<PAGE>
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")
<PAGE>
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")
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"),
ONE GROUP TREASURY PRIME MONEY MARKET FUND (THE "TREASURY PRIME MONEY
MARKET FUND"), AND
ONE GROUP MORTGAGE-BACKED SECURITIES FUND (THE "MORTGAGE-BACKED SECURITIES
FUND")
(EACH A "FUND," AND COLLECTIVELY THE "FUNDS")
NOVEMBER 1, 2000
This Statement of Additional Information is not a Prospectus, but supplements
and should be read in conjunction with the Prospectuses dated November 1, 2000.
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, 2000 is incorporated by reference into this Statement of
Additional Information. A copy of the Annual Report and each Prospectus are
available without charge by writing to One Group Administrative Services, Inc.,
at 1111 Polaris Parkway, P.O. Box 710211, Columbus, Ohio 43271-0211or by calling
toll free (800) 480-4111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
THE TRUST
INVESTMENT OBJECTIVES AND POLICIES................................................................................5
Additional Information on Fund Instruments....................................................................5
Asset-Backed Securities...................................................................................5
Bank Obligations..........................................................................................5
Commercial Paper..........................................................................................6
Common Stock..............................................................................................6
Convertible Securities....................................................................................6
Demand Features...........................................................................................7
Foreign Investments.......................................................................................7
Risk Factors of Foreign Investments...................................................................7
Limitations on the Use of Foreign Investments.........................................................8
Foreign Currency Transactions.............................................................................8
Position Hedging......................................................................................9
Forward Foreign Currency Exchange Contracts...........................................................10
Foreign Currency Futures Contracts....................................................................10
Foreign Currency Options..............................................................................11
Foreign Currency Conversion...........................................................................12
Other Foreign Currency Hedging Strategies.............................................................12
Risk Factors in Hedging Transactions..................................................................12
Futures and Options Trading...............................................................................13
Futures Contracts.....................................................................................13
Limitations on the Use of Futures Contracts...........................................................14
Risk Factors in Futures Transactions..................................................................14
Options Contracts.....................................................................................15
Purchasing Call Options...............................................................................16
Writing (Selling) Covered Calls.......................................................................16
Purchasing Put Options................................................................................17
Secured Puts..........................................................................................17
Straddles and Spreads.................................................................................17
Risk Factors in Options Transactions..................................................................17
Limitations on the Use of Options.....................................................................18
Government Securities.....................................................................................18
High Quality Investments With Regard to the Money Market and Institutional Money Market Funds.............19
High Yield/High Risk Securities/Junk Bonds................................................................20
Index Investing by the Equity Index, Market Expansion Index and International Equity Index Funds..........21
Impact of Initial Public Offerings on Smaller Funds.......................................................23
Index Shares..............................................................................................23
Investment Company Securities.............................................................................23
Loan Participations and Assignments.......................................................................23
Mortgage-Related Securities...............................................................................24
Mortgage-Backed Securities (CMOs and REMICs)..........................................................24
</TABLE>
<PAGE>
<TABLE>
Page
<S> <C>
Limitations on the Use of Mortgage-Backed Securities.................................................. 26
Mortgage Dollar Rolls................................................................................. 27
Stripped Mortgage-Backed Securities................................................................... 27
Adjustable Rate Mortgage Loans........................................................................ 28
Risk Factors of Mortgage-Related Securities........................................................... 29
Municipal Securities...................................................................................... 30
Risk Factors in Municipal Securities.................................................................. 32
Limitations on the Use of Municipal Securities........................................................ 33
Arizona Municipal Securities.......................................................................... 33
Kentucky Municipal Securities......................................................................... 34
Louisiana Municipal Securities........................................................................ 35
Michigan Municipal Securities......................................................................... 35
Ohio Municipal Securities............................................................................. 37
West Virginia Municipal Securities.................................................................... 37
New Financial Products................................................................................... 38
PERCS ................................................................................................. 38
Preferred Stock.......................................................................................... 38
Real Estate Investment Trusts ("REITs").................................................................. 38
Repurchase Agreements.................................................................................... 39
Reverse Repurchase Agreements............................................................................ 40
Restricted Securities.................................................................................... 40
Securities Lending....................................................................................... 41
Short-term Funding Agreements............................................................................ 41
Structured Instruments................................................................................... 42
Swaps, Caps and Floors................................................................................... 42
Treasury Receipts........................................................................................ 44
U.S. Treasury Obligations................................................................................ 44
Variable and Floating Rate Instruments................................................................... 44
Warrants................................................................................................. 45
When-Issued Securities and Forward Commitments........................................................... 46
Investment Restrictions........................................................................... 46
Portfolio Turnover........................................................................................ 54
Additional Tax Information Concerning All Funds........................................................... 54
Additional Tax Information Concerning the Tax-Advantaged Funds............................................ 56
Additional Tax Information Concerning the International Funds............................................. 58
Foreign Tax Credit........................................................................................ 59
Additional Tax Information Concerning the Funds of Funds.................................................. 59
VALUATION
Valuation of the Money Market and Institutional Money Market Funds........................................ 60
Valuation of the Equity Funds, the Bond Funds and the Municipal Bond Funds................................ 60
Additional Information Regarding The Calculation Of Per Share
Net Asset Value........................................................................................... 61
Additional Purchase And Redemption Information............................................................ 63
Exchanges................................................................................................. 63
Redemptions............................................................................................... 64
</TABLE>
<PAGE>
<TABLE>
Page
<S> <C>
MANAGEMENT OF THE TRUST........................................................................................... 65
Trustees & Officers........................................................................................... 65
Investment Advisor and Sub-Advisors........................................................................... 69
Codes of Ethics............................................................................................... 75
Portfolio Transactions........................................................................................ 76
Administrator, Predecessor Administrators and Sub-Administrators ............................................. 80
Distribution Plan............................................................................................. 88
Cash Compensation to Shareholder Servicing Agents............................................................. 90
Custodian, Transfer Agent and Dividend Disbursing Agent....................................................... 90
Subcustodian.................................................................................................. 91
Experts .................................................................................................. 91
ADDITIONAL INFORMATION........................................................................................ 93
Description of Shares......................................................................................... 93
Shareholder and Trustee Liability............................................................................. 94
Performance .................................................................................................. 95
Calculation of Performance Data............................................................................... 95
Miscellaneous................................................................................................. 111
FINANCIAL STATEMENTS.......................................................................................... 157
</TABLE>
Appendix A - Description of Ratings
<PAGE>
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-five 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),
the Diversified International Fund (formerly, Pegasus International
Equity Fund), 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), the Bond Fund (formerly, Pegasus Bond Fund), and the Mortgage-
Backed Securities Fund (these nine 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 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").
