 0 $ 0 0
Treasury Cash Management Money Market*** One Group Ser. $ 215 $ 0 $ 0 0
Treasury Prime Cash Management Money Market*** One Group Ser. $ 312 $ 0 $ 0 0
U.S. Government Securities Cash Management
Money Market*** One Group Ser. $ 462 $ 0 $ 0 0
Municipal Cash Management Money Market*** One Group Ser. $ 45 $ 0 $ 0 0
</TABLE>
* These Funds had not commenced operations as of June 30, 1999.
** For the period from March 22, 1999 to June 30, 1999.
*** For the period from March 29, 1999 to June 30, 1999.
(a) Amount is less than a $1000.
111
<PAGE> 971
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan and CDSC
Plan may be terminated with respect to the Class A Shares, Class B Shares, Class
C Shares or Service Class Shares of any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class A
Shares, Class B Shares, Class C Shares or Service Class Shares, respectively, of
that Fund. The Distribution Plan and CDSC Plan may be amended by vote of the
Trust's Board of Trustees, including a majority of the Independent Trustees,
cast in person at a meeting called for such purpose, except that any change in
the Distribution Plan or CDSC Plan that would materially increase the
distribution fee with respect to the Class A Shares, Class B Shares, Class C
Shares or Service Class Shares of a Fund requires the approval of that Fund's
Class A, Class B, Class C or Service Class Shareholders, respectively. The
Trust's Board of Trustees will review on a quarterly and annual basis written
reports of the amounts received and expended under the Distribution Plan
(including amounts expended by the Distributor to Participating Organizations
pursuant to the Servicing Agreements entered into under the Distribution Plan)
indicating the purposes for which such expenditures were made.
PREDECESSOR FUNDS' DISTRIBUTION AND SHAREHOLDER SERVICING PLANS
Prior to the merger with the Trust, the Predecessor Funds (other than
the predecessors to the Cash Management Funds) entered into servicing agreements
(the "SERVICE AGREEMENTS") with servicing agents (which could include the
Predecessor Fund's investment adviser and its affiliates) (collectively, the
"SERVICE AGENTS"). The Service Agreements provided that the Service Agents would
render shareholder administrative support services to their customers who were
the beneficial owners of the Predecessor Fund shares in consideration for such
Funds' payment of up to .25% (on an annualized basis) of the average daily net
asset value of the shares held by the Service Agents and, at the Predecessor
Fund's option, the Funds could reimburse the Service Agents' out-of-pocket
expenses (such fees and expenses being collectively referred to as the "SERVICE
PLAN"). The Predecessor Funds (other than the predecessors to the Cash
Management Funds) implemented the Service Plan with respect to Class A and Class
B Shares of the Predecessor Funds.
In addition, the Board of Trustees of the Predecessor Funds adopted a
plan under Rule 12b-1 under the 1940 Act (the "PEGASUS 12B-1 PLAN"). Pursuant to
the Pegasus 12b-1 Plan, the Funds other than the Cash Management Funds could pay
BISYS as distributor a fee of up to 0.75% of the average daily net asset value
attributable to Class B Shares and the Cash Management Funds could pay BISYS as
distributor a fee of up to 0.25% of the average daily net asset value
attributable to Service Shares. These fees were paid for advertising, marketing
and distributing such shares and for the provision of certain services to the
holders of such shares. Under the Pegasus 12b-1 Plan, BISYS was authorized to
make payments to certain financial institutions, securities dealers and other
financial industry professionals in respect of these services.
112
<PAGE> 972
For the period beginning January 1, 1999 until the date the Predecessor
Funds consolidated with One Group Mutual Funds in March, the distribution fees
paid by the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER
SERVICES SERVICES 12b-1
FEES FEES FEES
FUND CLASS A CLASS B CLASS S
- ---- ------- ------- -------
<S> <C> <C> <C>
Income Bond Fund $ 8,617.14 $ 1,387.44 $ 0.00
Intermediate Bond Fund $ 46,665.19 $ 1,694.32 $ 0.00
Small Cap Value Fund $ 16,353.05 $ 7,330.92 $ 0.00
Diversified Mid Cap Fund $143,494.78 $13,711.96 $ 0.00
Diversified International Fund $ 0.00 $ 5,145.44 $ 0.00
Market Expansion Index Fund $ 16.32 $ 16.12 $ 0.00
Bond Fund $125,258.84 $20,101.96 $ 0.00
Short-Term Municipal Bond Fund $ 327.67 $ 262.56 $ 0.00
Tax-Free Bond Fund $ 23,900.13 $ 4,584.36 $ 0.00
Michigan Municipal Bond $ 12,320.17 $ 4,994.12 $ 0.00
Michigan Municipal Money
Market Fund $ 34,935.94 $ 0.00 $ 0.00
Cash Management Money Market
Fund $ 0.00 $ 0.00 $804,125.88
Treasury Cash Management Money
Market Fund $ 0.00 $ 0.00 $189,087.24
Treasury Prime Cash Management
Money Market Fund $ 0.00 $ 0.00 $226,794.11
U.S. Government Securities Cash
Management Money Market Fund $ 0.00 $ 0.00 $299,977.52
Municipal Cash Management
Money Market Fund $ 0.00 $ 0.00 $ 33,703.38
</TABLE>
During the fiscal year ending December 31, 1998, the distribution fees
paid by the Predecessor Funds were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHAREHOLDER SERVICE
SERVICES SERVICES 12b-1 PLAN FEES
FEES FEES FEES SERVICE
FUND CLASS A CLASS B CLASS C SHARES
- ---- ------- ------- ------- ------
<S> <C> <C> <C> <C>
Income Bond Fund $ 31,428 $ 1,505 $ 4,515 NA
Intermediate Bond Fund $212,255 $ 1,738 $ 5,214 NA
Small Cap Value Fund $ 72,458 $ 7,983 $ 23,950 NA
Diversified Mid Cap Fund $680,933 $ 14,688 $ 44,063 NA
Diversified International Fund $ 98,786 $ 5,653 $ 16,958 NA
Market Expansion Index Fund $ 9 NA $ 1 NA
Bond Fund $515,680 $ 15,036 $ 45,107 NA
Short-Term Municipal Bond Fund $ 225 $ 108 $ 324 NA
Tax-Free Bond Fund $ 99,279 $ 4,252 $ 12,756 NA
Michigan Municipal Bond $ 48,204 $ 3,291 $ 9,873 NA
Michigan Municipal Money
Market Fund $110,571 NA NA NA
Cash Management Money Market
Fund NA NA NA $2,930,146
Treasury Cash Management Money
Market Fund NA NA NA $ 749,800
Treasury Prime Cash Management
Money Market Fund NA NA NA $ 790,269
U.S. Government Securities Cash
Management Money Market Fund NA NA NA $1,139,266
Municipal Cash Management
Money Market Fund NA NA NA $ 154,695
</TABLE>
113
<PAGE> 973
CASH COMPENSATION TO SHAREHOLDER SERVICING AGENTS
The One Group Services Company compensates Shareholder Servicing Agents
who sell shares of the Funds. Compensation comes from sales charges, 12b-1 fees
and payments by The One Group Services Company from its own resources.
Occasionally, The One Group Services Company, at its own expense, also will
provide cash incentives which will be paid to select Shareholder Servicing
Agents. As of September 30, 1999, the Servicing Agents listed below may receive
up to 0.15% of the amount of their customer assets that are invested in the
Fund.
Merrill Lynch
Pershing
Sungard
Kemper
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, 0.50% for sales of over $5 to $10
million, and 0.25% on amounts over $10 million.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Cash and securities owned by the Funds of the Trust are held by State Street
Bank and Trust Company, P.O. Box 8528, Boston, Massachusetts 02266-8528, ("STATE
STREET") as Custodian. State Street serves the respective Funds as Custodian
pursuant to a Custodian Agreement with the Trust (the "CUSTODIAN AGREEMENT").
Under the Custodian Agreement, State Street:
(i) maintains a separate account or accounts in the name of each
Fund;
(ii) makes receipts and disbursements of money on behalf of each
Fund;
(iii) collects and receives all income and other payments and
distributions on account of the Funds' portfolio securities;
(iv) responds to correspondence from security brokers and others
relating to its duties; and
(v) makes periodic reports to the Trust's Board of Trustees
concerning the Trust's operations. State Street may, at its
own expense, open and maintain a sub-custody account or
accounts on behalf of the Trust, provided that State Street
shall remain liable for the performance of all of its duties
under the Custodian Agreement.
Rules adopted under the 1940 Act permit the Trust to maintain its securities and
cash in the custody of certain eligible banks and securities depositories. The
Trust intends to select foreign custodians or sub-custodians to maintain foreign
securities of the International Funds pursuant to such rules, following a
consideration of a number of factors, including, but not limited to, the
reliability and financial stability of the institution; the ability of the
institution to perform custodial services for the Trust; the reputation of the
institution in its national market; the political and economic stability of the
country in which the institution is located; and the risks of potential
nationalization or expropriation of Trust assets. In addition, the 1940 Act
requires that foreign bank sub-custodians, among other things have Shareholder
equity in excess of $200 million, have no lien on the Trust's assets and
maintain adequate and accessible records.
114
<PAGE> 974
State Street serves as Transfer Agent and Dividend Disbursing Agent for each
Fund pursuant to Transfer Agency Agreements with the Trust (the "TRANSFER AGENCY
AGREEMENT"). Under the Transfer Agency Agreements, State Street has agreed
(i) to issue and redeem Shares of the Trust;
(ii) to address and mail all communications by the Trust to its
Shareholders, including reports to Shareholders, dividend and
distribution notices, and proxy material for its meetings of
Shareholders;
(iii) to respond to correspondence or inquiries by Shareholders and
others relating to its duties;
(iv) to maintain Shareholder accounts and certain sub-accounts; and
(v) to make periodic reports to the Trust's Board of Trustees
concerning the Trust's operations.
THE SUBCUSTODIAN
Bank One Trust Company, N.A. (the "Subcustodian") serves as Subcustodian in
connection with the Trust's securities lending activities for domestic
securities, pursuant to a Subcustodian Agreement between the Trust, State Street
and the Subcustodian and a Securities Lending Agreement between the Trust, Banc
One Investment Advisors, and the Subcustodian. The Subcustodian serves as
Subcustodian in connection with the Trust's securities lending activities for
international securities, pursuant to a Subcustodian Agreement between the
Trust, State Street and the Subcustodian and a Securities Lending Agreement
between the Trust, Banc One Investment Advisors, and the Subcustodian. The
Subcustodian is an indirect subsidiary of Bank One Corporation and an affiliate
of Banc One Investment Advisors. The Subcustodian is entitled to a fee from the
Trust under the agreements, which is calculated on an annual basis and accrued
daily, equal to:
Domestic Fee
o .05% of the value of collateral received from the borrower for
each securities loan of U.S. Government and Agency Securities;
and
o .10% of the value of collateral received from the borrower for
each loan of equities and corporate bonds.
International Fee
o .15% of the value received from the borrower for each loan of
foreign securities.
EXPERTS
The financial statements for the fiscal year ended June 30, 1999 have been
audited by PricewaterhouseCoopers LLP, 100 East Broad Street, Columbus, Ohio
43215, 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 Fund of the Kentucky Municipal Bond
Fund, the Trademark Kentucky Municipal Bond Fund, for the period from February
1, 1994 to January 19, 1995 were audited by the predecessor auditors for such
Funds.
115
<PAGE> 975
The financial statements for the Predecessor Funds for the period ended December
31, 1998, were audited by the predecessor auditors for such Funds.
The Financial Statements for the periods or years ended December 31, 1995 and
prior with respect to the predecessors of the Small Cap Value Fund, the Income
Bond Fund, and the Tax-Free Bond Fund were audited by the predecessor auditors
for such Funds.
The financial statements for the predecessors of the Cash Management Money
Market Fund, Treasury Prime Cash Management Money Market Fund, and the U.S.
Government Securities Cash Management Money Market Fund for the periods or years
prior to December 31, 1995 were audited by the predecessor auditors for such
Funds.
The law firm of Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite
800 East, Washington, D.C. 20005 is counsel to the Trust. From time to time,
Ropes & Gray has rendered legal services to Bank One Corporation and its
subsidiary banks.
116
<PAGE> 976
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Massachusetts Business Trust. The Trust's Declaration of
Trust was filed with the Secretary of State of the Commonwealth of Massachusetts
on May 23, 1985 and authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest, without par value. The
Trust's Declaration of Trust authorizes the Board of Trustees to establish one
or more series of Shares of the Trust, and to classify or reclassify any series
into one or more classes by setting or changing in any one or more respects the
preferences, designations, conversion, or other rights, restrictions, or
limitations as to dividends, conditions of redemption, qualifications, or other
terms applicable to the Shares of such class, subject to those matters expressly
provided for in the Declaration of Trust, as amended, with respect to the Shares
of each series of the Trust. The Trust presently includes 54 series of Shares,
which represent interests in the following:
1. The Prime Money Market Fund;
2. The U.S. Treasury Securities Money Market Fund;
3. The Municipal Money Market Fund;
4. The Ohio Municipal Money Market Fund;
5. The Equity Income Fund;
6. The Mid Cap Value Fund;
7. The Mid Cap Growth Fund;
8. The Diversified Equity Fund;
9. The Small Cap Growth Fund;
10. The Large Cap Value Fund;
11. The Large Cap Growth Fund;
12. The International Equity Index Fund;
13. The Equity Index Fund;
14. The Balanced Fund;
15. The Technology Fund;
16. The Real Estate Fund;
17. The Income Bond Fund;
18. The Short-Term Bond Fund;
19. The Intermediate Bond Fund;
20. The Government Bond Fund;
21. The Ultra Short-Term Bond Fund;
22. The High Yield Bond Fund;
23. The Investor Growth Fund;
24. The Investor Growth & Income Fund;
25. The Investor Conservative Growth Fund;
26. The Investor Balanced Fund;
27. The Municipal Income Fund;
28. The Intermediate Tax-Free Bond Fund;
29. The Ohio Municipal Bond Fund;
30. The West Virginia Municipal Bond Fund;
31. The Kentucky Municipal Bond Fund;
32. The Louisiana Municipal Bond Fund;
33. The Arizona Municipal Bond Fund;
34. The Treasury Only Money Market Fund;
35. The Government Money Market Fund;
36. The Tax-Exempt Money Market Fund;
37. The Institutional Prime Money Market Fund;
38. The Treasury & Agency Fund;
39. The Small Cap Value Fund;
40. The Diversified Mid Cap Fund;
41. The Diversified International Fund;
42. The Market Expansion Index Fund;
43. The Bond Fund;
44. The Short-Term Municipal Bond Fund;
45. The Tax-Free Bond Fund;
117
<PAGE> 977
46. The Michigan Municipal Bond Fund;
47. The Michigan Municipal Money Market Fund;
48. The Cash Management Money Market Fund;
49. The Treasury Cash Management Money Market Fund;
50. The Treasury Prime Cash Management Money Market Fund;
51. The U.S. Government Securities Cash Management Money Market Fund;
52. The Municipal Cash Management Money Market Fund;
53. The U.S. Government Securities Money Market Fund;
54. The Treasury Prime Money Market Fund
Generally, the Funds of the Trust (other than the Institutional Money Market
Funds, the Money Market Funds and the Cash Management Funds) offer shares in
four separate classes: Class I Shares, Class A Shares, Class B and Class C
Shares. The Institutional Money Market Funds (except for the Cash Management
Funds) may offer Class S Shares. Certain of the Money Market Funds offer Service
Class Shares. The classes of shares currently offered by the Funds can be
found on under the topic "The Trust" at the beginning of this Statement of
Additional Information. In addition, please read the relevant Prospectuses for
the Funds for more details.
Shares have no subscription or preemptive rights and only such conversion or
exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Prospectus and this Statement of Additional
Information, the Trust's Shares will be fully paid and non-assessable. In the
event of a liquidation or dissolution of the Trust, Shares of a Fund are
entitled to receive the assets available for distribution belonging to the Fund,
and a proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets not belonging to any particular Fund
which are available for distribution.
1. Class C Shares are currently not available for purchase in all Funds of
the Trust.
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding Shares of each Fund
affected by the matter. For purposes of determining whether the approval of a
majority of the outstanding Shares of a Fund will be required in connection with
a matter, a Fund will be deemed to be affected by a matter unless it is clear
that the interests of each Fund in the matter are identical, or that the matter
does not affect any interest of the Fund. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in investment policy would be
effectively acted upon with respect to a Fund only if approved by a majority of
the outstanding Shares of such Fund. However, Rule 18f-2 also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts, and the election of Trustees may be effectively acted
upon by Shareholders of the Trust voting without regard to series.
Class A Shares, Class B Shares, Class C Shares, Service Class Shares and Class S
Shares of a Fund have exclusive voting rights with respect to matters pertaining
to the Fund's Distribution Plan.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of beneficial interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, the Trust's Declaration of Trust
provides that Shareholders shall not be subject to any personal liability for
the obligations of the Trust, and that every written agreement, obligation,
instrument, or undertaking made by the Trust shall contain a provision to the
effect that the Shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any Shareholder held personally liable solely by reason of his being or having
been a Shareholder. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any Shareholder for
any act or obligation of the Trust, and shall satisfy any judgment thereon.
Thus, the risk of a Shareholder incurring financial loss on account of
Shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
118
<PAGE> 978
The Declaration of Trust states further that no Trustee, officer, or agent of
the Trust shall be personally liable in connection with the administration or
preservation of the assets of the Trust or the conduct of the Trust's business;
nor shall any Trustee, officer, or agent be personally liable to any person for
any action or failure to act except for his own bad faith, willful misfeasance,
gross negligence, or reckless disregard of his duties. The Declaration of Trust
also provides that all persons having any claim against the Trustees or the
Trust shall look solely to the assets of the Trust for payment.
PERFORMANCE
From time to time, the Funds may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of a Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of a Fund. This figure is then
"annualized" (multiplied by 365 days and divided by the applicable number of
days in the period).
Funds with a front-end sales charge would incorporate the offering price into
the distribution yield in place of month-end net asset value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period.
Further information about the performance of each class of the Funds is
contained in the Trust's Annual Report to Shareholders for One Group Mutual
Funds. Copies of the Annual Report may be obtained without charge by calling
1-800-480-4111.
CALCULATION OF PERFORMANCE DATA
The yield for each Money Market Funds, and the Institutional Money Market Funds
was computed with respect to each class of Shares by determining the percentage
net change, excluding capital changes, in the value of an investment in one
Share of the particular class of the Fund over the base period, and multiplying
the net change by 365/7 (or approximately 52 weeks). The effective yield of each
class of each Fund represents a compounding of the yield by adding 1 to the
number representing the percentage change in value of the investment during the
base period, raising that sum to a power equal to 365/7, and subtracting 1 from
the result. No performance data is available with respect to the Tax-Exempt
Money Market Fund, the U.S. Government Securities Money Market Fund, and the
Treasury Prime Money Market Fund because those Funds had not commenced
operations as of June 30, 1999.
119
<PAGE> 979
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
INCEPTION 7-DAY YIELD
CLASS I SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................09/09/85 4.31%
Prime Money Market........................................................08/01/85 4.60%
Municipal Money Market....................................................06/04/87 3.27%
Ohio Municipal Money Market(1)............................................06/09/93 3.20%
Michigan Municipal Money Market...........................................01/31/91 3.09%
Treasury Only Money Market................................................04/16/93 4.46%
Government Money Market...................................................06/14/93 4.85%
Cash Management Money Market..............................................07/30/92 4.72%
U.S Government Securities Cash Management Money Market....................06/02/92 4.64%
Treasury Cash Management Money Market.....................................09/12/97 4.47%
Treasury Prime Cash Management Money Market...............................03/22/95 4.27%
Municipal Cash Management Money Market(1).................................08/18/97 3.48%
Institutional Prime Money Market..........................................04/19/99 4.97%
<CAPTION>
INCEPTION 7-DAY YIELD
CLASS A SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................02/18/92 4.06%
Prime Money Market........................................................02/18/92 4.35%
Municipal Money Market....................................................02/18/92 3.02%
Ohio Municipal Money Market(1)............................................01/26/93 2.95%
Michigan Municipal Money Market(1)........................................01/31/91 2.84%
Cash Management Money Market..............................................01/17/95 4.47%
U.S Government Securities Cash Management Money Market....................01/17/95 4.39%
Treasury Cash Management Money Market.....................................09/12/97 4.22%
Treasury Prime Cash Management Money Market...............................03/22/95 4.02%
Municipal Cash Management Money Market(1).................................08/18/97 3.23%
<CAPTION> INCEPTION 7-DAY YIELD
CLASS B SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................11/01/96 3.31%
Prime Money Market........................................................11/01/96 3.60%
<CAPTION> INCEPTION 7-DAY YIELD
CLASS C SHARES DATE 6/30/99
- -------------- ---- -------
<S> <C> <C>
U.S. Treasury Securities Money Market.....................................02/18/98 3.31%
</TABLE>
(1) A portion of the income may be subject to alternative minimum tax.
The tax equivalent yields for the classes of the Municipal Money Market, Ohio
Municipal Money Market, Michigan Municipal Money Market, Municipal Cash
Management Money Market and Tax-Exempt Money Market Funds are computed by
dividing that portion of the Fund's yield (with respect to a particular class)
which is tax-exempt by 1 minus a stated income tax rate and adding the product
to that portion, if any, of the yield of the Fund (with respect to a particular
class) that is not tax-exempt. The tax equivalent yields for the classes of the
Municipal Money Market Funds contained in the following paragraph were computed
based on an assumed effective federal income tax rate of 39.6%. No such data was
provided for the Tax-Exempt Money Market Fund, the Treasury Prime Money Market
Fund, and the U.S. Government Securities Money Market Fund because they had not
commenced operations as of June 30, 1999. The tax equivalent effective yield for
the classes of the Municipal Money Market Fund, Ohio Municipal Money Market
Fund, the Michigan Money Market Fund, Municipal Cash Management Money Market and
Tax-Exempt Money Market Funds are computed by dividing that portion of the
effective yield of the Fund (with respect to a particular class) which is
tax-exempt by 1 minus a stated income tax rate and adding the product to that
portion, if any, of the effective yield of the Fund (with respect to a
particular class) that is not tax-exempt.
120
<PAGE> 980
TAX-EQUIVALENT YIELD
<TABLE>
<CAPTION>
7 DAY
YIELD
CLASS I SHARES 06/30/99 28% TAX 39.6% TAX
- -------------- -------- ------- ---------
<S> <C> <C> <C>
Municipal Money Market ..................................... 3.27% 4.54% 5.41%
Ohio Municipal Money Market................................. 3.20% 4.44% 5.30%
Michigan Municipal Money Market*............................ 3.09% 4.29% 5.12%
Municipal Cash Management Money Market*..................... 3.48% 4.83% 5.76%
<CAPTION> 7 DAY
CLASS A SHARES YIELD 28% TAX 39.6% TAX
- -------------- ----- ------- ---------
Municipal Money Market...................................... 3.02% 4.19% 5.00%
Ohio Municipal Money Market................................. 2.95% 4.10% 4.88%
Michigan Municipal Money Market*............................ 2.84% 3.94% 4.70%
Municipal Cash Management Money Market*..................... 3.23% 4.49% 5.35%
</TABLE>
* Prior to the consolidation with the Fund, the Predecessor Fund had a
fiscal year end of 12/31/98.
The performance of the Funds may be compared in publications to the performance
of various indices and investments (such as other mutual funds) for which
reliable performance data is available, as well as averages, performance
rankings or other information prepared by recognized mutual fund statistical
services, as set forth below.
Performance information showing a Fund's total return and/or 30-day yield with
respect to a particular class may be presented from time to time in advertising
and sales literature regarding the Equity Funds, the Bond Funds, the Funds of
Funds, and the Municipal Bond Funds. A 30-day yield is calculated by dividing
the net investment income per-share earned during the 30-day base period by the
maximum offering price per share on the last day of the period, according to the
following formula:
a-b
---
30-Day Yield = 2[(cd +1)6-1]
In the above formula, "a" represents dividends and interest earned by a
particular class during the 30-day base period; "b" represents expenses accrued
to a particular class for the 30-day base period (net of reimbursements); "c"
represents the average daily number of Shares of a particular class outstanding
during the 30-day base period that were entitled to receive dividends; and "d"
represents the maximum offering price per share of a particular class on the
last day of the 30-day base period.
From time to time the tax equivalent 30-day yield of a particular class of a
Municipal Bond Fund may be presented in advertising and sales literature. The
tax equivalent 30-day yield will be computed by dividing that portion of a
Fund's yield (respecting a particular class) which is tax-exempt by 1 minus a
stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund (respecting a particular class) that is not tax-exempt. The
tax equivalent 30-day yields for a Municipal Bond Fund (respecting a particular
class) will, unless otherwise noted, be computed based on an assumed effective
federal income tax rate of 31%.
A Fund's respective cumulative total return and average annual total return was
determined by calculating the change in the value of a hypothetical $1,000
investment in a particular class of the Fund for each of the periods shown.
Cumulative total return for a particular class of a Fund is computed by
determining the rate of return
121
<PAGE> 981
over the applicable period that would equate the initial amount invested to the
ending redeemable value of the investment. The cumulative return is calculated
as the total dollar increase or decrease in the value of an account assuming
reinvestment of all distributions divided by the original initial investment.
The average annual return for a particular class of a Fund is computed by
determining the average annual compounded rate of return over the applicable
period that would equate the initial amount invested to the ending redeemable
value of the investment. The ending redeemable value includes dividends and
capital gain distributions reinvested at net asset value. The resulting
percentages indicated the positive or negative investment results that an
investor would have experienced from changes in share price and reinvestment of
dividends and capital gains distributions.
Performance information showing a Fund's and/or particular Class's distribution
rate may be presented from time to time in advertising and sales literature
regarding the Bond Funds and Equity Funds. The distribution rate is calculated
as follows:
distribution yield = a/(b) x 365
-----------
c
In the formula, "a" represents dividends distributed by a particular class
during that period; "b" represents month end offer price or net asset value for
a particular class; "c" represents the number of days in the period being
calculated. "365" is the number of days in a year, used to annualize the
distribution yield.
Performance will fluctuate from time to time and is not necessarily
representative of future results. Accordingly, a Fund's performance may not
provide for comparison with bank deposits or other investments that pay a fixed
return for a stated period of time. Performance is a function of a Fund's
quality, composition, and maturity, as well as expenses allocated to the Fund.
Fees imposed upon customer accounts at a bank, with regard to Class I Shares and
Service Class Shares, or a Participating Organization, with regard to Class A
and Class B Shares, will reduce a Fund's effective yield to customers.
Performance data for the Funds through June 30, 1999 (calculated as described
above) is as follows:
122
<PAGE> 982
CLASS I SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 09/04/90 4.67% 6.00% 6.21% 6.76% 5.66%
Intermediate Tax-Free(2) 09/04/90 1.71% 5.70% 5.84% 6.34% 4.45%
Ohio Municipal Bond(2) 07/02/91 1.84% 5.37% 5.57% 6.20% 4.35%
Municipal Income(2) 02/09/93 3.06% 6.19% 6.11% 5.47% 4.97%
Government Bond 02/08/93 1.94% 6.89% 7.27% 5.76% 6.00%
Ultra Short-Term Bond 02/02/93 4.66% 5.93% 5.71% 5.10% 5.41%
Kentucky Municipal Bond(2) 03/12/93 2.05% 5.27% 5.77% 4.96% 4.18%
Louisiana Municipal Bond(2) 12/29/89 1.92% 5.09% 5.46% 6.29% 4.24%
West Virginia Municipal Bond(1),(2) 12/31/83 1.71% 5.44% 5.31% 6.09% 7.01% 4.29%
Arizona Municipal Bond(2) 11/30/79 1.94% 5.24% 5.34% 6.24% 7.06% 4.32%
Treasury & Agency(1) 04/30/88 3.54% 6.12% 6.71% 6.87% 7.04% 5.99%
Income Bond(4) 03/05/93 1.94% 6.51% 7.15% 5.90% 6.14%
Intermediate Bond(5) 12/31/83 3.97% 7.15% 7.57% 7.60% 8.52% 6.37%
Bond(5) 12/31/83 3.25% 7.77% 8.44% 8.38% 9.59% 7.06%
Short-Term Municipal Bond(5) 05/04/98 3.21% 3.85% 3.80%
Tax-Free Bond(6) 03/01/88 1.72% 6.03% 6.89% 7.58% 7.86% 4.49%
Michigan Municipal Bond(2) 02/01/93 1.75% 6.08% 6.46% 5.84% 4.52%
</TABLE>
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value 03/02/89 3.82% 17.09% 17.47% 12.46% 13.07%
Equity Income 07/02/87 11.29% 21.52% 22.02% 15.55% 13.76%
Equity Index 07/02/91 22.50% 28.76% 27.50% % 20.00%
Large Cap Value 03/01/91 17.26% 21.88% 20.29% % 14.99%
Mid Cap Growth 03/02/89 28.39% 27.37% 25.26% 19.04% 19.29%
International Equity Index(3) 10/28/92 11.27% 11.80% 10.12% % 12.61%
Balanced 04/05/93 12.74% 18.27% 17.12% % 13.56% 2.65%
Large Cap Growth 02/28/92 28.78% 32.52% 27.18% % 21.06%
Small Cap Growth 07/01/91 -0.72% 11.65% 13.57% % 14.71%
Diversified Equity 12/29/89 20.72% 28.20% 24.33% % 18.26%
Small Cap Value(4)(5) 06/30/72 -13.26% 11.70% 14.38% 13.71% 9.76%
Diversified Mid Cap(5) 12/31/83 5.47% 17.84% 17.14% 15.20% 14.69%
Diversified International(3)(5) 04/30/86 11.33% 10.60% 9.52% 7.44% 9.68%
Market Expansion Index(5) 07/31/98 14.90%
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<CAPTION> 30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 12/10/96 7.01% 10.11% NA
Investor Balanced 12/10/96 11.16% 14.44% NA
Investor Growth & Inc. 12/10/96 14.11% 17.89% NA
Investor Growth 12/10/96 16.84% 21.43% NA
</TABLE>
123
<PAGE> 983
CLASS A SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 02/18/92 4.41% 5.73% 5.94% 5.66% 5.23%
With Sales Charge 1.32% 4.67% 5.29% 5.22%
Intermediate Tax-Free(2) 02/18/92 1.45% 5.41% 5.59% 5.44% 4.01%
With Sales Charge -3.07% 3.81% 4.63% 4.78%
Ohio Municipal Bond(2) 02/18/92 1.59% 5.10% 5.31% 5.65% 3.86%
With Sales Charge -2.96% 3.49% 4.34% 4.98%
Municipal Income(2) 02/23/93 2.80% 5.94% 5.87% 5.21% 4.46%
With Sales Charge -1.85% 4.31% 4.89% 4.46%
Government Bond 03/05/93 1.69% 6.62% 7.02% 5.26% 5.48%
With Sales Charge -2.92% 5.00% 6.04% 4.50%
Ultra Short-Term Bond 03/10/93 4.40% 5.71% 5.48% 4.88% 4.99%
With Sales Charge 1.22% 4.65% 4.85% 4.37%
Kentucky Municipal Bond(2) 01/20/95 1.79% 5.01% 5.48% 4.74% 3.73%
With Sales Charge -2.78% 3.43% 4.51% 3.98%
Louisiana Municipal Bond(2) 12/29/89 1.67% 4.83% 5.35% 6.23% 3.82%
With Sales Charge -2.87% 3.23% 4.38% 5.72%
West Virginia Municipal Bond(1,2) 12/31/83 1.37% 5.24% 5.09% 5.85% 6.77% 3.82%
With Sales Charge -3.21% 3.65% 4.13% 5.36% 6.45%
Arizona Municipal Bond(1,2) 11/30/79 1.69% 4.48% 4.80% 5.83% 6.71% 3.91%
With Sales Charge -2.84% 2.90% 3.84% 5.35% 6.47%
Treasury & Agency(1) 04/30/88 3.30% 6.06% 6.54% 6.67% 6.83% 5.55%
With Sales Charge 0.22% 4.98% 5.89% 6.33% 6.54%
Bond(5) 12/31/83 2.99% 7.50% 8.28% 8.30% 9.54% 6.49%
With Sales Charge -1.62% 5.87% 7.28% 7.80% 9.22%
Income Bond(4) 03/05/93 1.72% 6.28% 6.87% 5.71% 5.65%
With Sales Charge -2.84% 4.65% 5.89% 4.95%
Intermediate Bond(5) 12/31/83 3.72% 6.85% 7.38% 7.48% 8.44% 5.79%
With Sales Charge -0.91% 5.23% 6.39% 6.99% 8.12%
Short-Term Municipal Bond(5) 05/04/98 3.06% 3.50% 3.45%
With Sales Charge -0.02% 0.81%
Tax-Free Bond(6) 03/01/88 1.46% 5.76% 6.59% 7.29% 7.58% 4.02%
With Sales Charge -3.14% 4.14% 5.62% 6.80% 7.14%
Michigan Municipal Bond(2) 02/01/93 1.58% 5.85% 6.32% 5.73% 3.97%
With Sales Charge -3.03% 4.24% 5.3%5 4.97%
High Yield Bond 11/13/98 3.53% 8.66%
With Sales Charge -1.12%
</TABLE>
124
<PAGE> 984
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value 02/18/92 3.70% 16.82% 17.13% 14.07%
With Sales Charge -1.76% 14.73% 15.88% 13.23%
Equity Income 02/18/92 10.94% 21.14% 21.70% 16.53%
With Sales Charge 5.12% 18.98% 20.39% 15.68%
Equity Index 02/18/92 22.22% 28.41% 27.15% 19.82%
With Sales Charge 15.82% 26.13% 25.80% 18.94%
Large Cap Value 02/18/92 17.39% 21.75% 20.00% 14.45%
With Sales Charge 11.22% 19.59% 18.71% 13.62%
Mid Cap Growth 02/18/92 27.87% 27.06% 24.97% 17.43%
With Sales Charge 21.15% 24.80% 23.63% 16.57%
International Equity Index(3) 04/23/93 11.21% 11.61% 9.93% 10.37%
With Sales Charge 5.35% 9.62% 8.75% 9.41%
Balanced 04/02/93 12.45% 17.94% 16.80% 13.25% 2.28%
With Sales Charge 6.51% 15.83% 15.56% 12.28%
Large Cap Growth 02/22/94 28.43% 32.11% 26.77% 24.57%
With Sales Charge 21.70% 29.75% 25.42% 23.33%
Small Cap Growth 07/01/91 -0.53% 11.66% 13.48% 14.66%
With Sales Charge -5.78% 9.65% 12.27% 13.90%
Diversified Equity 12/29/89 20.36% 27.83% 24.09% 18.14%
With Sales Charge 14.02% 25.54% 22.76% 17.47%
Small Cap Value(4)(5) 06/30/72 -13.44% 11.24% 13.19% 13.19% 9.19%
With Sales Charge -17.96% 9.25% 12.70% 12.58% 8.96%
Diversified Mid Cap(5) 12/31/83 5.21% 17.54% 16.96% 15.11% 14.63%
With Sales Charge -0.32% 15.44% 15.71% 14.49% 14.23%
Diversified International 04/30/86 11.06% 10.29% 9.32% 7.35% 9.61%
With Sales Charge 5.19% 8.33% 8.14% 6.77% 9.16%
Market Expansion Index 07/31/98 14.66%
With Sales Charge 8.69%
</TABLE>
125
<PAGE> 985
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative
Growth 12/10/96 6.77% 9.66%
With Sales Charge 1.18% 7.38%
Investor Balanced 12/10/96 10.70% 14.07%
With Sales Charge 4.85% 11.70%
Investor Growth & Income 12/10/96 13.62% 17.89%
With Sales Charge 7.68% 15.45%
Investor Growth 12/10/96 16.40% 20.83%
With Sales Charge 10.27% 18.33%
</TABLE>
CLASS B SHARES
FIXED INCOME
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond 01/14/94 4.02% 5.24% 5.43% 4.62% 4.88%
With Sales Charge 1.05% 4.64% 5.43% 4.62%
Intermediate Tax-Free(2) 01/14/94 0.80% 4.77% 4.93% 3.64% 3.52%
With Sales Charge -3.99% 3.85% 4.60% 3.49%
Ohio Muni Bond(2) 01/14/94 1.01% 4.46% 4.67% 3.49% 3.38%
With Sales Charge -3.84% 3.54% 4.33% 3.34%
Muni Income(2) 01/14/94 2.14% 5.22% 5.18% 4.35% 4.04%
With Sales Charge -2.77% 4.31% 4.85% 4.20%
Government Bond 01/14/94 1.14% 5.98% 6.39% 4.85% 5.07%
With Sales Charge -3.68% 5.08% 6.07% 4.70%
Ultra Short Term 01/14/94 3.99% 5.17% 4.98% 4.54% 4.66%
With Sales Charge 1.02% 4.57% 4.98% 4.54%
Kentucky Muni(2) 03/16/95 1.05% 4.33% 4.85% 3.28%
With Sales Charge -3.81% 3.40% 4.45%
Louisiana Muni(2) 09/16/94 1.11% 4.20% 4.62% 3.32%
With Sales Charge -3.75% 3.27% 4.26%
W.V. Muni Bond(1,2) 12/31/83 0.80% 4.62% 4.45% 5.19% 6.09% 3.34%
With Sales Charge -4.04% 3.69% 4.11% 5.19% 6.09%
Arizona Muni(1,2) 11/30/79 1.04% 2.78% 3.48% 4.83% 5.86% 3.32%
With Sales Charge -3.76% 1.83% 3.13% 4.83% 5.86%
Treas. & Agency(1) 04/30/88 2.89% 5.49% 6.01% 6.13% 6.29% 5.21%
With Sales Charge -0.03% 4.89% 6.01% 6.13% 6.29%
Income Bond(4) 03/05/93 0.86% 5.48% 6.23% 5.21% 5.23%
With Sales Charge -3.89% 4.59% 5.91% 5.21%
Intermediate Bond(5) 12/31/83 2.92% 6.21% 6.99% 7.29% 8.32% 5.52%
With Sales Charge -1.97% 5.31% 6.69% 7.29% 8.32%
Bond(5) 08/26/96 2.23% 6.87% 7.92% 8.11% 9.42% 6.07%
With Sales Charge -2.61% 5.99% 7.62% 8.11% 9.42%
Short-Term Municipal Bond 05/04/98 2.38% 2.92% 2.78%
With Sales Charge -0.61% 0.33%
Tax-Free Bond Fund(6) 04/04/95 0.76% 4.98% 5.15% 3.52%
With Sales Charge -4.08% 4.07% 4.74%
Michigan Municipal Bond 02/01/93 0.80% 5.06% 5.84% 5.37% 3.49%
With Sales Charge -4.05% 4.14% 5.52% 5.37%
High Yield Bond 11/13/98 3.30% 8.39%
With Sales Charge -1.64%
EQUITY FUNDS
Mid Cap Value 01/14/94 2.76% 15.88% 16.29% 13.76%
With Sales Charge -1.63% 15.13% 16.07% 13.65%
Equity Income 01/14/94 10.18% 20.29% 20.83% 18.18%
With Sales Charge 5.18% 19.59% 20.64% 18.10%
Equity Index 01/14/94 21.32% 27.49% 26.21% 22.48%
With Sales Charge 16.32% 26.87% 26.05% 22.40%
Large Cap Value 01/14/94 16.30% 20.71% 19.21% 16.71%
With Sales Charge 11.30% 20.02% 19.02% 16.62%
Mid Cap Growth 01/14/94 26.96% 26.04% 23.99% 19.67%
With Sales Charge 21.96% 25.40% 23.82% 19.59%
International Equity Index 01/14/94 10.15% 10.65% 8.97% 8.82%
With Sales Charge 5.15% 9.83% 8.69% 8.70%
Balanced 01/14/94 11.59% 17.07% 15.97% 13.26% 1.67%
With Sales Charge 6.59% 16.34% 15.75% 13.15%
Large Cap Growth 01/14/94 27.54% 31.18% 25.96% 23.40%
With Sales Charge 22.54% 30.60% 25.80% 23.33%
Small Cap Growth 09/12/94 -1.69% 10.65% 11.97%
With Sales Charge -6.05% 9.86% 11.70%
Diversified Equity 09/09/94 19.52% 26.84% 22.49%
With Sales Charge 14.52% 26.21% 22.29%
Small Cap Value(4,5) 06/30/72 -13.99% 10.62% 13.29% 12.88% 9.08%
With Sales Charge -18.17% 9.80% 13.04% 12.88% 9.08%
Diversified Mid Cap(5) 12/31/83 4.37% 17.04% 16.66% 14.98% 14.54%
With Sales Charge -0.63% 16.30% 16.44% 14.98% 14.54%
Diversified International(5) 04/30/86 10.33% 9.31% 8.78% 7.08% 9.40%
With Sales Charge 5.33% 8.47% 8.49% 7.08% 9.40%
Market Expansion 07/31/98 15.59%
With Sales Charge 10.59%
FUND OF FUNDS
Investor Conservative Growth 12/10/96 6.10% 9.00%
With Sales Charge 1.10% 7.96%
Investor Balanced 12/10/96 10.01% 13.42%
With Sales Charge 5.01% 12.45%
Investor Growth & Inc. 12/10/96 12.93% 17.02%
With Sales Charge 7.93% 16.09%
Investor Growth 12/10/96 15.57% 20.57%
With Sales Charge 10.57% 19.69%
</TABLE>
CLASS C SHARES
FIXED INCOME FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Income(2)) 11/04/97 2.24% 6.35% 3.93%
With Sales Charge 1.26% 6.35%
Intermediate Bond 03/22/99 -0.42% 5.53%
With Sales Charge -1.40%
Government Bond 03/22/99 -1.35% 4.83%
With Sales Charge -2.32%
High Yield Bond 03/22/99 -0.56% 8.33%
With Sales Charge -1.53%
</TABLE>
125
<PAGE> 986
EQUITY FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income 11/04/97 10.24% 16.39%
With Sales Charge 9.24% 16.39%
Equity Index 11/04/97 21.52% 26.33%
With Sales Charge 20.52% 26.33%
Mid Cap Growth 11/04/97 27.57% 25.63%
With Sales Charge 26.57% 25.63%
International Equity
Index(3) 11/04/97 10.78% 16.60%
With Sales Charge 9.78% 16.60%
Large Cap Growth 11/04/97 27.52% 34.29%
With Sales Charge 26.52% 34.29%
Small Cap Growth 11/04/97 -1.75% 0.77%
With Sales Charge -2.62% 0.77%
Diversified Equity 11/04/97 19.57% 24.97%
With Sales Charge 18.57% 24.97%
</TABLE>
FUNDS OF FUNDS
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/99
<TABLE>
<CAPTION>
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
---- ------ ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative
Growth 07/01/97 6.00% 8.72%
With Sales Charge 5.00% 8.72%
Investor Balanced 07/01/97 10.04% 12.84%
With Sales Charge 9.04% 12.84%
Investor Growth & Income 07/01/97 12.94% 16.00%
With Sales Charge 11.94% 16.00%
Investor Growth 07/01/97 15.65% 19.01%
With Sales Charge 14.65% 19.01%
</TABLE>
(1) The quoted performance of these funds ("MUTUAL FUNDS") advised by Banc
One Investment Advisors Corporation includes performance of certain
collective trust fund ("COMMINGLED") accounts for periods dating back
to 12/31/83 for the West Virginia Municipal Bond Fund, 11/30/79 for the
Arizona Municipal Bond, Fund and 4/30/88 for the Treasury & Agency
Fund. Prior to the Mutual Funds' commencement of operations on 1/20/97,
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
126
<PAGE> 987
transferred to the predecessors of the Small Cap Value Fund and the
Income Bond Fund.