-1-
<PAGE>
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:
-2-
<PAGE>
<TABLE>
<CAPTION>
Service
FUND Class A Class B Class C Class Class S Class I
---- ------- ------- ------- ----- ------- -------
<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 Cap........................... X X X X
6. Large Cap Growth.............................. X X X X
7. Large Cap Value............................... X X X X
8. Equity Income................................. X X X X
9. Diversified Equity............................ X X X X
10. Balanced...................................... X X X X
11. Equity Index.................................. X X X X
12. Market Expansion Index........................ X X X X
13. International Equity Index.................... X X X X
14. Diversified International..................... X X X X
15. Real Estate................................... X* X* X* X*
16. Ultra Short-Term Bond......................... X X X
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 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 Municipal Bond..................... X X X
25. Intermediate Tax-Free Bond.................... X X X
26. Tax-Free Bond................................. X X X
27. Municipal Income.............................. X X X X
28. Arizona Municipal Bond........................ X X X
29. Kentucky Municipal Bond....................... X X X
30. Louisiana Municipal Bond...................... X X X
31. Michigan Municipal Bond....................... X X X
32. Ohio Municipal Bond........................... X X X
33. West Virginia Municipal Bond.................. X X X
34. Investor Growth............................... X X X X
35. Investor Growth & Income...................... X X X X
36. Investor Balanced............................. X X X X
37. Investor Conservative Growth.................. X X X X
38. Cash Management Money Market.................. X*** X***
39. Treasury Cash Management Money Market......... X*** X***
40. Treasury Prime Cash Management Money Market... X*** X***
41. U.S. Government Securities Cash
Management Money Market....................... X*** X***
42. Municipal Cash Management Money Market........ X X
43. Prime Money Market............................ X X X X X
44. U.S. Treasury Securities Money Market......... X X X X X
45. Municipal Money Market........................ X X** X X
46. Michigan Municipal Money Market............... X X** X** X
47. Ohio Municipal Money Market................... X X** X** X
48. Treasury Prime Money Market................... X* X* X* X*
49. U.S. Government Securities Money Market....... X* X* X* X* X*
50. Institutional Prime Money Market.............. X X
51. Treasury Only Money Market.................... X X
52. Government Money Market....................... X X
53. Tax-Exempt Money Market....................... X* X*
54. Technology.................................... X X X X
55. Mortgage-Backed Securities.................... 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.
*** The Fund has discontinued public sale of shares to new investors, but
shareholders who have existing Fund accounts may make additional
investments.
-3-
<PAGE>
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:
<TABLE>
<CAPTION>
Name of Former Pegasus Fund One Group Mutual Funds' Name
<S> <C>
1. Pegasus Multi-Sector Bond Fund 1. the Income Bond Fund
2. Pegasus Intermediate Bond Fund 2. the Intermediate Bond Fund
3. Pegasus Small-Cap Opportunity Fund 3. the Small Cap Value Fund
4. Pegasus Mid-Cap Opportunity Fund 4. the Diversified Mid Cap Fund
5. Pegasus International Equity Fund 5. the Diversified International Fund
6. Pegasus Market Expansion Index Fund 6. the Market Expansion Index Fund
7. Pegasus Bond Fund 7. the Bond Fund
8. Pegasus Short Municipal Bond Fund 8. the Short-Term Municipal Bond Fund
9. Pegasus Municipal Bond Fund 9. the Tax-Free Bond Fund
10. Pegasus Michigan Municipal Bond Fund 10. the Michigan Municipal Bond Fund
11. Pegasus Michigan Municipal Money Market Fund 11. the Michigan Municipal Money Market Fund
12. Pegasus Cash Management Fund 12. the Cash Management Money Market Fund
13. Pegasus Treasury Cash Management Fund 13. the Treasury Cash Management Money Market Fund
14. Pegasus Treasury Prime Cash Management Fund 14. the Treasury Prime Cash Management Money Market Fund
15. Pegasus U.S. Government Securities Cash 15. the U.S. Government Securities Cash Management
Management Fund 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.
-4-
<PAGE>
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. The Funds are
advised by Banc One Investment Advisors Corporation ("BANC ONE INVESTMENT
ADVISORS"). In addition, Banc One High Yield Partners, LLC (the "HIGH YIELD
SUB-ADVISOR" or the "SUB-ADVISOR") serves as sub-advisor for the Income Bond
Fund and the High Yield Bond Fund. When this Statement of Additional Information
indicates that an action or determination may be taken or made by Banc One
Investment Advisors, such action or determination may be taken or made with
respect to the Income Bond Fund or the High Yield Bond Fund by the High Yield
Sub-Advisor subject to the supervision of Banc One Investment Advisors.
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, or credit card
receivables. Asset-backed securities also include 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. 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 recover additional amounts paid
(i.e., premiums) for securities with higher interest rates, resulting in an
unexpected loss.
Bank Obligations
Bank obligations consist of bankers' acceptances, certificates of
deposit, 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).
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
-5-
<PAGE>
secondary market and those exceeding seven days and with a withdrawal penalty
are considered to be illiquid. All of the Funds utilize Demand Deposits in
connection with their day-to-day operations. Time deposits will be maintained
only at banks or savings and loan associations from which a Fund could purchase
certificates of deposit.
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. the Ultra Short-Term Bond Fund, and the Mortgage-Backed
Securities 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"), P-2 or better by Moody's Investors Service, Inc.
("MOODY'S") or F-2 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 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.
Some of 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.
Common Stock
Common stock represents a share of ownership in a company and usually
carries voting rights and earns dividends. Unlike preferred stock, dividends on
common stock are not fixed but are declared at the discretion of the issuer's
board of directors. (Equity securities such as common stock will generally
comprise no more than 10% of the High Yield Bond Fund's total assets).
Convertible Securities
Convertible securities are 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' base their selection of convertible securities, to a great
extent, on
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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 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 and debt
securities (e.g., bonds and commercial paper) 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
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), and Global
Depositary Receipts ("GDRs"). 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. European Depositary Receipts
and Global Depositary Receipts are not listed on the New York Stock Exchange. As
a result, it may be difficult to obtain information about EDRs and GDRs.
Risk Factors of Foreign Investments
Political and Exchange Risks. Foreign investments may subject a Fund
to investment risks that differ in some respects from those related to
investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the
possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization or expropriation of foreign
deposits, the possible establishment of exchange controls or taxation
at the source, greater fluctuations in value due to changes in
exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and
interest on such obligations.
Higher Transaction Costs. Foreign investments may entail higher
custodial fees and sales commissions than domestic investments.