(5) Performance of the predecessor to the Small Cap Value Fund for periods
prior to January 27, 1995 is represented by performance of a common
trust fund managed by First National Bank of Chicago before the
effective date of the registration statement of the Fund. Performance
of the predecessor to the Diversified Mid Cap Fund (6/1/91), the
Diversified International Fund (12/3/94), the Intermediate Bond Fund
(6/1/91), the Bond Fund (6/1/91), and Short-Term Municipal Bond Fund
(5/04/98) for periods to the dates shown here (inception of the Funds
under 1940 Act) is represented by performance of certain common trust
funds managed by NBD before the effective date of the registration
statement of these Funds. The common trust funds were not registered
under the 1940 Act and were not subject to certain restrictions that
are imposed by the 1940 Act and Sub-Chapter M of the Code. If the
common trust funds had been registered under the 1940 Act, performance
may have been adversely affected. The common trust funds did not charge
any expenses. Performance of the common trust funds (other than the
common trust fund that is the predecessor to the Diversified
International Fund) has been restated to reflect the maximum operating
expenses charged (absent waivers and expense reimbursements) by the
predecessor Prairie Fund upon its inception on January 27, 1995 in the
case of the Small Cap Value Fund or by the other Funds upon their
inception, as the case may be. Performance of the common trust fund
that is the predecessor to the Diversified International Fund has been
restated to reflect actual operating expenses charged after waivers and
expense reimbursements.
(6) Performance for periods prior to September 14, 1996 is represented by
the performance of the Prairie Municipal Bond Fund. On such date, the
assets and liabilities of the Prairie Municipal Bond Fund were
transferred to the predecessor of the Tax-Free Bond Fund.
The above quoted performance for the Arizona Municipal Bond Fund, the
West Virginia Municipal Bond Fund, and the Treasury & Agency Fund,
respectively, includes the performance for the Arizona Municipal Bond
Investment Fund, the West Virginia Municipal Bond Investment Fund and
the Treasury Only Government Based Investment Trust, common trust funds
managed by Banc One Investment Advisors (collectively the "CIFs"). The
quoted performance of these Funds include performance of the
corresponding CIFs for periods dating back to December 31, 1983 for the
West Virginia Municipal Bond Fund, November 30, 1979 for the Arizona
Municipal Bond Fund and April 30, 1988 for the Treasury & Agency Fund.
Because the management of the Funds is materially identical as the
CIFs, the quoted performance of the Funds will include the performance
of the CIFs for the periods prior to January 20, 1997, the
effectiveness of the Trust's registration statement as it relates to
the Funds. The quoted performance will be adjusted to reflect the
deduction of estimated current fees of the Funds on a class by class
basis absent any waivers. The CIFs were not registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and
therefore were not subject to certain investment restrictions,
limitations, and diversification requirements that are imposed by the
1940 Act and the Code. If the CIFs had been so registered, their
performance might have been adversely affected.
In addition, the performance of each class of a Fund may from time to
time be compared to that of other mutual funds tracked by mutual fund
rating services, to that of broad groups of comparable mutual funds or
to that of unmanaged indices that may assume investment of dividends
but do not reflect deductions for administrative and management costs.
Further, the performance of each class of a Fund may be compared to
other funds or to relevant indices that may calculate total return
without reflecting sales charges; in which case, a Fund may advertise
its total return in the same manner. If reflected, sales charges would
reduce these total return calculations.
The Money Market and Institutional Money Market Funds may quote actual
total return performance in advertising and other types of literature
compared to indices or averages of alternative financial products
available to prospective
130
<PAGE> 988
investors. The performance comparisons may include the average return
of various bank instruments, some of which may carry certain return
guarantees offered by leading banks and thrifts, as monitored by the
BANK RATE MONITOR, and those of corporate and government security price
indices of various durations prepared by Shearson Lehman Brothers,
Solomon Brothers, Inc. and the IBC/Donoghue organization. These indices
are not managed for any investment goals.
The Money Market and Institutional Money Market Funds may also use
comparative performance information computed by and available from
certain industry and general market research and publications, such as
Lipper Analytical Services, Inc.
Statistical and performance information compiled and maintained by CDA
Technologies, Inc. and Interactive Data Corporation may also be used.
CDA is a performance evaluation service that maintains a statistical
data base of performance, as reported by a diverse universe of
independently-managed mutual funds. Interactive Data Corporation is a
statistical access service that maintains a data base of various
industry indicators, such as historical and current price/earning
information and individual stock and fixed income price and return
information.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal
Reserve (Bulletin H. 15), may also be used. Also current rate
information on municipal debt obligations of various durations, as
reported daily by the Bond Buyer, may also be used. The BOND BUYER is
published daily and is an industry-accepted source for current
municipal bond market information.
Comparative information on the Consumer Price Index may also be
included. This Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation. It
indicates the cost fluctuations of a representative group of consumer
goods. It does not represent a return on investment.
THE EQUITY, BOND AND MUNICIPAL BOND FUNDS AND THE FUNDS OF FUNDS may
quote actual total return performance from time to time in advertising
and other types of literature compared to results reported by the Dow
Jones Industrial Average.
The Dow Jones Industrial Average is an industry-accepted unmanaged
index of generally conservative securities used for measuring general
market performance. The performance reported will reflect the
reinvestment of all distributions on a quarterly basis and market price
fluctuations. The index does not take into account any brokerage
commissions or other fees. Comparative information on the Consumer
Price Index may also be included.
The Equity Funds, the Bond Funds, the Municipal Bond Funds and the
Funds of Funds may also promote the yield and/or total return
performance and use comparative performance information computed by and
available from certain industry and general market research and
publications, such as Lipper Analytical Services, Inc.; they may also
use indices, including those identified in the Prospectuses, such as
the Standard & Poor's 400 Composite Stock Index, the Standard & Poor's
500 Composite Stock Index, the Standard & Poor's 600 Composite Stock
Index, the Russell 2000, or the Morgan Stanley International European,
Asian and Far East Gross Domestic Product Index for performance
comparison. Statistical and performance information compiled and
maintained by CDA Technologies, Inc. and Interactive Data Corporation
may also be used.
THE BOND FUNDS, THE FUNDS OF FUNDS AND THE BALANCED FUND may quote
actual yield and/or total return performance in advertising and other
types of literature compared to indices or averages of alternative
financial products available to prospective investors. The performance
comparisons may include the average return of various bank instruments,
some of which may carry certain return
131
<PAGE> 989
guarantees offered by leading banks and thrifts as monitored by Bank
Rate Monitor, and those of corporate bond and government security price
indices of various durations. Comparative information on the Consumer
Price Index may also be included.
The Bond Funds, the Funds of Funds and the Balanced Fund may also use
comparative performance information computed by and available from
certain industry and general market research and publications, as well
as statistical and performance information, compiled and maintained by
CDA Technologies, Inc. and Interactive Data Corporation.
The Bond Funds, the Funds of Funds and the Balanced Fund may also use
current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal
Reserve (Bulletin H. 15). In addition, current rate information on
municipal debt obligations of various durations, as reported daily by
the Bond Buyer, may also be used.
132
<PAGE> 990
MISCELLANEOUS
The Trust is not required to hold a meeting of Shareholders for the purpose of
electing Trustees except that (i) the Trust is required to hold a Shareholders'
meeting for the election of Trustees at such time as less than a majority of the
Trustees holding office have been elected by Shareholders and (ii) if, as a
result of a vacancy on the Board of Trustees, less than two-thirds of the
Trustees holding office have been elected by the Shareholders, that vacancy may
only be filled by a vote of the Shareholders. In addition, Trustees may be
removed from office by a written consent signed by the holders of Shares
representing two-thirds of the outstanding Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of Shares representing not less than 20% of the outstanding Shares
of the Trust. Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
As used in the Trust's Prospectuses and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Trust upon the issuance or sale of Shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of the Trust not readily identified as
belonging to a particular Fund that are allocated to that Fund by the Trust's
Board of Trustees. The Board of Trustees may allocate such general assets in any
manner it deems fair and equitable. It is anticipated that the factor that will
be used by the Board of Trustees in making allocations of general assets to
particular Funds will be the relative net asset values of the respective Funds
at the time of allocation. Assets belonging to a particular Fund are charged
with the direct liabilities and expenses in respect of that Fund, and with a
share of the general liabilities and expenses of the Trust not readily
identified as belonging to a particular Fund that are allocated to that Fund in
proportion to the relative net asset values of the respective Funds at the time
of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Trust to particular Funds will be determined by
the Board of Trustees of the Trust and will be in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Trust as to the timing of the allocation of general liabilities and expenses and
as to the timing and allocable portion of any general assets with respect to a
particular Fund are conclusive. As used in the Trust's Prospectuses and in this
Statement of Additional Information, a "vote of a majority of the outstanding
Shares" of the Trust, a particular Fund, or a particular class of Shares of a
Fund, means the affirmative vote of the lesser of (a) more than 50% of the
outstanding Shares of the Trust, such Fund, or such class of Shares of such
Fund, or (b) 67% or more of the Shares of the Trust, such Fund, or such class of
Shares of such Fund present at a meeting at which the holders of more than 50%
of the outstanding Shares of the Trust, such Fund, or such class of Shares of
such Fund are represented in person or by proxy.
The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Trust.
The Prospectus and this Statement of Additional Information omit certain of the
information contained in the Registration Statement filed with the Securities
and Exchange Commission. Copies of such information may be obtained from the
Commission upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an offering
of the securities herein described in any State in which such offering may not
lawfully be made. No salesman, dealer, or other person is authorized to give any
information or make any representation other than those contained in the
Prospectus and Statement of Additional Information.
133
<PAGE> 991
As of October 4, 1999, Bank One Corporation, One First National Plaza, Chicago,
Illinois 60670 (a Delaware Corporation) through Bank Subsidiaries, acting on
behalf of their underlying accounts, held of record substantially all of the
Class I Shares of the Trust, and possessed voting or investment power as
follows:
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL
FUND
FUND OWNERSHIP
- ---- ---------
<S> <C>
Large Cap Growth Fund 85.84%
Mid Cap Value Fund 79.50%
Mid Cap Growth Fund 72.20%
Income Bond Fund 86.19%
Intermediate Tax-Free Bond Fund 95.61%
Prime Money Market Fund 49.29%
U.S. Treasury Securities Money Market Fund 18.52%
Municipal Money Market Fund 77.80%
Equity Income Fund 91.96%
Equity Index Fund 85.28%
Large Cap Value Fund 78.45%
Ohio Municipal Bond Fund 95.08%
Short-Term Bond Fund 88.48%
International Equity Index Fund 87.09%
Balanced Fund 70.15%
Ohio Municipal Money Market Fund 58.62%
Municipal Income 97.36%
Kentucky Municipal Bond Fund 94.08%
Government Bond Fund 83.75%
Ultra Short-Term Bond Fund 76.92%
Louisiana Municipal Bond Fund 85.17%
Diversified Equity Fund 76.94%
Small Cap Growth Fund 82.09%
Intermediate Bond Fund 91.15%
Arizona Municipal Bond Fund 95.75%
West Virginia Municipal Bond Fund 99.36%
Investor Growth Fund 53.16%
Investor Growth & Income Fund 45.89%
Investor Balanced Fund 55.45%
Investor Conservative Growth Fund 62.10%
Treasury Only Money Market Fund 15.93%
Government Money Market Fund 16.50%
Treasury & Agency Fund 96.38%
High Yield Bond Fund 54.08%
Bond Fund 78.03%
Cash Management Money Market Fund 60.55%
Diversified Mid Cap Fund 80.65%
Diversified International Fund 89.93%
Institutional Prime Money Market Fund 38.74%
Market Expansion Index Fund 96.89%
Michigan Municipal Bond Fund 99.93%
Michigan Municipal Money Market Fund 70.60%
Small Cap Value Fund 91.71%
Short-Term Municipal Bond Fund 99.53%
Tax-Free Bond Fund 97.95%
Treasury Cash Management Money Market Fund 6.70%
Treasury Prime Cash Management Money Market Fund 2.51%
US Government Securities Cash Management Money Market Fund 1.58%
Municipal Cash Management Money Market Fund 78.02%
</TABLE>
As a result, Bank One Corporation may be deemed to be a "controlling person" of
Class I Shares of each of the aforementioned Funds (other than the Government
Money Market Fund, the Treasury Only Money Market Fund, the U.S. Treasury
Securities Money Market Fund, the Treasury Cash Management Money Market Fund,
the Treasury Prime Cash Management Money Market Fund, and the U.S. Government
Securities Cash Management Money Market Fund) under the Investment Company
Act of 1940.
In addition, as of October 4, 1999, the following persons were the beneficial
owners of more than 25% of the outstanding Shares of the following class of
Shares of the following Funds:
131
<PAGE> 992
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 30.98% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Arizona Municipal Bond Fund 99.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Balanced Fund 89.81% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation Balanced Fund 26.46% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Strafe & Co. Bond Fund 79.07% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Bank NA Cash Management Money Market 40.45% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Bank One Cash Management Money Market 35.58% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road, Suite MI1-8217 Class A
Belleville, MI 48111-1632
Strafe & Co. Cash Management Money Market 76.93% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
132
<PAGE> 993
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Diversified Equity Fund 79.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Services Co Diversified International 97.11% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class C
Strafe & Co. Diversified International 90.82% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
State Street Bank & Trust Co. Diversified Mid Cap Fund 47.78% Record
Cust for the IRA of Class C
L. Rita Kincaid
561 Westbury Woods Ct.
Westerville, OH 43081-7705
State Street Bank & Trust Co. Diversified Mid Cap Fund 42.53% Record
Cust for the IRA of Class C
L. Rita Kincaid
561 Westbury Woods Ct.
Westerville, OH 43081-7705
State Street Bank & Trust Co. Mid Cap Value Fund 46.10% Record &
Cust for the IRA of Yvonne H. Clarke Class C Beneficial
33 Jordan Rd.
Hastings HDSN, NY 10706-3919
Strafe & Co Mid Cap Value Fund 82.64% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
133
<PAGE> 994
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp FBO Mid Cap Growth Fund 87.62% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Mid Cap Growth Fund 80.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co Income Bond Fund 88.71% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Institutional Prime Money 55.29% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Pershing As Agent - Omnibus Account Prime Money Market Fund 37.22% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Strafe & Co Prime Money Market Fund 74.17% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
134
<PAGE> 995
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.69% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Pershing As Agent - Omnibus Account US Treasury Securities Money 26.97% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc US Treasury Securities Money 26.62% Record
Fbo Bank One Texas Sweep Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Donaldson Lufkin Jenrette US Treasury Securities Money 55.73% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co (N) US Treasury Securities Money 77.72% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent-Omnibus Account US Treasury Securities Money 96.07% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Service Class
1 Pershing Plz
Jersey City, NJ 07399-0001
</TABLE>
135
<PAGE> 996
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent - Omnibus Account Municipal Money Market Fund 47.05% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc Municipal Money Market Fund 25.92% Record
FBO Bank One Corporate Sweep Class A
Attn: Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Municipal Money Market Fund 96.13% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Pershing As Agent-Omnibus Account Municipal Money Market Fund 92.73% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Strafe & Co Equity Income Fund 94.13% 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 59.75% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
136
<PAGE> 997
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Equity Index Fund 93.61% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co Large Cap Growth Fund 89.90% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Kemper Service Company Large Cap Value Fund 37.38% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting
7th Floor, 811 Main Street
Kansas City, MO 64105-2005
Donaldson Lufkin Jenrette Large Cap Value Fund 34.88% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Large Cap Value Fund 79.66% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Ohio Municipal Bond Fund 91.37% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
137
<PAGE> 998
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp Fbo International Equity Index 80.79% Record
The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Strafe & Co. International Equity Index 88.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Short-Term Bond Fund 90.59% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Louisiana Municipal Bond Fund 94.74% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Small Cap Growth Fund 81.34% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Small Cap Value Fund 44.63% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Small Cap Value Fund 31.60% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Small Cap Value Fund 92.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
138
<PAGE> 999
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Tax-Free Bond Fund 99.56% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Treasury & Agency Fund 99.84% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Bank NA Treasury Cash Management 40.05% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Bank One Treasury Cash Management 31.57% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Suite MI1-8217
Belleville, MI 48111-1632
First National Bank of Chicago Treasury Cash Management 70.80% Record
Corporate Trust Administration Money Market Fund
Attn: Cash Sweep Coordinator Class I
1 F&B Plaza, Suite 0126
Chicago, IL 60670
Strafe & Co. Treasury Only Money Market 65.40% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Institutional
PO Box 710211
Columbus OH 43271-0211
Bank One Treasury Prime Cash 27.46% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-1632
First National Bank of Chicago Treasury Prime Cash 45.61% Record
Corporate Trust Administration Management Money Market Fund
One N. State St., 9th Floor Class I
Mail ST 0126
Chicago, IL 60602-3300
</TABLE>
139
<PAGE> 1000
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One US Government Securities Cash 43.66% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-1632
First National Bank of Chicago US Government Securities Cash 81.74% Record
Corporate Trust Administration Management Money Market Fund
One N State St, 9th Fl Class I
Chicago, IL 60602-3300
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 98.51% Record
For Exclusive Benefit of Fund
One Group Customer Accounts Class A
1 Pershing Plaza
Jersey City, NJ 07399-0001
Strafe & Co. Ohio Municipal Money Market 98.06% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Municipal Income Fund 33.17% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 56.56% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Municipal Income Fund 98.94% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Kentucky Municipal Bond Fund 94.57% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
140
<PAGE> 1001
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. West Virginia Municipal Bond 99.13% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Government Bond Fund 45.22% Record
Securities Corporation Inc. Class C
P.O. Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Government Bond Fund 85.31% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Strafe & Co. Ultra Short Term Bond Fund 86.02% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Securities Corp FBO Intermediate Bond Fund 43.67% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 81.31% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 93.16% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Growth Fund Class I 68.82% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
141
<PAGE> 1002
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Sec Svgs Pl - Inv Grwth Investor Growth Fund 25.53% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Strafe & Co. Investor Growth & Income Fund 59.54% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co. NA TTEE Investor Growth & Income Fund 29.43% Record
First Chicago NBD Svgs & Invsmt Pln Class I
c/o Putnam Investments
P.O. Box 9740
Providence, RI 02940-9740
Strafe & Co. Investor Balanced Fund 65.86% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Investor Conservative Growth 86.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Con Grwth Investor Conservative Growth 25.25% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Strafe & Co. Government Money Market Fund 69.82% Record
BOIA - One Group Operations Institutional
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO High Yield Bond Fund Class C 62.70% Record &
The One Investment Solution Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
</TABLE>
142
<PAGE> 1003
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette High Yield Bond Fund Class C 29.78% Record &
PO Box 2052 Beneficial
Jersey City, NJ 07303-2052
Strafe & Co. High Yield Bond Fund 53.34% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Market Expansion Index Fund 37.51% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Market Expansion Index Fund 100.00% Record
BOIA-One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Strafe & Co. Michigan Municipal Bond Fund 99.98% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent - Omnibus Account Michigan Municipal Money 30.63% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
NBD Michigan Michigan Municipal Money 27.67% Record &
Attn: M.E. Bradley Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Strafe & Co. Michigan Municipal Money 84.01% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
143
<PAGE> 1004
25% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
NBD Bank Municipal Cash Management 67.60% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Municipal Cash Management 100.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 47.92% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Short-Term Municipal Bond Fund 99.92% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
AS A RESULT, THE AFOREMENTIONED PERSONS MAY BE DEEMED TO BE "CONTROLLING
PERSONS" OF THE CLASS OF SHARES OF THE FUND IN WHICH THEY OWN SUCH SHARES UNDER
THE 1940 ACT.