Accounting and Regulatory Differences. Foreign issuers of securities
or obligations are often subject to accounting treatment and engage in
business practices different from those respecting domestic issuers of
similar securities or obligations. Foreign branches of U.S. banks and
foreign banks are not regulated 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.
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Currency Risk. Foreign securities are typically denominated in foreign
currencies. The value of a Fund's investments denominated in foreign
currencies and any funds held in foreign currencies will be affected by:
. Changes in currency exchange rates;
. The relative strength of those currencies and the U.S. dollar; and
. Exchange control regulations.
Changes in the foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed
to Shareholders by a Fund. The exchange rates between the U.S. dollar and
other currencies are determined by the forces of supply and demand in
foreign exchange markets. Accordingly, the ability of the International
Funds to achieve their 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.
. The international investments of the International Equity Index Fund
may reduce the effect that events in any one country or geographic
area will have on its investment holdings. Of course, negative
movement by one of the Fund's investments in one foreign market
represented in its portfolio may offset potential gains from the
Fund's investments in another country's markets.
. The Diversified International Fund invests primarily in the securities
of companies located in Europe, Asia and Latin America. The Fund may
also invest in other regions and countries that present attractive
investment opportunities, including developing countries. Because the
Fund may invest over 25% of its total assets in a single country,
political and economic developments in that country will have a
greater impact on the performance of the Fund than would be the case
if the Fund were more widely diversified.
Limitations on the use of Foreign Investments. 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, the Short-Term Bond Fund, and the
Mortgage-Backed Securities Fund.
Foreign Currency Transactions
The International Funds may engage in various strategies to hedge against
interest rate and currency risks. These strategies may consist of use of any of
the following, some of which also have been described above: options on Fund
positions or currencies, financial and currency futures, options on such
futures, forward foreign currency transactions, forward rate agreements and
interest rate and currency swaps, caps and floors. The International Funds may
engage in such transactions in both U.S. and non-U.S. markets. To the extent a
Fund enters into such transactions in markets other than in the United States, a
Fund may be subject to certain currency, settlement, liquidity, trading and
other risks similar to those described above with respect to the Fund's
investments in foreign securities. The International Funds may enter into such
transactions only in connection with hedging strategies.
While a Fund's use of hedging strategies is intended to reduce the
volatility of the net asset value of Fund shares, the net asset value of the
Fund will fluctuate. There can be no assurance that a Fund's hedging
transactions will be effective. Furthermore, a Fund may only engage in hedging
activities from time to time and may not necessarily be engaging in hedging
activities when movements in interest rates or currency exchange rates occur.
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The International Funds are authorized to deal in forward foreign exchange
between currencies of the different countries in which the Fund will invest and
multi-national currency units as a hedge against possible variations in the
foreign exchange rate between these currencies. This is accomplished through
contractual agreements entered into in the interbank market to purchase or sell
one specified currency for another currency at a specified future date (up to
one year) and price at the time of the contract. Each International Fund's
dealings in forward foreign exchange will be limited to hedging involving either
specific transactions or portfolio positions.
Transaction Hedging. When the International Funds engage in transaction
hedging, they enter into foreign currency transactions with respect to specific
receivables or payables of the 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.
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.
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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.
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
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account (not with a futures commission merchant or broker) containing cash or
certain liquid assets equal to the purchase price of the contract (less any
margin on deposit). For a short position in futures or forward contracts held by
a Fund, those requirements may mandate the establishment of a segregated account
(not with a futures commission merchant or broker) with cash or certain liquid
assets that, when added to the amounts deposited as margin, equal the market
value of the instruments or currency underlying the futures or forward contracts
(but are not less than the price at which the short positions were established).
However, segregation of assets is not required if the Fund "covers" a long
position. For example, instead of segregating assets, a Fund, when holding a
long position in a futures or forward contract, could purchase a put option on
the same futures or forward contract with a strike price as high or higher than
the price of the contract held by the Fund. In addition, where a Fund takes
short positions, or engages in sales of call options, it need not segregate
assets if it "covers" these positions. For example, where a Fund holds a short
position in a futures or forward contract, it may cover by owning the
instruments or currency underlying the contract. A Fund may also cover such a
position by holding a call option permitting it to purchase the same futures or
forward contract at a price no higher than the price at which the short position
was established. Where a Fund sells a call option on a futures or forward
contract, it may cover either by entering into a long position in the same
contract at a price no higher than the strike price of the call option or by
owning the instruments or currency underlying the futures or forward contract.
The Fund could also cover this position by holding a separate call option
permitting it to purchase the same futures or forward contract at a price no
higher than the strike price of the call option sold by the Fund.
At the maturity of a futures contract, the Fund may either accept or make
delivery of the currency specified in the contract, or at or prior to maturity
enter into a closing transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts are usually
effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although the International 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
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currency swap contracts. Accordingly, 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.
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.
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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. Futures
contracts may be utilized by the Funds with respect to fixed-income securities,
foreign currencies, or financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income securities.
U.S. futures contracts are traded on exchanges which have been designated
"contract markets" by the Commodities Futures Trading Commission ("CFTC") and
must be executed through a futures commission merchant ("FCM"), or brokerage
firm, which is a member of the relevant contract market. Through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
Margin Requirements
The buyer or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when the contract is entered into. Initial
margin deposits
. are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded,
. may be maintained in cash or certain other liquid assets by the Funds'
custodian for the benefit of the FCM, and
. are similar to good faith deposits or performance bonds.
Unlike margin extended by a securities broker, initial margin payments do
not constitute purchasing securities on margin for purposes of the Fund's
investment limitations. If the value of either party's position declines, that
party will be required to make additional "variation margin" payments for the
benefit of the FCM to settle the change in value on a daily basis. The party
that has a gain may be entitled to receive all or a portion of this amount. In
the event of the bankruptcy of the FCM that holds margin on behalf of a Fund,
that Fund may be entitled to return of margin owed to such Fund only in
proportion to the amount received by the FCM's other customers. The Trust will
attempt to minimize this risk by careful monitoring of the creditworthiness of
the FCMs with which they do business and by depositing margin payments in a
segregated account with the Trust's custodian.
SEC Segregation Requirements
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 contacts 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.
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Liquidity Impact of Margin and SEC Segregation Requirements
Although a Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets will be
available to that Fund immediately upon closing out the futures position, while
settlement of securities transactions could take several days. However, because
a Fund's cash that may otherwise be invested would be held uninvested or
invested in other liquid assets so long as the futures position remains open,
such Fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.
Limits on Futures Contracts
The Funds intend to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the CFTC
and the National Futures Association, which regulate trading in the futures
markets. The Funds will use futures contracts and related options primarily for
bona fide hedging purposes within the meaning of CFTC regulations. To the extent
that a Fund holds positions in futures contracts and related options that do not
fall within the definition of bona fide hedging transactions, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the Fund's net assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. 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.