144
<PAGE> 1005
THE TABLE BELOW INDICATES RECORD AND BENEFICIAL OWNERS OF OVER 5% OF ANY CLASS
OF SHARES OF ANY FUND OF THE TRUST.
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Northern Trust Bank of AZ TTEE Arizona Municipal Bond Fund 20.51% Record
For Thomas A Brand & Rev Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Northern Trust Bank of AZ TTEE Arizona Municipal Bond Fund 13.21% Record
Hazel I. Olson a/c# 02-01078 Class A
UA DTD 09/21/1999
PO Box 929586, 801 S. Canal
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 11.98% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Gust Trust Under Agreement 1/17 Arizona Municipal Bond Fund 10.16% Record
Devens Gust & Mary Elizabeth Gust Class A
Co-Trustees
P.O. Box 25
Mule Creek, NM 88051-0025
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 8.10% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 6.53% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
J. Carl Riney & Katy Riney JT Ten Arizona Municipal Bond Fund 5.72% Record &
1155 E. Village Circle Drive N. Class A Beneficial
Phoenix, AZ 85022-4812
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 5.36% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
</TABLE>
145
<PAGE> 1006
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Northern Trust Bank of AZ TTEE Arizona Municipal Bond Fund 20.51% Record
For Thomas A Brand & Rev Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 30.98% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 15.71% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 10.85% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Carolyn S Ward Arizona Municipal Bond Fund 10.67% Record &
James D Ward JT TEN Class B Beneficial
825 W Annandale
Tucson, AZ 85737-6923
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 10.19% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 7.06% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 6.87% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
146
<PAGE> 1007
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Arizona Municipal Bond Fund 99.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Invesco Trust Co. TTEE Balanced Fund 22.57% Record
Scott Companies Profit Sharing Plan Class A
PO Box 77405
Atlanta, GA 30357
Strafe & Co. Balanced Fund 89.81% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation Balanced Fund 26.46% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
OFDA Balanced Fund 7.05% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Strafe & Co. Bond Fund 9.56% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co NA TTEE Bond Fund 6.63% Record
Market Square P/S Plan Class A
859 Willard Street MS B-3-B
Quincy, MA 02169-7428
</TABLE>
147
<PAGE> 1008
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Putnam Fiduciary Trust Co. TTEE Bond Fund 6.35% Record
Elco Textron Inc. Class A
Attn: K. Barry
859 Willard St. MSE2C
Quincy, MA 02169-7428
Kemper Service Co Bond Fund 22.74% Record
FBO Participating Kemflex Plans Class C
811 Main St
Kansas City, MO 64105-2005
Donaldson, Lufkin Jenrette Bond Fund 10.70% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO #H6A-776467 Bond Fund 10.11% Record
Margaret A Huddleston Class C
1110 21st Street
Portsmouth, OH 45662-2812
Georgia Pickett Haupt Bond Fund 7.69% Record
990 East Dogwood Class C
Littleton, CO 80121-2482
Donaldson, Lufkin Jenrette Bond Fund 7.54% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Sonia Charles Bond Fund 6.12% Record &
11523 West Briarwood Drive Class C Beneficial
Lakewood, CO 80226-3711
NFSC FEBO #H6A-778397 Bond Fund 5.56% Record
Lisa Huddleston Class C
1110 21st Street
Portsmouth, OH 45662-2812
</TABLE>
148
<PAGE> 1009
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Bond Fund 79.07% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Henry Ford Investment Mgmt Bond Fund 6.50% Beneficial
100 E. Broad Street Class I
Columbus OH 43215-3607
NBD Bank NA Cash Management Money Market 40.45% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Bank One Cash Management Money Market 35.58% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road, Suite MI1-8217 Class A
Belleville, MI 48111-1632
First National Bank of Chicago Cash Management Money Market 12.71% Record &
Attn: Commercial Products Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Bank One Cash Management Money Market 10.07% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road, Suite MI1-8217 Class A
Belleville, MI 48111-1632
Strafe & Co. Cash Management Money Market 76.93% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
149
<PAGE> 1010
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First National Bank of Chicago Cash Management Money Market 11.08% Record
Corporate Trust Administration Fund
Attn: Cash Sweep Dept Class I
One N. State St., 9th Floor
Mail ST 0126
Chicago, IL 60602-3300
Banc One Securities Corp Fbo Diversified Equity Fund 13.05% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Diversified Equity Fund 6.07% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Diversified Equity Fund 79.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co NA TTEE Diversified Equity Fund 6.41% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
The One Group Investor Growth & Income Fund Diversified Equity Fund 5.13% Record &
c/o Mark S. Redman Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
</TABLE>
150
<PAGE> 1011
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Loan Collateral Account Diversified International 12.45% Record
Bank One MI Pledge Fund
Attn: K. Kilby Class A
Tricap Group LTD Partnership
382 Cranbrook Ct.
Bloombield, MI 48304-3525
Strafe & Co. Diversified International 7.96% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class A
PO Box 710211
Columbus OH 43271-0211
The One Group Services Co Diversified International 97.11% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class C
Strafe & Co. Diversified International 90.82% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
The One Group Investor Growth & Income Fund Diversified International 5.58% Record &
3435 Stelzer Road Fund Beneficial
Columbus, OH 43219-6004 Class I
NBD Bancorp Ret Plan Diversified International 17.32% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Bank One Trust Co NA TTEE Diversified Mid Cap Fund 8.96% Record
American Axle & Manufacturing Inc Class A
Personal S/P Hourly Rate Association
900 Tower Dr
Troy, MI 48098-2810
</TABLE>
151
<PAGE> 1012
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Consolidated Natural Gas Diversified Mid Cap 7.72% Record
Attn: Latoya Young Class A
135 Santili Highway
AIM # 026-0027
Everett, MA 02149-1906
State Street Bank & Trust Co. Diversified Mid Cap Fund 47.78% Record
Cust for the IRA of Class C
L. Rita Kincaid
561 Westbury Woods Ct.
Westerville, OH 43081-7705
State Street Bank & Trust Co. Diversified Mid Cap Fund 42.53% Record
Cust for the IRA of Class C
L. Rita Kincaid
561 Westbury Woods Ct.
Westerville, OH 43081-7705
The One Group Services Co Diversified Mid Cap Fund 6.69% Record &
3435 Stelzer Road Class C Beneficial
Columbus OH 43219-6004
NBD Bancorp Ret Plan Diversified Mid Cap Fund 8.27% Beneficial
1111 Polaris Parkway Class I
Columus, OH 43271
Strafe & Co Mid Cap Value Fund 6.13% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
State Street Bank & Trust Co. Mid Cap Value Fund 46.10% Record &
Cust for the IRA of Yvonne H. Clarke Class C Beneficial
33 Jordan Rd.
Hastings HDSN, NY 10706-3919
</TABLE>
152
<PAGE> 1013
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Mid Cap Value Fund 23.37% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Mid Cap Value Fund 18.45% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Mid Cap Value Fund 10.26% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
Strafe & Co Mid Cap Value Fund 82.64% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Corporation Mid Cap Value Fund 9.99% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
The One Group Investor Mid Cap Value Fund 7.61% Record &
Growth & Income Fund Class I Beneficial
c/o Mark S. Redman
The One Group Services Co.
3435 Stelzer Rd.
Columbus, OH 43219-6004
Emp Ret Plan of NBD Bancorp Mid Cap Value Fund 7.33% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
</TABLE>
153
<PAGE> 1014
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
The One Group Investor Growth Fund Mid Cap Value Fund 5.34% Record &
c/o Mark S. Redman Class I Beneficial
The One Group Services Co.
3435 Stelzer Rd.
Columbus, OH 43219-6004
Banc One Securities Corp FBO Mid Cap Growth Fund 22.57% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville, OH 43081-4903
Banc One Securities Corp FBO Mid Cap Growth Fund 87.62% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Mid Cap Growth Fund 80.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Corporation Mid Cap Growth Fund 10.86% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Donaldson Lufkin Jenrette Income Bond Fund 6.88% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Income Bond Fund 88.71% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
154
<PAGE> 1015
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Institutional Prime Money 55.29% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Bank One Texas NA Institutional Prime Money 24.13% Record
1717 Main St. Market Fund
Dallas, TX 75201-4605
Arrow Door Company Institutional Prime Money 6.50% Record
4200 Roger B Chaffee Memorial Blvd. Market Fund
Grand Rapids, MI 49548
Bank One Illinois NA Institutional Prime Money 5.75% Record
Cash Management Dept. Market Fund
Attn: Tony Long
Suite 0256, 6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
Dominos Pizza Nat Adv Institutional Prime Money 10.55% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271
Texas Ref Corp Institutional Prime Money 6.95% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271
HSHS Pension Institutional Prime Money 5.66% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271
13s Inc. Institutional Prime Money 5.65% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271
</TABLE>
155
<PAGE> 1016
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent - Omnibus Account Prime Money Market Fund 37.22% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc Prime Money Market Fund 20.63% Record
Fbo Bank One Corporate Sweep Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 74.17% 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 5.39% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.69% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Pershing As Agent - Omnibus Account US Treasury Securities Money 26.97% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
</TABLE>
156
<PAGE> 1017
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Fund Services Inc US Treasury Securities Money 26.62% Record
Fbo Bank One Texas Sweep Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BISYS Fund Services Inc US Treasury Securities Money 18.03% Record
Fbo Bank One Corporate Sweep Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
BISYS Fund Services Inc US Treasury Securities Money 13.39% Record
Fbo Bank One Securities Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
State Street Bank & Trust Co. US Treasury Securities Money 10.50% Record
Cust for the Rollover IRA of Frederick R. Market Fund
Holliday Class B
7676 Cashel Ct.
Dublin, OH 43017-2646
State Street Bank & Trust Co. US Treasury Securities Money 7.74% Record
Director R/O Louis J. Caswell Market Fund
3825 Deer Rund Road Class B
Lake Charles, LA 70611-7023
Donaldson Lufkin Jenrette US Treasury Securities Money 7.25% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 5.64% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
</TABLE>
157
<PAGE> 1018
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette US Treasury Securities Money 5.40% Record
PO Box 2052 Market Fund
Jersey City, NJ 07303-2052 Class B
Donaldson Lufkin Jenrette US Treasury Securities Money 55.73% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette US Treasury Securities Money 14.30% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette US Treasury Securities Money 12.38% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Strafe & Co (N) US Treasury Securities Money 77.72% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Bank one Trust Company NA US Treasury Securities Money 10.99% Record
Omnibus-Corporate Cash Sweep AC Market Fund
235 W Schrock Rd Class I
Westerville OH 43081-2874
First National Bank of Chicago US Treasury Securities Money 6.16% Record
Corporate Trust Administration Market Fund
1 F&B Plaza, Ste. 0126 Class I
Chicago, IL 60670
Americredit 1999-c Prefunding US Treasury Securities Money 5.52% Record
1111 Polaris Parkway Market Fund
Columbus, OH 43271 Class I
</TABLE>
158
<PAGE> 1019
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Pershing As Agent-Omnibus Account US Treasury Securities Money 96.07% Record
For Exclusive Benefit of Market Fund Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
Pershing As Agent - Omnibus Account Municipal Money Market Fund 47.05% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
BISYS Fund Services Inc Municipal Money Market Fund 25.92% Record
FBO Bank One Corporate Sweep Class A
Attn: Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Municipal Money Market Fund 96.13% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Pershing As Agent-Omnibus Account Municipal Money Market Fund 92.73% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
The One Group Services Company Municipal Money Market Fund 7.06% Record
c/o fund Administration Service Class
3435 Stelzer Road
Columbus, OH 43219-6004
Donaldson Lufkin Jenrette Equity Income Fund 13.59% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
159
<PAGE> 1020
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
UMB Bank Cust Fbo Equity Income Fund 7.26% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
Vista CA 92083-7952
Donaldson Lufkin Jenrette Equity Income Fund 5.84% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO # ALT-007870 Equity Income Fund 5.75% Record
Ragsdale Investments Limited Par Class C
5644 N Homestead Ln.
Scottsdale, AZ 85253-5013
First Union Securities, Inc. Equity Income Fund 5.60% Record
A/C 2266-9058 Class C
Clifford J Cutler PSP & Trust
111 East Kilbourn Ave.
Milwaukee, WI 53202-6611
Lillian M Tepas TTEE Equity Income Fund 5.43% Record
Under Declaration of TST Class C
510 Princeton Greens Ct.
Sun City Ctr, FL 33573-7024
Strafe & Co Equity Income Fund 94.13% 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 21.90% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
160
<PAGE> 1021
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp Fbo Equity Index Fund 59.75% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 93.61% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 14.20% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Cons Power Union Welfare Benefit Equity Index Fund 8.22% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Banc One Securities Corp. FBO Large Cap Growth Fund 24.35% Record
The One Investment Solution Class C
733 Greencrest Dr.
Westerville, OH 43081
Kemper Service Company Large Cap Growth Fund 12.38% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting 7th Floor
811 Main Street
Kansas City, MO 64105-2005
Strafe & Co Large Cap Growth Fund 89.90% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
161
<PAGE> 1022
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Sec Svgs Plan Large Cap Growth Fund 8.51% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Banc One Corporation Large Cap Growth Fund 7.18% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Kemper Service Company Large Cap Value Fund 37.38% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting
7th Floor, 811 Main Street
Kansas City, MO 64105-2005
Donaldson Lufkin Jenrette Large Cap Value Fund 34.88% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Large Cap Value Fund 7.90% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co Large Cap Value Fund 79.66% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Banc One Corporation Large Cap Value Fund 17.90% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
The One Group Investor Growth & Income Fund Large Cap Value Fund 7.78% Record &
The One Group Services Company Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
</TABLE>
162
<PAGE> 1023
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
The One Group Investor Growth Fund Large Cap Value Fund 5.76% Record &
c/o Mark S. Redman Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 7.47% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 5.58% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Ohio Municipal Bond Fund 91.37% 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 9.69% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Key Trust Comp of OH CUST TTEE Ohio Municipal Bond Fund 6.92% Record
NES Group Class I
PO Box 98470
Cleveland, OH 44101-4870
Firstar Trust Co TTEE International Equity Index 7.87% Record
FBO Milwaukee Foundation - Equity Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
</TABLE>
163
<PAGE> 1024
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Loan Collateral Account International Equity Index 7.45% Record
Bank One MI Pledgee Fund
Attn: K. Kilby Class A
Tricap Group LTD Partnership
382 Cranbrook Ct.
Bloomfienld, MI 48304-3525
Banc One Securities Corp Fbo International Equity Index 80.79% Record
The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Kemper Service Company International Equity Index 6.03% Record
Master Account Fund
FBO Participating Kemflex Plans Class C
Attn: TA Accounting 7th Floor
811 Main Street
Kansas City, MO 64105-2005
Strafe & Co. International Equity Index 88.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Corporation International Equity Index 14.70% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271-0211 Class I
Strafe & Co. Short-Term Bond Fund 10.44% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Strafe & Co. Short-Term Bond Fund 90.59% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
164
<PAGE> 1025
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Louisiana Municipal Bond Fund 94.74% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bancroft Enterprises Louisiana Municipal Bond Fund 5.68% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Melvin Skol Small Cap Growth Fund 11.44% Record &
2811 Scley St Class C Beneficial
Erie, PA 16508-1719
Judith M Torrico Small Cap Growth Fund 10.25% Record &
101 Nicholson St Class C Beneficial
Buffalo, NY 14214-1128
Donaldson Lufkin Jenrette Small Cap Growth Fund 8.13% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Small Cap Growth Fund 5.84% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
William G Hines Small Cap Growth Fund 5.80% Record
Ruth M Hines Jt Ten Class C
4101 McLaughlin Rd.
McKean, PA 16426-2034
Strafe & Co. Small Cap Growth Fund 81.34% 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 6.98% Record &
c/o Mark S. Redman Class I Beneficial
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
165
<PAGE> 1026
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One Trust Co NA TTEE Small Cap Value Fund 13.11% Record
Bankers Systems Inc Class A
Employees Profit Sharing Plan
107 N Cross Street, Ste. 2092
Wheaton, IL 60187-5317
Strafe & Co. Small Cap Value Fund 9.98% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Small Cap Value Fund 44.63% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Small Cap Value Fund 31.60% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Small Cap Value Fund 19.20% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
Strafe & Co. Small Cap Value Fund 92.80% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
BF Goodrich Pension Small Cap Value Fund 11.31% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Donaldson Lufkin Jenrette Tax-Free Bond Fund 6.38% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
166
<PAGE> 1027
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Tax-Free Bond Fund 5.04% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Tax-Free Bond Fund 99.56% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Treasury & Agency Fund 9.53% Record
Securities Corporation Inc. Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Treasury & Agency Fund 6.27% Record
Securities Corporation Inc. Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Treasury & Agency Fund 99.84% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
NBD Bank NA Treasury Cash Management 40.05% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
Bank One Treasury Cash Management 31.57% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Suite MI1-8217
Belleville, MI 48111-1632
Bank One Treasury Cash Management 15.85% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Suite MI1-8217
Belleville, MI 48111-1632
</TABLE>
167
<PAGE> 1028
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First National Bank of Chicago Treasury Cash Management 12.52% Record
Attn: Commercial Products Money Market Fund
9000 Haggerty Rd. Class A
Belleville, MI 48111-8217
First National Bank of Chicago Treasury Cash Management 70.80% Record
Corporate Trust Administration Money Market Fund
Attn: Cash Sweep Coordinator Class I
1 F&B Plaza, Suite 0126
Chicago, IL 60670
Strafe & Co. Treasury Cash Management 16.93% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
P.O. Box 710211
Columbus, OH 43271-0211
Banc One Leasing Treasury Cash Management 8.92% Beneficial
1111 Polaris Parkway Money Market Fund
Columbus, OH 43271 Class I
First National Bank of Chicago Treasury Cash Management 8.04% Record
Corporate Trust Administration Money Market Fund
Attn: Cash Sweep Coordinator Class I
One N. State Street, 9th Floor
Chicago, IL 60602-3300
Bloomingdale S.D. Agency Treasury Cash Management 6.50% Beneficial
1111 Polaris Parkway Money Market Fund
Columbus, OH 43271 Class I
Strafe & Co. Treasury Only Money Market 65.40% Record
BOIA - One Group Operations Fund Institutional
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
BISYS Fund Services Inc Treasury Only Money Market 12.00% Record
FBO Bank One Corporate Sweep Fund Institutional
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
</TABLE>
168
<PAGE> 1029
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Fund Services Inc Treasury Only Money Market 6.65% Record
FBO Bank One Corporate Sweep Fund Institutional
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
First National Bank of Chicago Treasury Only Money Market 6.23% Record
Corporate Trust Administration Fund Institutional
Attn: Cash Sweep Coordinator
One N. State Street, 9th Floor
Mail St 0126
Chicago, IL 60602-3300
Bank One Treasury Prime Cash 27.46% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-1632
American National Bank Treasury Prime Cash 23.63% Record &
Corporate Trust Division Management Money Market Fund Beneficial
Attn: SEI Trust-First Chicago Team Class A
1 Freedom Drive
Oaks, PA 19456
First National Bank of Chicago Treasury Prime Cash 21.39% Record
Corporate Trust Administration Management Money Market Fund
Attn: Cash Sweep Coordinator Class A
One N. State St., 9th Floor
Mail ST 0126
Chicago, IL 60602-3300
First National Bank of Chicago Treasury Prime Cash 14.45% Record &
Attn: Commercial Products Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Belleville, MI 48111-8217
Bank One Treasury Prime Cash 6.11% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Suite MI1-8217
Belleville, MI 48111-1632
</TABLE>
169
<PAGE> 1030
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First National Bank of Chicago Treasury Prime Cash 45.61% Record