Purpose of Utilizing Futures
A Fund's primary purpose in entering into futures contracts is to protect
that Fund from fluctuations in the value of securities or interest rates without
actually buying or selling the underlying debt or equity security. For example,
if the fund anticipates an increase in the price of stocks, and it intends to
purchase stocks at a later time, that Fund could enter into a futures contract
to purchase a stock index as a temporary substitute for stock purchases. If an
increase in the market occurs that influences the stock index as anticipated,
the value of the futures contracts will increase, thereby serving as a hedge
against the fund not participating in a market advance. This technique is
sometimes known as an anticipatory hedge. Conversely, if a Fund holds stocks and
seeks to protect itself from a decrease in stock prices, the Fund might sell
stock index futures contracts, thereby hoping to offset the potential decline in
the value of its portfolio securities by a corresponding increase in the value
of the futures contract position. A Fund could protect against a decline in
stock prices by selling portfolio securities and investing in money market
instruments, but the use of futures contracts enables it to maintain a defensive
position without having to sell portfolio securities.
If a Fund owns Treasury bonds and the portfolio manager expects interest
rates to increase, that Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as that Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of
that Fund's interest rate futures contract will increase, thereby keeping the
net asset value of that Fund from declining as much as it may have otherwise.
If, on the other hand, a portfolio manager expects interest rates to decline,
that Fund may take a long position in interest rate futures contracts in
anticipation of later closing out the futures position and purchasing the bonds.
Although a Fund can accomplish similar results by buying securities with long
maturities and selling securities with short maturities, given the greater
liquidity of the futures market than the cash market, it may be possible to
accomplish the same result more easily and more quickly by using futures
contracts as an investment tool to reduce risk.
Risk Factors in Futures Transactions
Liquidity. Because futures contracts are generally settled within a day
from the date they are closed out, compared with a settlement period of three
days for some types of securities, the futures markets can provide superior
liquidity to the securities markets. Nevertheless, there is no assurance that a
liquid secondary market will exist for any particular futures contract at any
particular time. In addition, futures exchanges may establish daily price
fluctuation limits for futures contracts and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit reached, it may be impossible for
a Fund to enter into new positions or close out existing positions. If the
secondary market for a futures contract is not liquid because of price
fluctuation limits or otherwise, a Fund may not be able to promptly liquidate
unfavorable futures positions and potentially could be required to continue to
hold a
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futures position until the delivery date, regardless of changes in its value. As
a result, such Fund's access to other assets held to cover its futures positions
also could be impaired.
Risk of Loss. Futures contracts entail risks. Although the Funds believe
that use of such contracts will benefit the Funds, a Fund's overall performance
could be worse than if such Fund had not entered into futures contracts if the
Advisor's investment judgment proves incorrect. For example, if a Fund has
hedged against the effects of a possible decrease in prices of securities held
in its portfolio and prices increase instead, that Fund will lose part or all of
the benefit of the increased value of these securities because of offsetting
losses in its futures positions. In addition, if a Fund has insufficient cash,
it may have to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to such Fund.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the amount were then closed out. Thus, a purchase or sale
of a futures contract may result in losses in excess of the amount invested in
the contract. The Funds will only engage in futures transactions when it is
believed these risks are justified and will engage in futures transactions
primarily for risk management purposes.
Correlation Risk. The prices of futures contracts depend primarily on the
value of their underlying instruments. Because there are a limited number of
types of futures contracts, it is possible that the standardized futures
contracts available to a Fund will not match exactly such Fund's current or
potential investments. A Fund may buy and sell futures contracts based on
underlying instruments with different characteristics from the securities in
which it typically invests -- for example, by hedging investments in portfolio
securities with a futures contract based on a broad index of securities -- which
involves a risk that the futures position will not correlate precisely with the
performance of such Fund's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with a Fund's
investments. Futures prices are affected by factors such as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between a Fund's investments and its futures positions also may
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. A
Fund may buy or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or is considering purchasing in order to attempt
to compensate for differences in historical volatility between the futures
contract and the securities, although this may not be successful in all cases.
If price changes in a Fund's futures positions are poorly correlated with its
other investments, its futures positions may fail to produce desired gains or
result in losses that are not offset by the gains in that Fund's other
investments.
Options Contracts
Some of the Funds may use options on securities or futures contracts to
reduce investment risk. 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 (the "strike price"). The purchase price of an option is referred to as
its "premium." Options have limited life spans, usually tied to the delivery or
settlement date of the underlying futures contract or security. If an option is
not exercised prior to its expiration, it becomes worthless. This means the
buyer has lost the premium paid, while the seller (the "writer") has received a
premium without being required to perform. Increased market volatility and
relatively longer remaining life spans generally increase the value of options
by increasing the probability of market swings favorable to the holder and
unfavorable to the writer during the life of the option.
. 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. So long as the obligation of the writer of a call option
continues, the writer may be required 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 closes the transaction by repurchasing an
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option identical to that previously sold. To secure the writer's
obligation under a call option, a writer is required to deposit in
escrow the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation. A call option is
"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 level.
. A PUT OPTION gives the buyer the right to sell the underlying futures
contract or security. The writer of a put option must purchase futures
contracts or securities at a strike price if the option is exercised.
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.
. A COVERED OPTION is an option written by a party who owns the
underlying position,
. AN OPENING TRANSACTION is the initial purchase or sale of an option.
. A CLOSING TRANSACTION is a transaction which effectively ends an
option writer's financial exposure to an existing option obligation. A
closing transaction involves entering into an option contract that has
the reverse effect of that being closed out. Such an option will be on
the same security with the same exercise price and expiration date as
the option contract originally opened. 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 written,
depending in large part upon the relative price of the underlying
security at the time of each transaction. 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.
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.
Writing (Selling) Covered Call Options
Some of the Funds may write covered call options and purchase options to
close out options previously written by the Fund. A Fund's 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 the
Investment 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 retains the
risk of loss should the price of the security decline.
The security covering the call will be maintained in a segregated account
of the Fund's custodian. Unlike one who owns a security not subject to an
option, a Fund has no control over when it may be required to sell the
underlying security, 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. Additionally, when a security is called away, the Fund's turnover rate
will increase, which would cause a Fund to incur additional brokerage expenses.
If a call option which a Fund has written
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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 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. Call options written by a Fund will normally have expiration
dates of less than nine months from the date written.
The premium received is the market value of an option. In determining
whether a particular call option should be written, the Advisor will consider
the reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options.
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 a closing transaction on a call option is likely to be
offset in whole or in part by appreciation of the underlying security owned 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 the transaction cost.