Corporate Trust Administration Management Money Market Fund
One N. State St., 9th Floor Class I
Mail ST 0126
Chicago, IL 60602-3300
Hella North America Holding Inc. Treasury Prime Cash 24.42% Record &
1101 Vincennes Avenue Management Money Market Fund Beneficial
P.O. Box 398 Class I
Flora, IL 62839-0398
Strafe & Co. Treasury Prime Cash 15.52% Record
BOIA - One Group Operations Management Money Market Fund
1111 Polaris Parkway Class I
P.O. Box 710211
Columbus, OH 43271-0211
Bank One Illinois NA Treasury Prime Cash 11.68% Record &
Cash Management Department Management Money Market Fund Beneficial
Attn: Tony Long Class I
Suite 0256 6th Floor
525 W. Monroe St.
Chicago, IL 60661-3629
Bank One US Government Securities Cash 43.66% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-1632
First National Bank of Chicago US Government Securities Cash 22.93% Record &
Attn: Commercial Products Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Belleville, MI 48111-8217
American National Bank US Government Securities Cash 14.39% Record &
Corporate Trust Division Management Money Market Fund Beneficial
Attn: SEI Trust-First Chicago Team Class A
1 Freedom Dr.
Oaks, PA 19456
Bank One US Government Securities Cash 9.46% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Suite MI1-8217 Class A
Belleville, MI 48111-1632
</TABLE>
170
<PAGE> 1031
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
First National Bank of Chicago US Government Securities Cash 81.74% Record
Corporate Trust Administration Management Money Market Fund
One N State St, 9th Fl Class I
Chicago, IL 60602-3300
First National Bank of Chicago US Government Securities Cash 7.26% Record
Corporate Trust Administration Management Money Market Fund
Attn: Cash Sweep Coordinator Class I
1 F&B Plaza, Ste. 0126
Chicago, IL 60670
Strafe & Co. US Government Securities Cash 6.93% Record
BOIA - One Group Operations Management Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 98.51% Record
For Exclusive Benefit of Fund
One Group Customer Accounts Class A
1 Pershing Plaza
Jersey City, NJ 07399-0001
Strafe & Co. Ohio Municipal Money Market 98.06% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Wallick Construction Ohio Municipal Money Market 11.59% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Henny Penny Corp Ohio Municipal Money Market 7.68% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Douglas & Lois Peacock Ohio Municipal Money Market 6.28% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Harriet J. Goldberg Custody Ohio Municipal Money Market 5.89% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
</TABLE>
171
<PAGE> 1032
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
KRN LTD Partnership Ohio Municipal Money Market 5.61% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Akron Stadium Reserve Account Ohio Municipal Money Market 5.32% Beneficial
100 E. Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Securities Corp FBO Municipal Income Fund 33.17% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 56.56% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Municipal Income Fund 98.94% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette
Securities Corporation Inc Kentucky Municipal Bond Fund 17.13% Record
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Kentucky Municipal Bond Fund 5.78% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Kentucky Municipal Bond Fund 94.57% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette West Virginia Municipal Bond 14.18% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
</TABLE>
172
<PAGE> 1033
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette West Virginia Municipal Bond 11.38% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 8.32% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 7.72% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 7.10% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 6.03% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 5.88% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette West Virginia Municipal Bond 8.54% Record
Securities Corporation Inc. Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
Strafe & Co. West Virginia Municipal Bond 99.13% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
</TABLE>
173
<PAGE> 1034
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Government Bond Fund 45.22% Record
Securities Corporation Inc. Class C
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government Bond Fund 21.80% Record
Securities Corporation Inc. Class C
P.O. Box 2052
Jersey City, NJ 07303-2052
Banc One Securities Corp. FBO Government Bond Fund 19.35% Record
The One Investment Solution Class C
733 Greencrest Drive
Westerville, OH 43081-4903
Donaldson Lufkin Jenrette Government Bond Fund 5.67% Record
Securities Corporation Inc. Class C
P.O. Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Government Bond Fund 85.31% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Investment Company Institute Ultra Short Term Bond Fund 7.77% Record
1401 H St NW Class A
Washington, DC 20005-2110
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 5.51% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Ultra Short Term Bond Fund 86.02% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
</TABLE>
174
<PAGE> 1035
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
The One Group Investor Balanced Fd Ultra Short Term Bond Fund 5.66% Record &
c/o Mark S. Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219-6004
RC Archdiocese Ultra Short Term Bond Fund 5.46% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Banc One Securities Corp FBO Intermediate Bond Fund 43.67% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 5.45% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Banc One Securities Corp FBO Intermediate Bond Fund 81.31% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Intermediate Bond Fund 93.16% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
INVESCO Trust Co Investor Growth Fund 5.23% Record
Hudson, Potts & Bernstein Class A
LLC Employees Profit Sharing Plan
PO Box 77405
Atlanta, GA 30357-1405
Strafe & Co. Investor Growth Fund Class I 68.82% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
</TABLE>
175
<PAGE> 1036
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One TTEE Investor Growth Fund 12.31% Record
Brillion Iron Works P/S Class I
190 Heatherdown Drive
Westerville OH 43081-2868
Banc One Sec Svgs Pl - Inv Grwth Investor Growth Fund 25.53% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Virginia R Corrin Investor Growth Fund 9.38% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Ind. Fam Coll. Sav. Plan Investor Growth Fund 8.16% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Bank One Trust Co. NA TTEE Investor Growth & Income Fund 9.90% Record
Clarian Health Partners Inc. Class A
Defined Contribution Plan
c/o Putnam Investments
P.O. Box 9740
Providence, RI 02940-9740
BISYS Brokerage Services Inc Investor Growth & Income Fund 6.90% Record
FBO Kelly Retirement Plus Class A
PO Box 4054
Concord, CA 94524-4054
Donaldson Lufkin Jenrette Investor Growth & Income Fund 6.32% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Kemper Service Company Investor Growth & Income Fund 6.27% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting, 7th Floor
811 Main Street
Kansas City, MO 64105-2005
</TABLE>
176
<PAGE> 1037
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Investor Growth & Income Fund 5.19% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Investor Growth & Income Fund 59.54% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Trust Co. NA TTEE Investor Growth & Income Fund 29.43% Record
First Chicago NBD Svgs & Invsmt Pln Class I
c/o Putnam Investments
P.O. Box 9740
Providence, RI 02940-9740
Banc One Sec Svgs Plan Investor Growth & Income Fund 12.44% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Revco D.S., Inc. Serp - Trust A Investor Growth & Income Fund 5.65% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
DWPLLC/Target BNF-Bal Fd Investor Growth & Income Fund 5.07% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Investor Balanced Fund 7.01% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Kemper Service Company Investor Balanced Fund 5.46% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting, 7th Floor
811 Main Street
Kansas City, MO 64105-2005
</TABLE>
177
<PAGE> 1038
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Investor Balanced Fund 5.33% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Investor Balanced Fund 65.86% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
First Chicago NBD TTEE Investor Balanced Fund 17.34% Record
First Chicago NBD Svgs & Invsmt Plan Class I
C/O Putnam Investments
PO Box 9740
Providence, RI 02940-9740
Kenosha Carpenters #161 Pens-Mgd Investor Balanced Fund 8.37% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Centennial Liquor Retirement Plan Investor Balanced Fund 7.35% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Donaldson Lufkin Jenrette Investor Conservative Growth 6.71% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Conservative Growth 5.92% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Investor Conservative Growth 5.52% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
</TABLE>
178
<PAGE> 1039
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Investor Conservative Growth 86.76% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Banc One Sec Svgs Pl - Inv Con Grwth Investor Conservative Growth 25.25% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Kenosha Carpenters #161 Pens-Mgd Investor Conservative Growth 14.15% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Bank One Inv Option Plan Investor Conservative Growth 10.23% Beneficial
1111 Polaris Parkway Fund
Columbus, OH 43271 Class I
Strafe & Co. Government Money Market Fund 69.82% Record
BOIA - One Group Operations Institutional
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Bank One Texas NA Government Money Market Fund 9.46% Record &
1717 Main St Institutional Beneficial
Dallas TX 75201-4605
BWC - JP Morgan Government Money Market Fund 6.59% Beneficial
1111 Polaris Parkway
Columbus, OH 43271
BWC - Western Asset Government Money Market Fund 6.06% Beneficial
1111 Polaris Parkway
Columbus, OH 43271
BWC - John Hancock Government Money Market Fund 5.05% Beneficial
1111 Polaris Parkway
Columbus, OH 43271
</TABLE>
179
<PAGE> 1040
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
BISYS Fund Services Inc Government Money Market Fund 5.24% Record
FBO Bank One Corporate Sweep Institutional
Attn: Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Donoaldson Lufkin Jenrette High Yield Bond Fund Class B 7.37% Record
PO Box 2052
Jersey City, NJ 07303-2052
Banc One Securities Corp FBO High Yield Bond Fund Class C 62.70% Record &
The One Investment Solution Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
Donoaldson Lufkin Jenrette High Yield Bond Fund Class C 29.78% Record &
PO Box 2052 Beneficial
Jersey City, NJ 07303-2052
Strafe & Co. High Yield Bond Fund 53.34% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
The One Group Investor Growth & Income Fund High Yield Bond Fund 17.19% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
The One Group Investor Balanced Fund High Yield Bond Fund 16.34% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
Empl Ret Plan of NBD Bancorp High Yield Bond Fund 10.46% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Banc One Corporation High Yield Bond Fund 7.55% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
</TABLE>
180
<PAGE> 1041
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
The One Group Investor Growth Fund High Yield Bond Fund 7.51% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
Donaldson Lufkin Jenrette Market Expansion Index Fund 13.27% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 13.18% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
UMB Bank Cust Market Expansion Index Fund 8.45% Record
FBO Robert R. Barela IRA Class A
9578 Smoke Tree Avenue
Fountain Valley, CA 92708-7258
State Street Bank & Trust Co. Market Expansion Index Fund 6.59% Record
Cust for the IRA of Class A
FBO Michael L. Thiel
1865 Lazy Ridge Ct.
Chesterfield, MO 63017-5215
Donaldson Lufkin Jenrette Market Expansion Index Fund 6.18% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Jose B Zavala Market Expansion Index Fund 5.42% Record
Maria E. Zavala JT TEN Class A
1238 Selma
Westland, MI 48186-4031
State Street Bank and Trust Co. Market Expansion Index Fund 5.26% Record
Cust for the 403B of Darcy A. Young Class A
99 Theresa Ct.
West Seneca, NY 14224-4715
Donaldson Lufkin Jenrette Market Expansion Index Fund 37.51% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
181
<PAGE> 1042
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
State Street Bank & Trust Co Market Expansion Index Fund 11.86% Record
Cust for the IRA of Class C
Patricia L Burke
716 Running Creek Dr
Arlington, TX 76001-7524
Donaldson Lufkin Jenrette Market Expansion Index Fund 10.99% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
State Street Bank & Trust Co Market Expansion Index Fund 9.16% Record
Cust for the 403(b) of Class C
Lois J Hayward
14110 Patterson Dr
Shelby TWP, MI 48315-4292
Donaldson Lufkin Jenrette Market Expansion Index Fund 8.69% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Market Expansion Index Fund 8.08% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
The One Group Services Co Market Expansion Index Fund 6.91% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
Strafe & Co Market Expansion Index Fund 100.00% Record
BOIA-One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
Dow Chemical Market Expansion Index Fund 7.07% Beneficial
100 E. Broad Street Class I
Columbus, OH 43215
Wendy M Alterman Michigan Municipal Bond Fund 5.42% Record &
271 Lone Pine Class A Beneficial
Bloomfield, MI 48304-3428
</TABLE>
182
<PAGE> 1043
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Michigan Municipal Bond Fund 5.85% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Michigan Municipal Bond Fund 99.98% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Pershing As Agent - Omnibus Account Michigan Municipal Money 30.63% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
NBD Michigan Michigan Municipal Money 27.67% Record &
Attn: M.E. Bradley Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
James R. Donahey Michigan Municipal Money 7.41% Record &
Pat J. Donahay JT TEN Market Fund Beneficial
421 Highland Class A
Ann Arbor, MI 48104-1729
Strafe & Co. Michigan Municipal Money 84.01% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Raj Vattikuti Michigan Municipal Money 9.31% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271 Class I
NBD Securities Inc. Michigan Municipal Money 6.67% Record
ACMS for Woodward MI Tax-Exempt Money Martket Market Fund
Fund for Bank 021 Business Bookeeping Class I
9000 Haggerty Rd.
Belleville, MI 43111-1632
</TABLE>
183
<PAGE> 1044
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Peter Basile Michigan Municipal Money 6.12% Beneficial
1111 Polaris Parkway Market Fund
Columbus, OH 43271 Class I
OK Thompson Michigan Municipal Money 5.68% Beneficial
100 E. Broad Street Market Fund
Columbus OH 43215-3607 Class I
Inner Lake & Co Michigan Municipal Money 5.04% Record
C/O State Street Bank Market Fund
One Group Michigan Muni Bond Fund Class I
Fund #8Z2D
1 Heritage Drive
North Quincy, MA 02171-2105
NBD Bank Municipal Cash Management 67.60% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Municipal Cash Management 18.15% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Bank One Municipal Cash Management 14.24% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
Strafe & Co. Municipal Cash Management 100.00% Record
BOIA - One Group Operations Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 47.92% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
</TABLE>
184
<PAGE> 1045
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 19.89% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 6.78% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 24.12% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 23.39% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 13.67% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 8.67% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Short-Term Municipal Bond Fund 5.90% Record
Securities Corporation Inc Class B
PO Box 2052
Jersey City, NJ 07303-2052
Strafe & Co. Short-Term Municipal Bond Fund 99.92% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
Detroit Edison Short-Term Municipal Bond Fund 8.64% Record
1111 Polaris Parkway Class I
Columbus, OH 43271
</TABLE>
185
<PAGE> 1046
5% SHAREHOLDERS AS OF OCTOBER 4, 1999
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Haworth Inc Short-Term Municipal Bond Fund 8.21% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Bruce Becker Rev Trust Short-Term Municipal Bond Fund 7.83% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
Charles Lefler Short-Term Municipal Bond Fund 5.14% Beneficial
1111 Polaris Parkway Class I
Columbus, OH 43271
</TABLE>
As a group, the Trustee and Officers of the Trust owned less than 1% of the
Shares of each class of the Trust.
FINANCIAL STATEMENTS
The financial statements of the Trust are incorporated by reference into this
Statement of Additional Information. The financial statements for the fiscal
year ended June 30, 1999 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.
186
<PAGE> 1047
Registration Statement
of One Group(R) Mutual Funds
on Form N-1A
PART C
Item 23. Exhibits
--------
-1-
<PAGE> 1048
(a) Amended and Restated Declaration of Trust dated as of February
18, 1999 is incorporated by reference to Exhibit (1) to the
Registrant's Registration Statement on Form N-1A (filed March
12, 1999).
(b) Code of Regulations as amended and restated as of October 25,
1990 is incorporated by reference to Exhibit (2) to
Post-Effective Amendment No. 39 (filed August 16, 1996) to
Registrant's Registration Statement on Form N-1A.
(c) Rights of Shareholders.
-----------------------
The following portions of Registrant's Declaration of Trust
incorporated as Exhibit (1) hereto, define the rights of
shareholders:
5.1 Shares in the Series or Classes of the Trust.
---------------------------------------------
A. The Trustees shall have full power and authority, in their
sole discretion, without obtaining the prior approval of the
Shareholders (either with respect to the Trust as a whole or
with respect to any series or classes of the Trust) by vote or
otherwise, to establish one or more series of Shares of the
Trust. The establishment of any such series shall be effective
upon the adoption by a majority of the Trustees then in office
of a resolution establishing such series and setting the
voting rights, preferences, designations, conversion or other
rights, restrictions, limitations as to distributions,
conditions of redemption, qualifications, or other terms of
the Shares of such series. The beneficial interest in each
series of the Trust shall at all times be divided into an
unlimited number of full and fractional transferable Shares
without par value. The investment objective, policies, and
restrictions governing the management and operations of each
series of the Trust, including the management of assets
belonging to any particular series, may from time to time be
changed or supplemented by the Trustees, subject to the
requirements of the Act. The Trustees may from time to time
divide or combine the outstanding Shares of any one or more
series of the Trust into a greater or lesser number without
thereby changing their proportionate beneficial interests in
the Trust assets allocated or belonging to such series.
Subject to the respective voting rights, preferences,
designations, conversion or other rights, restrictions,
limitations as to distributions, conditions of redemption,
qualifications, or other terms of the Shares of each series of
the Trust, the Trustees may, without Shareholder approval,
divide the Shares of any series into two or more classes,
Shares of each such class having such
-2-
<PAGE> 1049
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> 1050
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> 1051
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> 1052
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> 1053
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> 1054
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> 1055
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> 1056
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> 1057
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> 1058
subject to the inspection of any Shareholder during each
meeting of Shareholders.
1.5 RECORD DATE. The Trustees may fix a time (during which
they may close the Share transfer books of the Trust) not more
than ninety (90) days prior to the date of any meeting of
Shareholders, or the date fixed for the payment of any
dividend, or the date of the allotment of rights or the date
when any change or conversion or exchange of Shares shall go
into effect, as a record date for the determination of the
Shareholders entitled to notice of, or to vote at, any such
meeting, or entitled to receive payment of any such dividend,
or to receive any such allotment of rights, or to exercise
such rights, as the case may be. In such case, only such
Shareholders as shall be shareholders of record at the close
of business on the date so fixed shall be entitled to notice
of, or to vote at, such meeting or to receive payment of such
dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any
record date, as aforesaid.
3.1 FORM. Notices to Shareholders shall be in writing and
delivered personally or mailed to the Shareholders at their
addresses appearing on the books of the Trust.
3.2 WAIVER. Whenever any notice of the time, place, or purpose
of any meeting of Shareholders, Trustees, or committee is
required to be given under the provisions of Massachusetts law
or under the provisions of the Declaration of Trust or these
Regulations, a waiver thereof in writing, signed by the person
or persons entitled to such notice and filed with the record
of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting of Shareholders in person
or by proxy, or at the meeting of Trustees or committee in
person, shall be deemed equivalent to the giving of such
notice to such persons.
(d)(1) Investment Advisory Agreement dated January 11, 1993 between
Registrant and Banc One Investment Advisors Corporation is
incorporated by reference to Exhibit 5(a) to Post-Effective
Amendment No. 27 (filed March 17, 1993) to Registrant's
Registration Statement on Form N-1A.
(d)(2) Amended and Restated Schedule A to the Investment Advisory
Agreement between Registrant and Banc One Investment Advisors
Corporation dated May 20, 1999 is incorporated by reference to
Exhibit (d)(2) to Post-Effective Amendment No. 50 (filed
August 26, 1999) to the Registrant's Registration Statement on
Form N-1A.
(d)(3) Sub-Investment Advisory Agreement dated October 1, 1996
between Banc One Investment Advisors Corporation and
Independence International Associates, Inc. is incorporated by
reference to Exhibit (5)(c) to Post-Effective Amendment No. 42
(filed June 18, 1997) to the Registrant's Registration
Statement on Form N-1A.
-12-
<PAGE> 1059
(d)(4) Sub-Investment Advisory Agreement, dated as of August 20, 1998
between Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC is incorporated by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(e)(1) Re-executed Distribution Agreement dated December 13, 1995
between Registrant and The One Group Services Company is
incorporated by reference to Exhibit (7)(c) to Registrant's
Registration Statement on Form N-14 (filed January 19, 1996).
(e)(2) Revised Schedules A-E to the Distribution Agreement between
the Registrant and The One Group Services Company are
incorporated by reference to Exhibit (e)(2) to Post-Effective
Amendment No. 50 (filed August 26, 1999) to Registrant's
Registration Statement on Form N-1A.
(e)(3) Dealer's Agreement for Registrant dated November 11, 1995
between The One Group Services Company and Banc One Securities
Corporation is incorporated by reference to Exhibit (7)(d) to
Registrant's Registration Statement on Form N-14 (filed
January 19, 1996).
(e)(4) Form of Shareholder Servicing Agreement between the Registrant
and Participating Service Organizations is incorporated by
reference to Exhibit (7)(f) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(e)(5) Agency Services and Delegation Agreement between INVESCO Trust
Company and Registrant dated January 1, 1998 is incorporated
by reference to Exhibit (10)(j) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(e)(6) Amendment to Agency and Services Delegation Agreement between
INVESCO Trust Company and Registrant is incorporated by
reference to Exhibit (e)(6) to Post-Effective Amendment No. 50
(filed August 26, 1999) to Registrant's Registration Statement
on Form N-1A.
(e)(7) Processing Agreement by and between Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation and The
One Group dated as of February, 1999 is incorporated by
reference to Exhibit (6)(f) to Registrant's Registration
Statement on Form N-1A (filed March 12, 1999).
(f) Deferred Compensation Plan for Trustees of The One Group is
incorporated by reference to Exhibit (7) to Post-Effective
Amendment No. 47 (filed December 23, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(1) Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(a) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(2) Amendment to Custodian Contract dated as of July 29, 1988
between Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(b) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(g)(3) Sub-Custodian Agreement between State Street Bank and Trust
Company, Bank One Trust Company, N.A. and the Registrant is
incorporated by reference to Exhibit (8)(b) to Post-Effective
Amendment No. 37 (filed June 13, 1996) to the Registrant's
Registration Statement on Form N-1A.
(g)(4) First Amendment to the Subcustodian Agreement dated as of
December, 1996 between State Street Bank and Trust Company,
Bank One Trust Company,
-13-
<PAGE> 1060
N.A. and the Registrant is incorporated by reference to
Exhibit (8)(d) to Post Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(g)(5) International Securities Lending Subcustodian and Services
Agreement, dated December 29, 1997 between State Street Bank
and Trust Company, Bank One Trust Company, N.A. and the
Registrant is incorporated by reference to Exhibit (8)(c) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to the
Registrant's Registration Statement on Form N-1A.
(g)(6) Sub-Custodian Agreement dated as of March 19, 1999, between
State Street Bank and Trust Company, NBD Bank and One Group
Mutual Funds is incorporated by reference to Exhibit (8)(f)
to Post-Effective Amendment No.49 (filed April 27, 1999) to
the Registrant's Registration Statement on Form N-1A.
(h)(1) Re-executed Management and Administration Agreement dated
November 20, 1997 is incorporated by reference to Exhibit
(13)(b) to Registrant's Registration Statement on Form N-14
(filed on May 29, 1998).
(h)(2) Revised Schedule A to the Management and Administration
Agreement between the Registrant and The One Group Services
Company is incorporated by reference to Exhibit (h)(2) to
Post-Effective Amendment No. 50 (filed August 26, 1999) to
Registrant's Registration Statement on Form N-1A.
(h)(3) Transfer Agency and Service Agreement dated as of February 9,
1988 between the Registrant and State Street Bank and Trust
Company is incorporated by reference to Exhibit (9)(c) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(h)(4) Amendment to the Transfer Agency and Service Agreement dated
as of February 6, 1996 is incorporated by reference to Exhibit
(9)(d) to Post-Effective Amendment No. 45 (filed August 26,
1998) to the Registrant's Registration Statement on Form N-1A.
(h)(5) Fund Accounting Agreement dated December 1, 1995 between the
Registrant and The One Group Services Company is incorporated
by reference to Exhibit (13)(c) to Registrant's Registration
Statement on Form N-14 (filed January 19, 1996).
(h)(6) Revised Schedule A to the Fund Accounting Agreement between
the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (h)(6) to Post-Effective
Amendment No. 50 (filed August 26, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(7) Sub-Administration Agreement dated December 1, 1995 between
The One Group Services Company and Banc One Investment
Advisors Corporation is incorporated by reference to Exhibit
(13)(d) to the Registrant's Registration Statement on Form
N-14 (filed January 19, 1996).
(h)(8) Revised Schedule A to the Sub-Administration Agreement between
The One Group Services Company and Banc One Investment
Advisors Corporation is incorporated by reference to Exhibit
(h)(8) to Post-Effective Amendment No. 50 (filed August 26,
1999) to Registrant's Registration Statement on Form N-1A.
(h)(9) Agency Services and Delegation Agreement dated January 1, 1996
between the Registrant and BISYS Qualified Plan Services is
incorporated by reference
-14-
<PAGE> 1061
to Exhibit (9)(g) to Post-Effective Amendment No. 37 (filed
June 13, 1996) to the Registrant's Registration Statement on
Form N-1A.
(h)(10) Amendment to Agency Services and Delegation Agreement between
Registrant and BISYS Qualified Plan Services is incorporated
by reference to Exhibit (h)(10) to Post-Effective Amendment
No. 50 (filed August 26, 1999) to Registrant's Registration
Statement on Form N-1A.
(h)(11) Recordkeeping and Late Trading Agreement between Registrant
and Bank One Trust Company, NA is filed herewith.
(h)(12) Shareholder Servicing Agreement between The One Group Services
Company and Bank One Corporation is incorporated by reference
to Exhibit 9(h) to Post-Effective Amendment No. 37 (filed June
13, 1996) to the Registrant's Registration Statement on Form
N-1A.
(h)(13) Services Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(l) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(h)(14) Operating Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration Statement on
Form N-1A.
(h)(15) Retirement Services Order Processing Agreement dated as of
June 6, 1997 between the Registrant and Charles Schwab &
Company, is incorporated by reference to Exhibit (9)(n) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to
Registrant's Registration Statement on Form N-1A.
(h)(16) Securities Lending Agreement for Non-ERISA Accounts dated as
of August 1995 between the Registrant, Banc One Investment
Advisors Corporation, and Bank One Trust Company, N.A. is
incorporated by reference to Exhibit (9)(p) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(h)(17) Amendment to Securities Lending Agreement for Non-ERISA
Accounts dated as of January 21, 1997 between the Registrant,
Banc One Investment Advisors Corporation, and Bank One Trust
Company, N.A. is incorporated by reference to Exhibit (9)(q)
to Post Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(h)(18) Second Amendment to the Securities Lending Agreement (Domestic
Securities), effective May 21, 1998, between the Registrant,
Banc One Investment Advisors, and Bank One Trust Company, N.A.
is incorporated by
-15-
<PAGE> 1062
reference to Exhibit (9)(r) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(h)(19) Securities Lending Agreement for Non-ERISA Accounts dated as
of January 8, 1998 between the Registrant, Banc One Investment
Advisors, and Bank One Trust Company, N.A. is incorporated by
reference to Exhibit (9)(s) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(h)(20) Amendment to the Securities Lending Agreement (Foreign
Securities) effective May 21, 1998 is incorporated by
reference to Exhibit (9)(t) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(h)(21) Fund Alliance Agreement by and between The One Group, The One
Group Services Company, and Putnam Fiduciary Trust Company is
incorporated by reference to Exhibit (9)(u) to Post-Effective
Amendment No. 49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(22) Agency Agreement dated as of March 18, 1997 between Pegasus
Funds and BISYS Fund Services, Inc. is incorporated by
reference to Exhibit (9)(v) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(23) Amendment dated April 1, 1999, to the Agency Agreement dated
as of March 18, 1997 between Pegasus Funds and BISYS Fund
Services, Inc. is incorporated by reference to Exhibit (9)(w)
to Post-Effective Amendment No. 49 (filed April 27, 1999) to
Registrant's Registration Statement on Form N-1A.
(h)(24) Agency Agreement dated as of March 11, 1997 between Pegasus
Funds and NBD Bank is incorporated by reference to Exhibit
(9)(x) to Post-Effective Amendment No. 49 (filed April 27,
1999) to Registrant's Registration Statement on Form N-1A.
(h)(25) Amendment to the Agency Agreement dated as of March 11, 1997
between Pegasus Funds and NBD Bank is incorporated by
reference to Exhibit (9)(y) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(26) Agency Agreement dated as of November 1, 1996 between Pegasus
Funds and Putnam Fiduciary Trust Company is incorporated by
reference to Exhibit (9)(z) to Post-Effective Amendment No. 49
(filed April 27, 1999) to Registrant's Registration Statement
on Form N-1A.
(h)(27) Fifth Amendment dated March 19, 1999, to the Agency Agreement
dated as of November 1, 1996 between Pegasus Funds and Putnam
Fiduciary Trust Company is incorporated by reference to
Exhibit (9)(aa) to Post-Effective Amendment No. 49 (filed
April 27, 1999) to Registrant's Registration Statement on Form
N-1A.
(h)(28) Form of Agency Distribution Agreement between The One Group
Services Company and various shareholder servicing agents is
incorporated by reference to Exhibit (9)(bb) to Post-Effective
Amendment No. 49 (filed April 27, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(29) Sub-Transfer Agency Agreement between One Group Mutual Funds
and the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corporation, is incorporated by reference to
Exhibit (h)(29) to Post-Effective Amendment No. 50 (filed
August 26, 1999) to Registrant's Registration Statement on
Form N-1A.
(h)(30) Form of Sub-Transfer Agency Agreement is incorporated by
reference to Exhibit (9)(dd) to Post-Effective Amendment No.
49 (filed April 27, 1999) to Registrant's Registration
Statement on Form N-1A.
(h)(31) Form of Order Processing Agreement is incorporated by
reference to Exhibit (9)(ee) to Post-Effective Amendment No.
49 (filed April 27, 1999) to Registrant's Registration
Statement on Form N-1A.
(h)(32) Services Agreement between One Group Mutual Funds, Bank One
Trust Company, NA, Kemper Services Company, Kemper
Distributors, Inc. and The One Group Services Company is
incorporated by reference to Exhibit (h)(32) to Post-Effective
Amendment No. 50 (filed August 26, 1999) to Registrant's
Registration Statement on Form N-1A.
(h)(33) Sub-Transfer Agency Agreement between Nationwide Investment
Services and One Group Mutual Funds is incorporated by
reference to Exhibit (h)(33) to Post-Effective Amendment No.
50 (filed August 26, 1999) to Registrant's Registration
Statement on Form N-1A.
(h)(34) FundVest Institutional No Transaction Fee Agreement between
Pershing Division of Donaldson Lufkin & Jenrette Securities
Corporation, The One Group Services Company, and One Group
Mutual Funds is filed herewith.
(i) Opinion and consent of counsel is filed herewith.
(j)(1) Consent of PricewaterhouseCoopers LLP is filed herewith.
(j)(2) Consent of Ropes & Gray is filed herewith.
(k) None
(l) Purchase Agreement dated July 18, 1985, between Registrant and
Physicians Insurance Company of Ohio is incorporated by
reference to Exhibit (13) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(m)(1) Re-Executed Distribution and Shareholder Services Plan - Class
A and Service Class shares dated November 1, 1995, as amended
August 20, 1997, between the Registrant and The One Group
Services Company is incorporated by reference to Exhibit
(15)(a) to Post-Effective Amendment No. 43 (filed August 29,
1997) to Registrant's Registration Statement on Form N-1A.
(m)(2) Revised Schedule A to the Distribution and Shareholder
Services Plan - Class A and Service Class Shares is
incorporated by reference to Exhibit (m)(2) to Post-Effective
Amendment No. 50 (filed August 26, 1999) to Registrant's
Registration Statement on Form N-1A.
(m)(3) Distribution and Shareholder Services Plan - Class B and Class
C Shares dated January 1, 1994, as amended August 20, 1997,
between the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (15)(b) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to Registrant's
Registration Statement on Form N-1A.
(m)(4) Revised Schedules A and B to the Distribution and Shareholder
Services Plan - Class B and Class C Shares is incorporated by
reference to Exhibit (m)(4) to Post-Effective Amendment No. 50
(filed August 26, 1999) to Registrant's Registration Statement
on Form N-1A.
-16-
<PAGE> 1063
(n) Multiple Class Plan for the Registrant adopted by the Board of
Trustees on May 22, 1995, as amended May 20, 1999 is
incorporated by reference to Exhibit (n) to Post-Effective
Amendment No. 50 (filed August 26, 1999) to Registrant's
Registration Statement on Form N-1A.
Item 24. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
As of the effective date of this Registration Statement there are no persons
controlled or under common control with the Registrant.
Item 25. Indemnification.
----------------
Article IX, Section 9.2 of the Registrant's Declaration of
Trust, incorporated as Exhibit (1) hereto, provides for the
indemnification of Registrant's trustees and officers.
Indemnification of the Registrant's principal underwriter,
custodians, investment advisers, administrator, and transfer
agents is provided for in the Registrant's respective
Agreements with those service providers as filed or
incorporated by reference as Exhibits hereto. As of the
effective date of this Registration Statement, the Registrant
has obtained from a major insurance carrier a trustees and
officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of
its trustees, officers, employees, or agents against any
liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of
his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person
of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
-17-
<PAGE> 1064
Item 26. Business and Other Connections of Investment Advisers
-----------------------------------------------------
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors") performs investment advisory services for all of
the Funds of The One Group. Independence International
Associates, Inc. performs investment sub-advisory services for
the International Equity Index Fund. Banc One High Yield
Partners, LLC provides investment advisory services for the
High Yield Bond Fund.
Banc One Investment Advisors is an indirect wholly-owned
subsidiary of BANK ONE CORPORATION, a bank holding company
incorporated in the state of Delaware. BANK ONE CORPORATION
now operates affiliate banking organizations in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana, Michigan,
Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANK ONE CORPORATION has several affiliates that
engage in data processing, venture capital, investment and
merchant banking, and other diversified services including
trust management, investment management, brokerage, equipment
leasing, mortgage banking, consumer finance, and insurance.
To the knowledge of Registrant, none of the directors or
officers of Banc One Investment Advisors, Independence
International Associates, Inc. or Banc One High Yield
Partners, LLC, except as set forth or incorporated herein, is
or has been, at any time during the past two calendar years,
engaged in any other business, profession, vocation or
employment of a substantial nature. Set forth below are the
names and principal businesses of the directors of Banc One
Investment Advisors who are engaged in any other business,
profession, vocation or employment of a substantial nature.
Banc One Investment Advisors
----------------------------
<TABLE>
<CAPTION>
Position with Banc Other
One Investment Advisors Substantial Occupation Type of Business
----------------------- ---------------------- ----------------
<S> <C> <C>
David J. Kundert, Chairman, Chairman, Bank One Investment
President, and CEO Trust Company, NA,
100 East Broad
Street, Columbus,
Ohio 43215
</TABLE>
-18-
<PAGE> 1065
<TABLE>
<S> <C> <C>
Kenneth T. Stevens, Director CEO, Bank One Retail Group Banking
1111 Polaris Parkway
Columbus, Ohio 43240
Peter W. Atwater, Director Former Treasurer, Investment
and Chief Operating Officer Bank One Corporation,
Chief Operating Officer
Banc One Investment Advisers Corporation;
1111 Polaris Parkway
Columbus, Ohio 43271
David R. Meuse, Director Principal Stonehenge Holdings, Inc.; Investment
Chairman/CEO Banc One
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 Bank One Plaza,
Chicago, Illinois 60670
Richard W. Vague, Director Chairman & CEO, Credit Card
First USA
201 North Market Street
Wilmington, Delaware 19801
</TABLE>
The principal business address of the principal executive officer and directors
of Banc One Investment Advisors is 1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211.
-19-
<PAGE> 1066
Banc One High Yield Partners, LLC
- ---------------------------------
Banc One High Yield Partners, LLC is the Sub-Investment Advisor to the
High Yield Bond Fund ("Banc One Partners"). Banc One Partners, a limited
liability company organized under the laws of Ohio, provides investment advice
to the High Yield Bond Fund. Set forth below are the names and principal
businesses of the managers and investment officers of Banc One Partners who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Position with Other Substantial Type of
Banc One Partners Occupation Business
----------------- ---------- --------
<S> <C> <C>
James P. Shanahan, Manager Pacholder Associates, Investment
Inc., Managing Director
& General Counsel, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
William J. Morgan, Manager Pacholder Associates, Investment
Inc., President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
Mark A. Beeson, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Columbus, Ohio 43271
Peter W. Atwater Banc One Investment Investment
Advisors, Chief
Operating Officer,
1111 Polaris Parkway,
Columbus, OH 43271
Gary Madich, Manager Banc One Investment Investment
Advisors, Senior
Managing Director, 1111
Polaris Parkway,
Columbus, Ohio 43271
</TABLE>
-20-
<PAGE> 1067
<TABLE>
<S> <C> <C>
Yvonne M. Goetz, Vice Pacholder Investment
President -- Senior Analyst Associates, Inc., Vice
President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
Anthony L. Longi, Jr., Vice
President -- Portfolio Manager Pacholder Investment
Associates, Inc.,
Executive Vice
President, 8044
Montgomery Road, Suite
#382, Cincinnati, Ohio
45236
</TABLE>
Item 27. Principal Underwriters
----------------------
(a) The One Group Services Company acts as administrator and
distributor for each of the Fund's Portfolios.
(b) The directors and officers of The One Group Services Company are
set forth below. The business address of each director or officer is
3435 Stelzer Road, Columbus, Ohio 43219.
<TABLE>
<CAPTION>
Positions and Offices
With The One Group
Name Services Company Positions With Registrant
---- ---------------- -------------------------
<S> <C> <C>
Lynn J. Mangum Chairman and Chief None
Executive Officer
Dennis Sheehan Director None
Kevin J. Dell Vice President/Secretary/ None
Michael D. Burns Vice President None
Steven Ludwig Compliance Officer None
Robert Tuch Assistant Secretary None
David P. Blackmore Vice President/ None
Chief Financial Officer
</TABLE>
-21-
<PAGE> 1068
<TABLE>
<S> <C> <C>
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records
--------------------------------
(1) Banc One Investment Advisors Corporation, 1111 Polaris
Parkway, P.O. Box 710211, Columbus, Ohio 43271-0211
(records relating to its functions as Investment Adviser
and Sub-Administrator).
(2) Independence International Associates, Inc., 75 State
Street, Boston, MA 02109 (records relating to its
functions as Sub-Investment Adviser to the International
Equity Index Fund).
(3) Banc One High Yield Partners, LLC, 1111 Polaris Parkway,
P.O. Box 710211, Columbus, Ohio 43271-0211 and 8044
Montgomery Road, Suite #382, Cincinnati, Ohio 45236
(records relating to its functions as Sub-Investment
Advisor to the High Yield Bond Fund).
(4) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Distributor for all Funds).
(5) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions as
Administrator for all Funds).
(6) State Street Bank and Trust Company, 470 Atlantic
Avenue, Fifth Floor, Boston, MA 02205-9087 (records
relating to its functions as custodian and transfer
agent to all Funds).
(7) Ropes & Gray, One Franklin Square, 1301 K Street, N.W.,
Suite 800 East, Washington, D.C. 20005 (Declaration of
Trust, Code of Regulations, and Minute Books).
Item 29. Management Services
-------------------
N/A
Item 30. Undertakings
------------
The Registrant undertakes to call a meeting of
Shareholders, at the request of at least 10% of the
Registrant's outstanding shares, for the purpose of
voting upon the question of removal of a trustee or
trustees and to assist in communications with other
shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
-22-
<PAGE> 1069
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> 1070
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 the requirements
for effectiveness to this Post-Effective Amendment pursuant to Rule 485(b) under
the 1933 Act and has duly caused this Post-Effective Amendment No. 51 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 22nd day of October,
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 October 22, 1999
- ------------------
* Mark S. Redman
/s/ Peter C. Marshall Trustee October 22, 1999
- ---------------------
*Peter C. Marshall
/s/ Charles I. Post Trustee October 22, 1999
- --------------------
*Charles I. Post
/s/ Frederick W. Ruebeck Trustee October 22, 1999
- -------------------------
*Frederick W. Ruebeck
/s/ Robert A. Oden Trustee October 22, 1999
- ------------------
*Robert A. Oden
/s/ John F. Finn Trustee October 22, 1999
- ----------------
*John F. Finn
/s/ Marilyn McCoy Trustee October 22, 1999
- -----------------
*Marilyn McCoy
/s/ Donald L. Tuttle Trustee October 22, 1999
- --------------------
*Donald L. Tuttle
/s/ Julius L. Pallone Trustee October 22, 1999
- ---------------------
*Julius L. Pallone
*By: /s/ Alan G. Priest
------------------
Alan G. Priest
Attorney-in-Fact, pursuant to powers of attorney filed herewith.