Writing (Selling) 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.
Engaging in 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, a 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 in Purchasing Transactions. 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.
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Risk of Loss in Writing (Selling) Options. When it writes a covered
call option, a Fund runs the risk that it will be forced to sell a security
it owns at below its market value or, alternatively, incur a loss in
otherwise extinguishing its obligation under the covered call option. When
it writes a secured put option, a Fund runs the risk that it will be
required to buy a security at above its market price or, alternatively,
incur a loss in otherwise extinguishing its obligation under the secured
put option.
Judgment of Advisor. The successful use of the options strategies
depends on the ability of the 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 the Advisor deems it desirable to
do so. A Fund will take an option position only if the 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 lack of liquidity 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 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
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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 Funds 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 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 Funds (other than the Tax-Exempt Money Market
Fund and the Municipal Cash Management 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, the Municipal Cash Management 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
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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."
These securities are considered to be high risk investments. The risks include
the following:
Greater Risk of Loss. These securities are regarded as predominately
speculative. 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, a Fund would
experience a decrease in income and a decline in the market value of their
investments. A Fund may also incur additional expenses in seeking recovery
from the issuer.
Sensitivity to Interest Rate and Economic Changes. The income and market
value of lower-rated 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 investments in lower-rated securities
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 lower rated investments may be thinly traded
and there may be no established secondary market. Because of the lack of
market pricing and current information for investments in lower rated
securities, 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
investments in lower rated securities. As a result, a Fund that invests in
lower rated securities 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.
New Legislation. Future legislation 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
Portfolio's investments in lower rated securities.
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High yield, high risk investments may include the following:
Straight fixed-income debt securities. These include bonds and other
debt obligations which bear a fixed or variable rate of interest payable at
regular intervals and have a fixed or resettable maturity date. The
particular terms of such securities vary and may include features such as
call provisions and sinking funds.
Zero-coupon debt securities. These bear no interest obligation but are
issued at a discount from their value at maturity. When held to maturity,
their entire return equals the difference between their issue price and
their maturity value.
Zero-fixed-coupon debt securities. These are zero-coupon debt
securities which convert on a specified date to interest-bearing debt
securities.
Pay-in-kind bonds. These are bonds which allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds.
Private Placements. These are bonds sold directly to a small number of
investors, usually institutional, without registration under the Securities
Act of 1933.
Convertible Securities. These are bonds or preferred stock that
convert to common stock.
Preferred Stock. These are stocks that generally pay a dividend at a
specified rate and which have preference over common stock in the payment
of dividends and in liquidation.
Loan Participations and Assignments. These are participations in, or
assignments of all or a portion of loans to corporations or to governments,
including governments of the less developed countries ("LDC'S").
This foregoing list is not definitive. The prospectus and this Statement of
Additional Information list additional types of permissible investments. Such
investments may be purchased by some of the Funds even if they are classified as
non-investment grade securities.
Index Investing by the Equity Index, 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
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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.
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
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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.
Impact of Initial Public Offerings on Smaller Funds
Initial public offerings ("IPOs") and other investment techniques may have
a magnified performance impact on a fund with a small asset base. The Fund may
not experience similar performance as its assets grow.
Index Shares
Certain of the Funds may invest in Index Shares. Index Shares are ownership
interests in unit investment trusts, closed-end funds, 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. New types of
Index Shares continue to be developed such as select sector SPDRs and other
Index Shares that are designed to track indices other than the S&P 500 Index or
Nasdaq 100 Index. In the future, the Portfolios may invest in these types of
Index Shares.
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.
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. Nasdaq-100
Shares are subject to risks specific to the performance of a few component
securities that currently represent a highly concentrated weighting in the
Nasdaq-100 Index. SPDRs distribute dividends on a quarterly basis.
The investment vehicles issuing Index Shares are not actively managed.
Rather, the investment vehicle's 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 investment vehicle was not fully invested in such
securities.
A Fund will limit its investments in any one issue of Index Shares to 5% of the
Fund's total assets and 3% of the outstanding voting securities of the Index
Share issue. Moreover, a Fund's investments in all Index Shares 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 or its affiliate 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. Banc One Investment Advisors will waive its fees
attributable to the assets of any Fund invested in any investment company if
required by the laws of any state in which shares of the Trust are sold.
Loan Participations and Assignments
Some of the Funds may invest in fixed and floating rate loans ("Loans").
Loans are typically arranged through private negotiations between borrowers
(which may be corporate issuers or issuers of sovereign debt obligations) and
one or more
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financial institutions ("Lenders"). Generally, the Funds invest in Loans by
purchasing Loan Participations ("Participations") or assignments of all or a
portion of Loans ("Assignments") from third parties.
Typically, a Fund will have a contractual relationship only with the Lender
and not with the borrower when it purchases a Participation. In contrast, a Fund
has direct rights against the borrower on the Loan when it purchases an
Assignment. 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.
Limitations on Investments in Loan Participations and Assignments. Loan
participants and assignments may be illiquid. As a result, a Fund will invest no
more than 15% (10% for the Money Market Funds and Institutional Money Market
Funds) of its net assets in these investments. If a government entity is a
borrower on a Loan, the Fund will consider the government to be the issuer of a
Participation 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).
Risk Factors of Loan Participations and Assignments. A Fund may have
difficulty disposing of Assignments and Participations because to do so it will
have to assign such securities to a third party. Because there is no liquid
market for such securities, the Funds anticipate that such securities could be
sold only to a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse impact on the value of such securities and
a Fund's ability to dispose of particular Assignments or Participations when
necessary to meet a Fund's liquidity needs in response to a specific economic
event such as a deterioration in the creditworthiness of the borrower. The lack
of a liquid secondary market for Assignments and Participations also may make it
more difficult for a Fund to assign a value to those securities when valuing the
Fund's securities and calculating its net asset value.
Mortgage-Related Securities
Mortgage-Backed Securities (CMOs and REMICs). Mortgage-backed securities
include collateralized mortgage obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs"). (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).
Mortgage-backed securities represent pools of mortgage loans assembled for sale
to investors by:
- various governmental agencies such as Ginnie Mae;
- government-related organizations such as Fannie Mae and Freddie Mac;
- non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies.
(Non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies).