</TABLE>
-24-
<PAGE> 1071
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> 1072
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> 1073
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> 1074
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> 1075
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> 1076
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> 1077
POWER OF ATTORNEY
-----------------
Marilyn McCoy, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ Marilyn McCoy
-----------------
Marilyn McCoy
-31-
<PAGE> 1078
POWER OF ATTORNEY
-----------------
Donald L. Tuttle, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa Albertelli, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One Group(R)
(the "Group"), to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all instruments and/or
documents pertaining to the federal registration of the shares of the Group,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in the name and on behalf of the undersigned as
a director and/or officer of the Group any and all amendments to the Group's
Registration Statement as filed with the Securities and Exchange Commission
under said Acts, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: May 19, 1999
/s/ Donald L. Tuttle
--------------------
Donald L. Tuttle
-31-
<PAGE> 1079
POWER OF ATTORNEY
-----------------
Julius L. Pallone, whose signature appears below, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
The One Group(R) (the "Group"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing and effectiveness of any and all
instruments and/or documents pertaining to the federal registration of the
shares of the Group, including specifically, but without limiting the generality
of the foregoing, the power and authority to sign in the name and on behalf of
the undersigned as a director and/or officer of the Group any and all amendments
to the Group's Registration Statement as filed with the Securities and Exchange
Commission under said Acts, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Dated: May 19, 1999
/s/ Julius L. Pallone
---------------------
Julius L. Pallone
-31-
<PAGE> 1080
Exhibits
(h)(11) Recordkeeping and Late Trading Agreement between One Group Mutual
Funds and Bank One Trust Company, NA.
(h)(34) FundVest Institutional No Transaction Fee Agreement between Pershing
Division of Donaldson Lufkin & Jenrette Securities Corporation, The
One Group Services Company, and One Group Mutual Funds.
(i) Opinion and Consent of Ropes & Gray.
(j)(1) Consent of PricewaterhouseCoopers LLP.
(j)(2) Consent of Ropes & Gray.
1
<PAGE> 1
Exhibit (h)(11)
Recordkeeping and Late Trading Agreement
between
One Group Mutual Funds and Bank One Trust Company, NA
<PAGE> 2
RECORDKEEPING AND LATE TRADING AGREEMENT
AGREEMENT made as of September 13, 1999 by and between Bank One Trust Company,
NA ("Recordkeeper") and One Group(R) Mutual Funds (the "Fund Company").
WITNESSETH
WHEREAS, the Fund Company desires to enter into a Recordkeeping and Late Trading
Agreement pursuant to which the Fund Company will retain the Recordkeeper to
perform certain recordkeeping and accounting services and functions with respect
to transactions in shares ("Shares") of series ("Funds") of the Fund Company
made by or on behalf of participants, beneficiaries or plan sponsors
(collectively, "Participants") in certain employee pension benefit plans as
defined in Section 3(2)(A) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("Plans"), and with respect to holdings of Shares
maintained by or on behalf of such Participants, when with respect to the Fund
Company such Plans maintain with the Fund Company's transfer agent ("Transfer
Agent") a single master shareholder account; and
NOW, THEREFORE, in consideration of the following premises and mutual covenants,
the parties agree as follows:
1. Services Provided by the Recordkeeper
-------------------------------------
When and to the extent requested by the Fund Company, the Recordkeeper
agrees to perform recordkeeping and accounting services and functions
with respect to transactions in and holdings of Shares by or on behalf
of Participants in Plans which maintain Plan level shareholder accounts
with the Fund Company's Transfer Agent. To the extent requested, the
Recordkeeper will provide the following services:
A. Maintain separate records for each Participant reflecting
Shares purchased, redeemed and exchanged on behalf of such
Participant and outstanding balances of Shares owned by or for
the benefit of such Participant.
B. Prepare and transmit to each Plan and/or its Participants
periodic account statements indicating the number of Shares of
the Fund Company owned by or for the benefit of Participants
and purchases, redemptions and exchanges made on behalf of
Participants.
C. With respect to each Plan, aggregate all purchase, redemption
and exchange instructions ("Instructions") made by or on
behalf of the Plan's Participants and Sponsors and transmit
orders ("Orders") based an such aggregate Instructions to the
Transfer Agent for acceptance.
D. Provide to the Fund Company, the Transfer Agent and/or other
parties designated by them such other information relating to
transactions in and holdings of Shares by or on behalf of
Participants as is reasonably requested.
1
<PAGE> 3
E. As agreed upon with the Fund Company, deliver or arrange for
the delivery of appropriate documentation in connections with
Orders.
2. Provision of Net Asset Value.
-----------------------------
The Fund Company or its designee shall furnish the Recordkeeper with
the confirmed net asset value ("NAV") information as of the close of
trading on the New York Stock Exchange (generally, 4:00 p.m., Eastern
Time ("ET")) ("Market Close") on any day that the Fund Company is open
for business ("Business Day"), and dividend and capital gains
information as it arises. The Fund Company or its designee shall use
its best efforts to provide such information by 6:30 p.m., ET on each
Business Day.
3. The Recordkeepers Receipt and Transmission of Orders.
-----------------------------------------------------
A. The Recordkeeper agrees that (i) Orders derived from
Participant Instructions received by the Recordkeeper prior to
the Market Close on any Business Day of the Fund Company, as
defined in the Fund Company's registration statement, ("Day
1") will be electronically transmitted to the Fund Company by
5:00 a.m., ET the next Business Day (such Orders are referred
to as "Day 1 Trades"); and (ii) orders derived from
Instructions received by the Recordkeeper after the Market
Close on Day 1 ("Day 2 Trades") will be electronically
transmitted to the Fund Company on the next Business Day
following Day 2 ("Day 3").
B. If the Recordkeeper cannot electronically transmit Day 1
Trades by 5:00 a.m. on Day 2, the Recordkeeper will transmit
such Orders by facsimile prior to the Market Open (generally
7:00 a.m.) on Day 2.
4. Pricing of Orders.
------------------
The Fund Company agrees that Day 1 Trades will be effected at the NAV
calculated as of the Market Close on Day 1, provided that such trades
are received by the Fund Company by 5:00 a.m., ET on Day 2 or prior to
7:00 a.m. on Day 2; and Day 2 Trades will be effected at the NAV
calculated as of the Market Close on Day 2, provided they are received
by the Fund Company by 5:00 a.m., ET on Day 3 or prior to 7:00 a.m. on
Day 3. The Fund Company agrees that, consistent with the foregoing, Day
1 Trades will have been received by the Fund Company prior to the
Market Close on Day 1, and Day 2 trades will have been received by the
Fund Company prior to the Market Close on Day 2 for all purposes,
including, without limitation, effecting distributions.
5. Confirmations
-------------
The Fund Company will send a confirmation of each Business Day's Order
via electronic transmission or facsimile by Market Close on Day 2 for
Day 1Trades received by 7:00 a.m. on Day 2 and by Day 3 for Day 2
trades received by 7:00 a.m. on Day 3.
2
<PAGE> 4
6. Verification
------------
Each party shall, as soon as practicable after notification that a
report, confirmations, notification or other information has been
transmitted by the other party via facsimile or other electronic
transmission, confirm the receipt of such report, notification or other
information. Such confirmation shall be in oral, written or electronic
format. In the absence of such confirmation, a party to whom the
transmission was sent shall not be held liable for any failure to act
in accordance with the transmission, and absent evidence to the
contrary, the sending party may not claim that the transmission was
received by the other party. Each party shall promptly notify the other
of any errors, omission or interruptions in, or delay or unavailability
of, any such transmission as promptly as possible.
7. Appointment as Agent for Limited Purpose
----------------------------------------
The Recordkeeper shall be deemed the agent of the Fund Company for the
sole and limited purpose of receiving purchase, redemption and exchange
Instructions from Participants or Plan sponsors and transmitting
corresponding Orders to the Transfer Agent. Except as provided
specifically herein, neither the Recordkeeper nor any person to which
the Fund Company may delegate any of its duties hereunder shall be or
hold itself out as an agent of the Transfer Agent or the Fund Company.
8. Representations of Recordkeeper
-------------------------------
The Recordkeeper agrees, represents and warrants that:
A. It will forward Orders within such time periods and to such
parties as are specified by the Fund Company, the Transfer
Agent, the Fund Company's prospectuses and applicable law and
regulation.
B. If and to the extent required under applicable federal and
state securities laws and regulations, it is duly registered
pursuant to such laws and regulations; and the receipt of any
fees by it from the Fund Company will not constitute a
non-exempt "prohibited transaction" for purposes of Title I of
ERISA, and section 4975 of the Internal Revenue Code of 1986,
as amended.
C. At all times during the term of this contract, the
Recordkeeper will maintain errors and omissions coverage in an
amount not less than $1,000,000 per occurrence, and in the
aggregate. A certificate of insurance evidencing such coverage
will be provided by the Recordkeeper to the Fund Company as
soon as is practicable after commencement of this agreement.
D. It is a national banking association with its principal
offices in Columbus, Ohio.
E. It possesses full power and authority to enter into and
perform services under this Agreement.
3
<PAGE> 5
F. It understands and agrees to comply with the Fund Company's
As-of-Trade Processing Policy, attached hereto as Exhibit A.
9. Records and Reporting
---------------------
A. The Recordkeeper will maintain and preserve all records as
required by the Investment Company Act of 1940 (the "1940
Act"), as amended, and the rules thereunder, in connection
with its provision of services under this Agreement. All
records maintained by the Recordkeeper hereunder are the
property of the Fund Company and shall be made available in
accordance with the 1940 Act and the rules thereunder. Upon
the reasonable request of the Fund Company and at its sole
reasonable expense, the Transfer Agent, or the independent
accountants for the Fund Company, the Recordkeeper will
promptly provide copies, or originals if required, of (i)
historical records relating to transactions involving the Fund
Company and Participants; (ii) written communications
regarding the Fund Company to or from Participants; (iii) and
other materials relating to the provision of services by the
Recordkeeper under this Agreement. The Recordkeeper will
comply with any reasonable request for such information and
documents made by the Fund Company or its board of Trustees or
any governmental body or self-regulatory organization.
B. The Recordkeeper agrees that, with respect to the Plans for
which it is providing services under this Agreement, the
Recordkeeper will permit the Fund Company, the Transfer Agent,
or their representatives, to have reasonable access to its
personnel and records in order to facilitate the monitoring of
the quality of the services provided by the Recordkeeper.
Notwithstanding anything herein to the contrary, the
Recordkeeper shall not be required to provide the names and
addresses of Participants to the Transfer Agent or the Fund
Company, unless applicable law or regulation otherwise
requires.
C. This Section 9 shall survive termination of this Agreement.
10. Ability to Provide Services
---------------------------
The Recordkeeper agrees to notify the Fund Company promptly if for any
reason it is unable to perform its obligations under this Agreement.
11. Compensation
------------
A. In consideration of performance of the services by the
Recordkeeper hereunder, the Fund Company will compensate the
Recordkeeper per year at a rate of eighteen dollars ($18.00)
per participant account, or such other amount as to which the
Fund Company and the Recordkeeper shall agree from
time-to-time in writing. The Recordkeeper shall invoice the
Fund Company quarterly. Said compensation will commence with
the calendar quarter ending June 30, 1999.
B. The Recordkeeper will permit the Fund Company and its
representatives (including counsel and independent
accountants) at its sole cost, reasonable
4
<PAGE> 6
access to its records to enable the Fund Company to verify
that the Recordkeeper's charges hereunder comply with the
provisions of this Agreement. Such access shall include, but
not be limited to, up to four on-site inspections of the
Recordkeeper's records each calendar year.
12. Indemnification
---------------
The Recordkeeper shall indemnify and hold harmless the Fund Company
from and against any and all losses and liabilities that it may incur,
including without limitation reasonable attorneys' fees, expenses and
costs arising out of or related to the performance or non-performance
of the Recordkeeper of its responsibilities under this Agreement;
excluding, however, any such claims, suits, loss, damage or costs
caused by, contributed to or arising from any noncompliance by the Fund
Company with its obligations under this Agreement, including the late
or inaccurate provision of NAV information. Fund Company shall
indemnify and hold harmless the Recordkeeper from and against any and
all losses and liabilities that it may incur, including without
limitation reasonable attorneys' fees, expenses and costs arising out
of or related to the performance or non-performance of the Fund Company
of its responsibilities under this Agreement; excluding, however, any
such claims, suits, loss, damage or costs caused by, contributed to or
arising from any noncompliance by the Recordkeeper with its obligations
under this Agreement. This Section 12 shall survive termination of this
Agreement.
13. Termination
-----------
The Fund Company will provide the Recordkeeper with ninety (90) days
prior written notice if purchase Orders may no longer be effected in
accordance with this Agreement. Such termination shall not affect the
remaining provisions of this Agreement and redemption Orders shall
continue to be effected. Either party may terminate this Agreement upon
ninety (90) day's prior written notice to the other party.
14. Limitation of Liability of Trustees, Directors and Shareholders
---------------------------------------------------------------
a. It is expressly agreed that the obligations of the
Recordkeeper hereunder shall not be binding upon any of the
directors, shareholders, nominees, officers, agents or
employees of the Recordkeeper personally, but shall bind only
the Recordkeeper.
B. The execution and delivery of this Agreement have been
authorized by the Trustees of the Fund Company and the
directors of the Recordkeeper, and this Agreement has been
signed and delivered by an authorized officer of the Fund
Company and the Recordkeeper.
15. NOTICES. Unless otherwise specified, all notices and other
communications shall be in writing and shall be duly given if hand
delivered, delivered by facsimile with written confirmation, or mailed
by first class mail to the following addresses:
5
<PAGE> 7
If to the Fund Company:
-----------------------
One Group Mutual Funds
Attn: Mark Redman
3435 Stelzer Road
Columbus, Ohio 43219
If to the Recordkeeper:
-----------------------
Bank One Trust Company, NA
Attn: Robert Konrad
P.O. Box 710091
190 Heatherdown Road
Westerville, OH 43271-0091
16. SEVERABILITY. If any provision of this Agreement are held or made
invalid by a statute, rule, regulation , decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected and,
to this extent, the provisions of this Agreement shall be deemed to be
severable.
17. GOVERNING LAW. This Agreement shall be governed by the laws of the
state of Ohio, except as such laws are superseded by or preempted by
any Federal law.
18. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party.
19. DISPUTE RESOLUTION AND ARBITRATION. Any controversy or claim arising
out of or relating to this Agreement, or the breach of the same which
gives rise to a remedy at law, shall be settled through consultation
and negotiation in good faith and a spirit of mutual cooperation.
However, if those attempts fail, the parties agree that any
misunderstandings or disputes arising from this Agreement shall be
decided by arbitration which shall be conducted, upon request by either
party, before a single arbitrator designated by the American
Arbitration Association (the "AAA"), in accordance with the terms of
the Commercial Arbitration Rules of the AAA, and, to the maximum extent
applicable, the United States Arbitration Act (Title 9 of the United
States Code), or if such Act is not applicable, any substantially
equivalent Ohio state law. The parties further agree that the
arbitrator(s) will decide which party must bear the expenses of the
arbitration proceedings. The arbitration will take place in Columbus,
Ohio.
20. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties, supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, and shall not be
modified or amended except by a writing signed by both parties.
21. FUND COMPANY LIABILITY. The names "One Group Mutual Funds" and
"Trustees of One Group Mutual Funds" refer, respectively, to the trust
created and the trustees, as trustees, but not individually or
personally, acting from time to time under a Declaration of Fund
Company dated as of May 23, 1985 to which reference is hereby made and
a copy of
6
<PAGE> 8
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all
amendments thereto so filed or hereafter filed. The obligations of "One
Group Mutual Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agent are made not
individually, but in such capacities, and are not binding upon any of
the Trustees, Shareholders, or representatives of the Fund Company
personally, but bind only the assets of the Fund Company, and all
persons dealing with any series of Shares of the Fund Company must look
solely to the assets of the Fund Company belonging to such series for
the enforcement of any claim against the Fund Company.
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
One Group(R) Mutual Funds Bank One Trust Company, NA
By: /s/ Mark S. Redman By: /s/ John Alexander
------------------------ --------------------------------
Title: President Title: Senior Managing Director
--------------------- -----------------------------
7
<PAGE> 1
Exhibit (h)(34)
FundVest Institutional No Transaction Fee Agreement
<PAGE> 2
FUNDVEST INSTITUTIONAL NO TRANSACTION FEE AGREEMENT
This Agreement is made as of ________________________, 1999, between Pershing
Division of Donaldson, Lufkin & Jenrette Securities Corporation ("Pershing"), a
Delaware Corporation, and The One Group Services Company ("Fund Agent"), and One
Group Mutual Funds ("Fund").
WHEREAS it is understood that Pershing functions primarily as a clearing agent
for introducing broker-dealers/correspondents and in such capacity performs
traditional operational functions, including execution and clearance of trades
and holding customers funds and securities, and that certain of these
broker-dealers/correspondents have agreed to participate in Pershing's mutual
fund no transaction fee program ("FundVest") under the terms and conditions as
set forth in a separate agreement between Pershing and the
broker-dealer/correspondent ("Participating Correspondent(s)");
WHEREAS the terms and conditions set forth herein apply to mutual fund
transactions for funds participating in FundVest effected either on behalf of
customers of Participating Correspondents or customers of Pershing
("Client/Shareholder(s)");
WHEREAS the Fund wishes to have Pershing or a Participating Correspondent act as
a sub-transfer agent for the Fund with respect to shares of the Fund held under
the FundVest program.
WHEREAS the Fund Agent wishes to have Pershing or Participating Correspondents
provide, on its behalf, certain administrative services with respect to
Client/Shareholders of such Fund;
WHEREAS such services will be performed pursuant to the terms and conditions as
set forth herein and in the manner described in Schedule II attached hereto;
NOW THEREFORE, in consideration of the foregoing and the mutual promises set
forth below, the parties agree as follows:
1. Services
--------
During the term of this Agreement, Pershing or Participating Correspondents
will perform sub-transfer agency and shareholder services as set forth in
Schedule III attached hereto (the "Services"). Such Schedule may be amended
from time to time with mutual consent of the parties.
2. Fees
----
a. For performance of Services, Pershing shall receive a fee (the "Fee")
which will be calculated and paid as provided in Schedule IV attached
hereto. Fees are solely for sub-transfer agency, shareholder servicing
and other administrative services provided by Pershing or Participating
Correspondents and do not constitute payment in any manner for
investment advisory, distribution, trustee, or custodial services. Fees
shall be payable on all shares of the Fund being held by Pershing for
Client/Shareholders excluding: (i) shares held by Pershing for such
Client/ Shareholders prior to the effective date of Agreement with Fund
Agent; (ii) shares first placed into a Client/Shareholders account
after the termination of the Agreement with such Fund; (iii) shares on
which Pershing or Participating Correspondent has, upon purchase,
assessed any transaction fee.
The total number of shares of the funds upon which Fees are due
Pershing are referred to within this Agreement as program shares
("Program Shares"). This Fee is in addition to any service or 12b-1
fees due and payable by Fund Agent to Pershing or Participating
<PAGE> 3
Correspondent pursuant to any existing l2b-1 or service agreements
between Fund Agent and Pershing or Participating Correspondent.
b. Fund Agent's sole responsibility for Fee payment shall be to Pershing.
c. In the event that Schedule III is revised, the parties agree, in good
faith, to negotiate a revision of fees set forth in Schedule IV.
3. Transaction Charges
-------------------
Pershing or any Participating Correspondent shall not, during the term of
this Agreement, assess against, or collect from, Client/Shareholders, any
transaction fee upon the purchase or redemption of any Fund's shares that
meet the minimum purchase criteria set forth in this Agreement, except as
noted in Section 4 below. Client/Shareholder purchases not meeting the
criteria as set forth herein may be charged a transaction fee by the
Participating Correspondent or Pershing, as the case may be, and will not
be included in Fee invoices presented to Fund for payment.
4. Short Term Redemptions
----------------------
It is hereby understood that Pershing or Participating Correspondents may
apply a redemption fee for any short-term redemption of shares purchased
within specified time frames.