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. Ginnie Mae's 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
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private stockholders. 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 Bank and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. Freddie Mac Certificates
entitle the holder to timely payment of interest, which is guaranteed by
Freddie Mac. Freddie Mac guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When
Freddie Mac does not guarantee timely payment of principal, Freddie Mac may
remit the amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
CMOs and guaranteed REMIC pass-through certificates ("REMIC CERTIFICATES")
issued by Fannie Mae, Freddie Mac, Ginnie Mae and private issuers are types of
multiple class pass-through securities. Investors may purchase beneficial
interests in REMICs, which are known as "regular" interests or "residual"
interests. The Funds do not currently intend to purchase residual interests in
REMICs. The REMIC Certificates represent beneficial ownership interests in a
REMIC Trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage pass-through certificates (the "MORTGAGE
ASSETS"). The obligations of Fannie Mae, Freddie Mac or Ginnie Mae under their
respective guaranty of the REMIC Certificates are obligations solely of Fannie
Mae, Freddie Mac or Ginnie Mae, respectively.
Fannie Mae REMIC Certificates. 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.
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. Ginnie Mae guarantees 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.
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Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-BONDS"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of 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, the Technology 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, the Mortgage-Backed Securities 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
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Management Money Market Fund may invest in mortgage-backed securities
issued by private issuers including Guaranteed CMOs and REMIC pass-through
securities. With respect to the Institutional Money Market Funds, mortgage-
backed securities must be rated in one of the two highest rating categories
by at least one NRSRO at the time of investment or, if unrated, determined
by Banc One Investment Advisors to be of comparable quality.
Mortgage Dollar Rolls. Some of the Funds may enter into Mortgage Dollar
Rolls in which the Funds sell securities for delivery in the current month and
simultaneously contract with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. When a Fund enters into mortgage dollar rolls, the Fund will hold and
maintain a segregated account until the settlement date. The segregated account
will contain 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 or gains on
the securities sold as part of the mortgage dollar roll, the investment
performance of a Fund will be less than what the performance would have been
without the use of mortgage dollar rolls. The benefits of mortgage dollar rolls
may depend upon Banc One Investment Advisors' ability to predict 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 subject to the following additional risks:
Prepayment/Interest Rate Sensitivity. SMBS are extremely sensitive to
changes in prepayments and interest rates. Even though these securities
have been guaranteed by an agency or instrumentality of the U.S.
Government, under certain interest rate or prepayment rate scenarios, the
Portfolios may lose money on investments in SMBS.
Interest Only SMBS. Changes in prepayment rates can cause the return on
investment in IOs to be highly volatile. Under extremely high prepayment
conditions, IOs can incur significant losses.
Principal Only SMBS. 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.
Generally, the market value of these securities is unusually volatile in
response to changes in interest rates.
Yield Characteristics. Although SMBS may yield more than other
mortgage-backed securities, 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 techniques.
The Bond Funds (other than the Treasury & Agency Fund), the Municipal Bond
Funds, and the Balanced Fund may invest in SMBS to enhance revenues or hedge
against interest rate risk. The Funds may only invest in SMBS issued or
guaranteed by the U.S. government, its agencies or instrumentalities. Although
the market for SMBS is increasingly liquid, certain SMBS may not be readily
marketable and will be considered illiquid for purposes of the Funds'
limitations on investments in illiquid securities.
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Adjustable Rate Mortgage Loans. The Bond Funds and the Balanced Fund, may
invest in adjustable rate mortgage loans ("ARMS"). The Treasury & Agency Fund
may buy only government ARMs. ARMs eligible for inclusion in a mortgage pool
will generally provide for a fixed initial mortgage interest rate for a
specified period of time. Thereafter, the interest rates (the "MORTGAGE INTEREST
RATES") may be subject to periodic adjustment based on changes in the applicable
index rate (the "INDEX RATE"). The adjusted rate would be equal to the Index
Rate plus a gross margin, which is a fixed percentage spread over the Index Rate
established for each ARM at the time of its origination.
Adjustable interest rates can cause payment increases that some borrowers
may find difficult to make. However, certain ARMs may provide that the Mortgage
Interest Rate may not be adjusted to a rate above an applicable lifetime maximum
rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may
also be subject to limitations on the maximum amount by which the Mortgage
Interest Rate may adjust for any single adjustment period (the "MAXIMUM
ADJUSTMENT"). Other ARMs ("NEGATIVELY AMORTIZING ARMS") may provide instead or
as well for limitations on changes in the monthly payment on such ARMs.
Limitations on monthly payments can result in monthly payments which are greater
or less than the amount necessary to amortize a Negatively Amortizing ARM by its
maturity at the Mortgage Interest Rate in effect in any particular month. In the
event that a monthly payment is not sufficient to pay the interest accruing on a
Negatively Amortizing ARM, any such excess interest is added to the principal
balance of the loan, causing negative amortization and will be repaid through
future monthly payments. It may take borrowers under Negatively Amortizing ARMs
longer periods of time to achieve equity and may increase the likelihood of
default by such borrowers. In the event that a monthly payment exceeds the sum
of the interest accrued at the applicable Mortgage Interest Rate and the
principal payment which would have been necessary to amortize the outstanding
principal balance over the remaining term of the loan, the excess (or
"accelerated amortization") further reduces the principal balance of the ARM.
Negatively Amortizing ARMs do not provide for the extension of their original
maturity to accommodate changes in their Mortgage Interest Rate. As a result,
unless there is a periodic recalculation of the payment amount (which there
generally is), the final payment may be substantially larger than the other
payments. These limitations on periodic increases in interest rates and on
changes in monthly payment protect borrowers from unlimited interest rate and
payment increases.
Certain adjustable rate mortgage loans may provide for periodic adjustments
of scheduled payments in order to amortize fully the mortgage loan by its stated
maturity. Other adjustable rate mortgage loans may permit their stated maturity
to be extended or shortened in accordance with the portion of each payment that
is applied to interest as affected by the periodic interest rate adjustments.
There are two main categories of indices which provide the basis for rate
adjustments on ARMs: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year, three-year and
five-year constant maturity Treasury bill rates, the three-month Treasury bill
rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities,
the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost
of Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as the 11th
District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes
in market rate levels and tend to be somewhat less volatile. The degree of
volatility in the market value of the Fund's portfolio and therefore in the net
asset value of the Fund's shares will be a function of the length of the
interest rate reset periods and the degree of volatility in the applicable
indices.
In general, changes in both prepayment rates and interest rates will change
the yield on Mortgage-Backed Securities. The rate of principal prepayments with
respect to ARMs has fluctuated in recent years. As is the case with fixed
mortgage loans, ARMs may be subject to a greater rate of principal prepayments
in a declining interest rate environment. For example, if prevailing interest
rates fall 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.
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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 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. Adjustable rate Mortgage-Backed Securities have less
potential for capital appreciation than fixed rate Mortgage-Backed
Securities because their coupon rates will decline in response to market
interest rate declines. The market value of fixed rate Mortgage-Backed
Securities may be adversely affected as a result of increases in interest
rates and, because of the risk of unscheduled principal prepayments, may
benefit less than other fixed rate securities of similar maturity from
declining interest rates. Finally, to the extent Mortgage-Backed Securities
are purchased at a premium, mortgage foreclosures and unscheduled principal
prepayments may result in some loss of the Fund's principal investment to
the extent of the premium paid. On the other hand, if such securities are
purchased at a discount, both a scheduled payment of principal and an
unscheduled prepayment of principal will increase current and total returns
and will accelerate the recognition of income.
Yield Characteristics. The yield characteristics of Mortgage-Backed
Securities differ from those of traditional fixed income securities. The
major differences typically include more frequent interest and principal
payments, usually monthly, and the possibility that prepayments of
principal may be made at any time. Prepayment rates are influenced by
changes in current interest rates and a variety of economic, geographic,
social and other factors and cannot be predicted with certainty. As with
fixed rate mortgage loans, adjustable rate mortgage loans may be subject to
a greater prepayment rate in a declining interest rate environment. The
yields to maturity of the Mortgage-Backed Securities in which the Funds
invest will be affected by the actual rate of payment (including
prepayments) of principal of the underlying mortgage loans. The mortgage
loans underlying such securities generally may be prepaid at any time
without penalty. In a fluctuating interest rate environment, a predominant
factor affecting the prepayment rate on a pool of mortgage loans is the
difference between the interest rates on the mortgage loans and prevailing
mortgage loan interest rates (giving consideration to the cost of any
refinancing). In general, if mortgage loan interest rates fall sufficiently
below the interest rates on fixed rate mortgage loans underlying mortgage
pass-through securities, the rate of prepayment would be expected to
increase. Conversely, if mortgage loan interest rates rise above the
interest rates on the fixed rate mortgage loans underlying the mortgage
pass-through securities, the rate of prepayment may be expected to
decrease.
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Municipal Securities
Municipal Securities are issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as:
1. bridges,
2. highways,
3. roads,
4. schools,
5. waterworks and sewer systems, and
6. other utilities.
Other public purposes for which Municipal Securities may be issued include:
1. refunding outstanding obligations,
2. obtaining funds for general operating expenses and
3. 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
1. water, sewage and solid waste facilities,
2. qualified residential rental projects,
3. certain local electric, gas and other heating or cooling facilities,
4. qualified hazardous waste facilities,
5. high-speed intercity rail facilities,
6. governmentally-owned airports, docks and wharves and mass
transportation facilities,
7. qualified mortgages,
8. student loan and redevelopment bonds, and
9. 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:
1. privately operated housing facilities,
2. sports facilities,
3. industrial parks,
4. convention or trade show facilities,
5. airport, mass transit, port or parking facilities,
6. air or water pollution control facilities,
7. sewage or solid waste disposal facilities, and
8. 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
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class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Private activity bonds and industrial development
bonds generally are revenue bonds and thus not payable from the unrestricted
revenues of the issuer. The credit and quality of such bonds is generally
related to the credit of the bank selected to provide the letter of credit
underlying the bond. Payment of principal of and interest on industrial
development revenue bonds is the responsibility of the corporate user (and any
guarantor).
The Portfolios 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 Portfolio that may purchase municipal securities may purchase:
1. Short-term tax-exempt General Obligations Notes,
2. Tax Anticipation Notes,
3. Bond Anticipation Notes,
4. Revenue Anticipation Notes,
5. Project Notes, and
6. 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. Also, the yields
on Municipal Securities depend upon a variety of factors, including:
- general money market conditions,
- coupon rate,
- 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. However, ratings are general and are not absolute
standards of quality. 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 Portfolio, 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 Portfolio. Banc One Investment Advisors will consider such
an event in determining whether the Portfolio 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.
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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. Municipal
leases may be considered to be illiquid. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a participation
interest in any of the above. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be canceled.
Risk Factors in Municipal Securities
Tax Risk. The Code imposes certain continuing requirements on issuers
of tax-exempt bonds regarding the use, expenditure and investment of bond
proceeds and the payment of rebates to the United States of America.
Failure by the issuer to comply subsequent to the issuance of tax-exempt
bonds with certain of these requirements could cause interest on the bonds
to become includable in gross income retroactive to the date of issuance.
Housing Authority Tax Risk. The exclusion from gross income for
Federal income tax purposes for certain housing authority bonds depends on
qualification under relevant provisions of the Code and on other provisions
of Federal law. These provisions of Federal law contain 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. Typically, 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 requirements. However,
there is no assurance that the requirements will be met. If such
requirements are not met:
- the interest on the bonds may become taxable, possibly retroactively
from the date of issuance;
- the value of the bonds may be reduced;
- you and other Shareholders may be subject to unanticipated tax
liabilities;
- a Portfolio may be required to sell the bonds at the reduced value;
- it may be an event of default under the applicable mortgage;
- the holder may be permitted to accelerate payment of the bond; and
- the issuer may be required to redeem the bond.
In addition, if the mortgage securing the bonds is insured by the Federal
Housing Administration ("FHA"), the consent of the FHA may be required
before insurance proceeds would become payable.
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.
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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 determines that such Municipal Securities offer
attractive yields. The Funds may invest in Municipal Securities either by
purchasing them directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or principal
payments, or both, on Municipal Securities, provided that, in the opinion of
counsel to the initial seller of each such certificate or instrument, any
discount accruing on such certificate or instrument that is purchased at a yield
not greater than the coupon rate of interest on the related Municipal Securities
will to the same extent as interest on such Municipal Securities be exempt from
federal income tax and state income tax (where applicable) and not treated as a
preference item for individuals for purposes of the federal alternative minimum
tax.
The Funds may also invest in Municipal Securities by purchasing from banks
participation interests in all or part of specific holdings of Municipal
Securities. Such participation may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from a Fund in connection with the arrangement. A Fund will
not purchase participation interests unless it receives an opinion of counsel or
a ruling of the Internal Revenue Service that interest earned by it on Municipal
Securities in which it holds such participation interest is exempt from federal
income tax and state income tax (where applicable) and not treated as a
preference item for individuals for purposes of the federal alternative minimum
tax.
The Tax-Advantaged Funds may not be a desirable investment for "substantial
users" of facilities financed by private activity bonds or industrial
development bonds or for "related persons" of substantial users. Each Fund will
limit its investment in municipal leases to no more than 5% of its total assets.
Arizona Municipal Securities
As used in the Prospectus and this Statement of Additional Information, the
term "Arizona Municipal Securities" refers to debt securities which are issued
by or on behalf of Arizona or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and Arizona personal income tax.