5. Indemnification
---------------
a. Pershing shall indemnify and hold harmless Fund Agent, the Fund, their
directors' officers, employees, and agents (hereinafter "Indemnified
Parties") from and against any and all losses, claims, liabilities and
expenses (including, but not limited to, reasonable attorney's fees)
incurred by any of them and arising as a result of: (i) Pershing's
dissemination of information (oral or written) regarding the any Funds,
that is materially incorrect and that was not provided to Pershing, or
approved by such Fund, any of its affiliated persons (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")
(affiliates) or agents; or (ii) Pershing's willful misconduct or
negligence in the performance of, or failure to perform, its
obligations under this Agreement, except to the extent the losses are a
result of the negligence, willful misconduct, or breach of this
Agreement by an Indemnified Party or (iii) the failure of Pershing to
comply with any provision hereof or the breach of any representation or
warranty herein (including the Schedules hereto).
b. Fund Agent hereby agrees to indemnify Pershing and Participating
Correspondents their directors, officers, employees, and agents
(hereinafter, "Indemnified Parties") from and against any and all
losses, claims, damages, liabilities and expenses (including, but not
limited to, reasonable attorney's fees) to which Pershing or
Participating Correspondents may become subject as a result of (i) Fund
Agents violation of any law, rule or regulation, at common law or
otherwise, including any related to or in connection with the offering
for sale of Fund shares, (ii) dissemination of any information,
advertising or promotional material regarding Fund, that is materially
incorrect, inaccurate or misleading and which was provided or generated
by Fund Agent or any of its affiliated persons (as defined in the
Investment Company of 1940, as amended (the "1940 Act")); or (iii)
willful misconduct or negligence in the performance of, or failure to
perform, its obligations pursuant to this Agreement except to the
extent the losses are a result of the negligence or willful misconduct
of an Indemnified Party.
c. In any event, no party shall be liable for any special, consequential
or incidental damages.
<PAGE> 4
d. In order that the indemnification provisions contained herein shall
apply, upon the assertion of a claim or loss for which any party (the
"Indenmitor") may be required to indemnify another party (the
"Indemnitee"), the Indemnitee shall promptly notify the Indemnitor of
such assertion or loss, and shall keep the INDEMINITOR ADVISED WITH
RESPECT to all developments concerning any such claim. The Indemnitor
shall have the option to participate at its expense with the Indemnitee
in the defense of any such claim. The Indemnitee shall in no case
confess any claim or make any compromise in any case in which the
Indemnitor may be required to indemnify it except with the Indemnitor's
prior written consent.
e. This Section 5 shall survive termination of this Agreement.
6. Role of Parties
---------------
The parties acknowledge and agree that the Services under this Agreement
are sub-transfer agent, recordkeeping, shareholder communication, and
related services only and are not the services of an underwriter or a
principal underwriter within the meaning of the Securities Act of 1933, as
amended, or the Investment Company Act of 1940. This Agreement does not
grant Pershing or Participating Correspondents any right to purchase shares
from any Fund (although it does not preclude them from purchasing any such
shares), nor does it constitute Pershing or Participating Correspondent an
agent of the Fund Agent for purposes of selling shares of any Fund to any
dealer or to the public. To the extent Pershing or Participating
Correspondent is involved in the purchase of shares of Fund by
Client/Shareholders, such involvement will be as agent of such
Client/Shareholders only.
7. Information to be provided
--------------------------
The Fund Agent shall provide to Pershing, prior to the effectiveness of
this Agreement, or as soon thereafter as possible, a copy of the current
prospectus and statement of additional information for each Fund
participating in the program described herein. The Fund Agent shall provide
Pershing with written copies of any amendments to, or changes in such
documents as soon as possible after such amendments or changes become
available.
8. Notices
-------
All notices required under this Agreement must be in writing and delivered
either personally or via first class mail. Such notices will be deemed to
be received as of the date of actual receipt, or three (3) days after
deposit, first class postage prepaid, in the United States mail, whichever
is earlier.
All such notices shall be made:
If to Pershing, to: Pershing Division of Donaldson, Lufkin
& Jenrette Securities Corporation
One Pershing Plaza
Jersey City, New Jersey 07399
with a copy to: Attention: General Counsel (at the same address); if to the
Fund Agent, to the address as given below in the signature block, with a
copy to the General Counsel (at the same address).
9. Nonexclusivity
--------------
Each Party acknowledges that the other may enter into agreements, similar
to this one, with other parties, for the performance of services similar to
those to be provided under this Agreement, unless otherwise agreed to in
writing by the parties.
<PAGE> 5
10. Assignability
-------------
This Agreement is not assignable by any party without the other party's
prior written consent. Any attempted assignment in contravention hereof
shall be null and void; provided, however, that Pershing or the Fund may
assign its rights and obligations under this Agreement to any Affiliate.
11. Schedules
---------
All Schedules attached to this Agreement (as they may be amended from time
to time) are, by this REFERENCE, INCORPORATED INTO, AND MADE A PART of,
this Agreement.
12. Entire Agreement Amendment
--------------------------
This Agreement (including the Schedules attached hereto), constitutes the
entire agreement between the parties with regard to the subject matter
herein. Additionally, these materials supersede any and all agreements,
representations and warranties, whether written or oral, made prior to the
execution of this Agreement. This Agreement and the Schedules attached
hereto may be amended only by a writing executed by each party to be bound
by the amendment.
13. Governing Law
-------------
This Agreement will be governed by, and interpreted under, the laws of the
State of New York as applied to contracts entered into and to be performed
entirely within that state.
14. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, but all of which together shall constitute one
instrument.
15. Effectiveness of Agreement Termination
--------------------------------------
a. This Agreement will become effective as to a Fund as of (i) the date set
forth on Schedule I opposite the name of the Fund; or (ii) such later
date as Pershing may, in its discretion, designate.
b. This Agreement shall have an initial term of one (1) year after which it
may be terminated, as to one or more Funds (as reflected in Schedule I),
by either party (i) upon sixty (60) days written notice to the other
parties; or (ii) upon such shorter notice as is required by law, order,
or instruction from a court of competent jurisdiction, regulatory body,
or self-regulatory organization with jurisdiction over the terminating
party; or (iii) automatically, effective on the day following
termination of any plan of distribution ("Rule 12b-1 Plan") adopted and
maintained pursuant to Rule 12b-1 under the 1940 Act by any fund that
has a Rule 12b-1 Plan in effect as of the effective date of this
Agreement, provided that a portion of the Fee is paid pursuant to the
Rule 12b-1 Plan to; (iv) Fund Agent's non-performance of
responsibilities including, but not limited to, non-payment of Fees.
c. Upon termination as to a Fund, Fund Agent will not be obligated to pay
the Fee with respect to any shares of the Fund that become part of a
Client/Shareholders account after the date of such termination. However,
notwithstanding any such termination, the Fund will remain obligated to
pay Pershing the Fee as to each share of such Fund that was considered
when calculating the Fee as of the date of termination (a
"Pre-Termination Share"), for so long as such Pre-Termination Share is
held in any Client/Shareholders account and Pershing or Participating
Correspondent continues to perform the Services as to such shares.
16. Confidentiality
---------------
Each party acknowledges and understands that any and all technical, trade
secret, or business information, including, without limitation, financial
information, business or marketing strategies or plans, product development
or customer information, which is disclosed to the other or is otherwise
obtained by the other, its affiliates, agents or representatives during the
term of this Agreement (the
<PAGE> 6
"Proprietary Information") is confidential and proprietary, constitutes
trade secrets of the owner, and is of great value and importance to the
success of the owner's business. Each party agrees to use its best efforts
(the same being not less than that employed to protect his own proprietary
information) to safeguard the Proprietary Information and to prevent the
unauthorized, negligent or inadvertent use or disclosure thereof. Neither
party shall, without the prior written approval of any officer of the
other, directly or indirectly, disclose the Proprietary Information to any
person or business entity except for a limited number of employees,
attorneys, accountants and other advisors of the other on a need-to-know
basis or as may be required by law or regulation. Each party shall promptly
notify the other in writing of any unauthorized, negligent or inadvertent
use or disclosure of Proprietary information.
Each party shall be liable under this Agreement to the other for any use or
disclosure in violation of this Agreement by its employees, attorneys,
accountants, or other advisors or agents. This section shall continue in
full force and effect notwithstanding the termination of this Agreement.
17. Custody
-------
Fund acknowledges that Fund shares maintained by the Fund for
Client/Shareholders hereunder are held in custody for the exclusive benefit
of Client/Shareholders and shall be held free of any right, charge,
security interest, lien or claim against Pershing or Participating
Correspondents in favor of the Fund or its agents acting on behalf of the
Fund.
18. Additional Terms applicable to One Group
----------------------------------------
The names 'One(R) Group Mutual Funds' and 'Trustees of One(R) Group Mutual
Funds' refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under
a Declaration of Trust dated 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(R) Group Mutual Funds' entered into in the name or on behalf thereof
by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders or representatives of the Trust personally, but bind
only the assets of the Trust and all persons dealing with any series of
Shares of the Trust must look solely to the assets of the Trust belonging
to such series for the enforcement of any claims against the Trust.
<PAGE> 7
IN WITNESS WHEREOF, duly authorized representatives of the parties hereto have
executed this Agreement.
Fund Agent: The One Group Services Company Pershing Division of Donaldson,
Lufkin & Jenrette Securities
By: /s/ Mark S. Redman Corporation
------------------------------------
Print Name: Mark S. Redman By: /s/ John C. Colas
--------------------------- ----------------------------
Title: President Print Name: John C. Colas
-------------------------------- ---------------------
Address: 3435 Stelzer Road Title: Senior Vice President
----------------------------- -------------------------
Columbus, OH 43219
- ---------------------------------------
One Group Mutual Funds
By: /s/ James T. Gillespie
-----------------------------------
Print Name: James T. Gillespie
---------------------------
Title: Vice President
---------------------------------
Address: 3435 Stelzer Road
------------------------------
Columbus, OH 43219
- ---------------------------------------
<PAGE> 8
SCHEDULE I
Fund Date
One Group High Yield Bond Fund Class A 5/l/99
One Group Bond Fund Class A 5/l/99
One Group Balanced Fund Class A 5/l/99
One Group Large Cap Growth Fund Class A 5/l/99
One Group Large Cap Value Fund Class A 5/l/99
One Group Mid Cap Growth Fund Class A 5/l/99
One Group International Equity Index Fund Class A 5/l/99
One Group Mid Cap Value Fund Class A 5/l/99
One Group Equity Income Fund Class A 5/l/99
One Group Diversified Equity Fund Class A 5/l/99
One Group Small Cap Growth Fund Class A 5/1/99
One Group Investor Balanced Fund Class A 5/l/99
One Group Investor Conservative Growth Fund Class A 5/1/99
One Group Investor Growth Fund Class A 5/l/99
One Group Investor Growth & Income Fund Class A 5/l/99
One Group Small Cap Value Fund Class A 5/l/99
One Group Diversified Mid Cap Fund Class A 5/l/99
<PAGE> 9
SCHEDULE II
OPERATIONAL PROCEDURES RELEVANT TO THE AGREEMENT
Unless processed using the NSCC FundServ and/or Networking interfaces in the
customary manner as prescribed by the NSCC, or as amended by mutual agreement
whether verbally or in writing, operational responsibilities will be executed as
outlined below in paragraphs (1), (2), and (3).
(1) NON FUNDSERV PURCHASE AND REDEMPTION ORDERS
Pershing will aggregate and calculate purchase and redemption orders for shares
of a Fund that it has accepted as placed by Client/Shareholders prior to the
close of trading on the New York Stock Exchange, and will communicate to Fund
Agent such orders for each Fund for each business day. Fund Agent agrees that
such orders will receive the applicable Fund's closing net asset value for that
business day, provided they have been received by Pershing by 4:00 p.m.
(Eastern time) and are communicated to Fund by 8:00 p.m. Eastern Time.
(2) SETTLEMENT OF NON FUNDSERV TRADES
Both Pershing and Fund will use their best efforts to cause to be transmitted by
wire on the Business Day immediately following trade date (settlement date) to
an account as directed by the counterpart, the proceeds of all redemption orders
and the purchase price of all purchase orders.
(3) ACCOUNT ACTIVITY AND DISTRIBUTION INFORMATION (OMNIBUS OR HOUSE ACCOUNTS)
(a) Fund shall cause to be provided to Pershing confirmations of Fund activity
in the form of statements detailing activity no less frequently than monthly, as
well as other information as may reasonably be requested by Pershing.
(b) Fund shall cause to be provided to Pershing all distribution announcement
information (ex. dates, record dates, payable dates, distribution rate per
share, record date share balances, etc.) as soon as it is announced by each
Fund.
<PAGE> 10
SCHEDULE III
Schedule of services to be performed by Pershing or Participating Correspondent
(s) pursuant to this Agreement.
1. Pershing/Participating Correspondent represents and warrants that it has
and will continue at all times to have the necessary facilities, equipment
and personnel to perform the services hereunder in a businesslike and
competent manner and its system complies with any applicable laws, rules
and regulations related to the services to be provided under this
Agreement, including the maintenance and preservation of all records and
registrations required by any applicable laws, rules and regulations.
2. Client/Shareholders are aware that they are transacting business with
Pershing/Participating Correspondent and not the Fund Agent, and will look
to Pershing/Participating Correspondent and not the Fund Agent for
resolution of problems or discrepancies in their accounts.
3. PERSHING/PARTICIPATING CORRESPONDENT AGREES THAT IT WILL PERFORM VARIOUS
services for the Client/Shareholders in those accounts, including where
applicable:
- Establishing and maintaining records of
Client/Shareholders' accounts;
- Processing purchase and redemption transactions;
Confirming Client/Shareholder transactions;
- Answering routine client inquires regarding the Fund;
- Assisting clients in changing dividend options, accounts
designations and addresses; withholding taxes on
non-resident alien accounts;
- Disbursing income dividends and capital gains
distributions;
- Reinvesting dividends and distributions; Preparing and
delivering to Client/Shareholders and state and federal
authorities, including the United States Internal Revenue
Service, such information respecting dividends and
distributions paid by the Funds as may be required by law,
rule or regulation;
- Withholding on dividends and distributions as may be
required by state or Federal authorities from time to
time;
- And such other services as Fund may reasonably request.
Pershing/Participating Correspondent shall maintain all historical
Client/Shareholder records, consistent with requirements of all applicable
laws, rules and regulations. Upon the request of the Fund or Fund Agent,
Pershing shall provide copies of all the historical records relating to
transactions between the Funds and the Client/Shareholders, written
communications regarding the Funds to or from the Client/Shareholders and
other materials, in each case (1) as are maintained by Pershing in the
ordinary course of its business, and (2) as may reasonably be requested to
enable the Fund including without limitation its auditors or legal counsel
to (A) monitor and review the Services, (B) comply with any request of a
governmental or self regulatory organization, (C) verify compliance by
Pershing with the terms of this agreement, (D) make required regulatory
reports, or (E) perform general customer supervision. Pershing agrees that
it will permit the Fund Agent to have reasonable access to its personnel
and records in order to facilitate the monitoring of the services. Upon the
request of Pershing, Fund Agent shall provide copies of all the historical
records relating to transactions between the Funds and Pershing, written
communications regarding the Funds to or from Pershing and other materials,
in each case (1) as are maintained by the Fund Agent in the ordinary course
of its business and in compliance with applicable law, and (2) as may be
requested to enable Pershing to (A) comply with the request of any
governmental body or self regulatory organization, (B) verify compliance by
the Fund Agent with the terms of this Agreement, (C) make required
regulatory reports, or (D) perform general customer supervision.
<PAGE> 11
4. Pershing/Participating Correspondent shall make available to Fund Agent (if
requested) records or communications necessary to determine the number of
Client/Shareholders in each Pershing/Participating Correspondent omnibus
account, if applicable.
<PAGE> 12
SCHEDULE IV
For performance of Services as outlined in Schedule 11 (attached hereto),
Pershing shall receive a service fee calculated as follows:
An annual service fee rate of 15 basis points of the average daily market value
of Program Shares, to be paid monthly upon receipt of invoice by the Fund Agent
from Pershing. Total market value of Program Shares will be calculated daily and
averaged throughout the exact number of days in the month to arrive at the
average daily market value.
The fee shall be paid by both the Fund and Fund Agent. The Fund shall pay no
more than that portion of the fee equivalent to $16 per account for each account
holding Program Shares, and the Fund Agent shall pay the remainder of the fee.
Payment shall be made by Fund and Fund Agent to Pershing within 30 days after
Fund's receipt of such invoice. Unless otherwise agreed to by Pershing, Fund,
and Fund Agent, such payment shall be by wire transfer and shall be separate
from other wire transfer payments from the Fund and Fund Agent to Pershing.
<PAGE> 1
Exhibit (i)
Opinion and Consent
of
Ropes & Gray
<PAGE> 2
ROPES & GRAY
ONE FRANKLIN SQUARE
1301 K STREET, N.W.
SUITE 800 EAST
WASHINGTON, D.C. 20005
WRITER'S DIRECT DIAL NUMBER: (202) 626-3925
October 21, 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 on the foregoing, we are of the opinion that the issue and sale
of authorized but unissued Shares of the Funds have been duly authorized under
Massachusetts law. Upon the original issue and sale of your authorized but
unissued Shares and upon receipt of the authorized consideration therefor in an
amount not less than the net asset value of the Shares established and in force
at the time of their sale, the Shares issued will be validly issued, fully paid
and non-assessable.
<PAGE> 3
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust provides for indemnification out
of the property of a particular series of Shares for all loss and expenses of
any shareholder of that series held personally liable solely by reason of his
being or having been a shareholder. Thus, the risk of shareholder liability is
limited to circumstances in which that series of Shares itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection with the
filing of the Post-Effective Amendment. We consent to the filing of this opinion
with and as part of your Post-Effective Amendment.
Sincerely,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
Exhibit (J)(1)
Consent
of
PricewaterhouseCoopers LLC
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 51 to the Registration Statement on Form N-1A (File No. 2-95973) of One
Group Mutual Funds, of our reports dated August 20, 1999 on our audits of the
financial statements and financial highlights of the Prime Money Market Fund,
the U.S. Treasury Securities Money Market Fund, the Municipal Money Market Fund,
the Michigan Municipal Money Market Fund, the Ohio Municipal Money Market Fund,
the Ultra Short-Term Bond Fund, the Short-Term Bond Fund, the Intermediate Bond
Fund, the Bond Fund, the Income Bond Fund, the Government Bond, Fund, the
Treasury & Agency Fund, the High Yield Bond Fund, the Short-Term Municipal Bond
Fund, the Intermediate Tax-Free Bond Fund, the Tax-Free Bond Fund, the Municipal
Income Fund, the Arizona Municipal Bond Fund, the Kentucky Municipal Bond Fund,
the Louisiana Municipal Bond Fund, the Michigan Municipal Bond Fund, the Ohio
Municipal Bond Fund, the West Virginia Municipal Bond Fund, the Institutional
Prime Money Market Fund, the Treasury Only Money Market Fund, the Government
Money Market Fund, the Cash Management Money Market Fund, the Treasury Prime
Cash Management Money Market Fund, the U.S. Government Securities Cash
Management Money Market Fund, the Treasury Cash Management Money Market Fund,
the Municipal Cash Management Money Market Fund, the Small Cap Growth Fund, the
Small Cap Value Fund, the Mid Cap Growth Fund, the Mid Cap Value Fund, the
Diversified Mid Cap Fund, the Large Cap Growth Fund, the Large Cap Value Fund,
the Equity Income Fund, the Diversified Equity Fund, the Balanced Fund, the
Equity Index Fund, the Market Expansion Index Fund, the International Equity
Index Fund, the Diversified International Fund, the Investor Conservative Growth
Fund, the Investor Balanced, the Investor Growth & Income Fund and the Investor
Growth Fund constituting One Group Mutual Funds which reports are included in
the Annual Reports to Shareholders for the period ended June 30, 1999, which are
incorporated by reference in the Statement of Additional Information in this
Post-Effective Amendment to the Registration Statement. We also consent to the
references to our Firm under the caption "Financial Highlights" in the
Prospectuses and "Experts" in the Statement of Additional Information relating
to One Group Mutual Funds in this Post-Effective Amendment No. 51 to the
Registration Statement on Form N-1A (File No. 2-95973).
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
October 21, 1999
<PAGE> 1
Exhibit (j)(2)
Consent of Ropes & Gray
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" and "Experts" included in or made a part of
Post-Effective Amendment No. 51 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.
October 21, 1999