Risk Factors Regarding Investments in Arizona Municipal Securities. Over
the past several decades, Arizona's economy has grown faster than most other
regions of the country. During the last decade, Arizona's population increased
22% to 4.87 million, and is expected to increase another 2.7% per year through
2002. Arizona's employment increased 5.6% in 1996, 4.4% in 1997, 4.7% in 1998,
and 4.2% in 1999, and is projected to increase 3.9% in 2000 and 3.6% in 2001 --
a total of 164,000 new jobs -- which is approximately 2 to 3 times the national
rate. The state's unemployment rate was 5.5% in 1996, 4.0% in 1997, 4.1% in 1998
and 4.4% in 1999.
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Arizona's per capita personal income has generally varied between 5% and
15% below the national average due to such factors as the chronic poverty on the
state's Indian reservations, the states relatively high number of retirees and
children, and the state's below-average wage scale. Nevertheless, 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,
from 1998 to 1999, average per capita income increased by 4.5%.
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 7.8% for fiscal
year 1997-98 and 8.2% for fiscal year 1998-99.
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. During fiscal year 1999, a significant portion of the
accumulated surpluses were committed to construction and renovation of public
school 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 the state'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.
Recently, however, an initiative petition was filed with the Arizona
Secretary of State seeking to place on the November 2000 general election ballot
a proposed amendment to the Arizona Constitution which, if approved by a
majority of the voters at the election, would repeal the authority of the
Arizona Legislature or any political subdivision of the state to impose income
taxes, effective January 1, 2005, and would require that any state legislation
providing for a new tax, an increase in an existing tax rate or a reduction or
elimination of any tax deduction, exemption, exclusion or credit be approved not
only by a two-thirds vote of each house of the Arizona Legislature but also by a
majority vote of the electors voting in the succeeding general election. It is
unclear whether the proposed amendment will appear on the ballot, if it does,
whether it will be approved and, if it is, what effect such approval would have
on state revenues or operations. However, some sources have suggested that as
much as one-half of the state's current revenues would be eliminated. Any such
action would not affect state or local bonds payable from ad valorem (property)
taxes or revenues.
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 is each authorized
to issue revenue bonds for their respective purposes. In addition, the State of
Arizona has financed certain capital improvements and equipment through the
execution and sale of certificates of participation, which represent undivided
interests in lease payments to be made by the state pursuant to lease-purchase
agreements 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. Furthermore, 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. In addition, with voter
approval, incorporated cities or towns 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, therefore, 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 to be unconstitutional by the Arizona Supreme Court, the Arizona
Legislature enacted legislation in July 1998, which establishes a centralized
state school capital finance system and, among other things, substantially
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
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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, municipal corporations, 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. For
calendar year 1999, Kentucky's per capita income ranked 43rd 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 $422,400,000 as
of June 30, 1999, which was $147,008,000 above the budgeted balance.
The municipal securities of many states constitute general obligations of
the state itself or of an agency or political subdivision of the state which
holds substantial assets. This has not been the case in Kentucky until recent
years. Municipal securities in Kentucky have generally been issued by public
entities which are created primarily for that purpose and which have no
substantial assets, with the real source of funds for repayment being restricted
to either revenues from the property financed by the municipal security or
rentals due from another public entity which has an enforceable obligation to
pay rent to the issuer on only a short term basis. This situation began to
change in the late 1990s after a decision of Kentucky's Supreme Court regarding
an earlier amendment to the Kentucky Constitution. The decision has confirmed
that local governmental entities in Kentucky may now issue general obligation
debt instruments. The Commonwealth itself, and its agencies, are still bound by
the prior rule and may not issue general obligation bonds without a statewide
election. The Fund is not required to invest any particular percentage of its
assets in Kentucky Municipal Securities which are general obligations of issuers
with substantial assets.
Louisiana Municipal Securities
As used in the Prospectus and this Statement of Additional Information, the
term "Louisiana Municipal Securities" refers to debt securities which are issued
by or on behalf of Louisiana or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and Louisiana personal income tax.
Risk Factors Regarding Investments in Louisiana Municipal Securities. The
State of Louisiana continues to consolidate its economic and financial gains
after a period of difficulty. In the mid-1980's, abrupt declines in the price of
oil disrupted both the economy and financial operations of the State. Recent
years have generally produced operating surpluses and major financial issues,
such as Medicaid and risk management, have been addressed. Louisiana has reduced
its per capita debt to more moderate levels in recent years. Available general
fund revenue was $4,455,000 in fiscal year 1998/1999.
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 $24 per barrel in fiscal year 1999/2000.
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 4.2%. With regard to employment, Louisiana's annual
average employment growth rate was 1.3% during fiscal year 1999/2000 and is
projected to be 1.6% for 2000/2001.
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.
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Total State wage and salary employment is estimated to have grown by 1.2%
in 1999. The rate of unemployment is estimated to have been 3.6% in 1999, below
the national average for the sixth consecutive year. Personal income grew at an
estimated 4.5% annual rate in 1999.
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,
1999 is estimated to have been in excess of $1.1 billion.
The Michigan Constitution limits the amount of total State revenues that
can be raised from taxes and certain other sources. State revenues (excluding
federal aid and revenues for payment of principal and interest on general
obligation bonds) in any fiscal year are limited to a fixed percentage of State
personal income in the prior calendar year or the average of the prior three
calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar 1977 State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of State
spending paid to all units of local government to total State spending may not
be reduced below the proportion in effect in the 1978-79 fiscal year. The State
originally determined that portion to be 41.6%. If such spending does not meet
the required level in a given year, an additional appropriation for local
government units is required by the following fiscal year; which means the year
following the determinations of the shortfall, according to an opinion issued by
the State's Attorney General. Spending for local units met this requirement for
fiscal years 1986-87 through 1991-92. As the result of litigation, the State
agreed to reclassify certain expenditures, beginning with fiscal year 1992-93,
and 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, 1999, the State had
approximately $870 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. These lawsuits involve programs
generally in the areas of corrections, tax collection, commerce, and proceedings
involving budgetary reductions to school districts and governmental units, and
court 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% (since reduced to 4.3%
in 2000 and 4.2% in 2001), 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.
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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 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.
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Risk Factors Regarding Investments in West Virginia Municipal Securities.
Being invested primarily in West Virginia Municipal Securities, the West
Virginia Municipal Bond Fund is subject to the risks of West Virginia's economy
and of the financial condition of its state and local governments and their
agencies.
West Virginia's economy is relatively stable. Coal mining, chemicals and
manufacturing make up an important part of that economy. The coal industry, in
particular, 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 . These
various products may be used to adjust the risk and return characteristics of
each Fund's investments. These various products may increase or decrease
exposure to security prices, interest rates, commodity prices, or other factors
that affect security values, regardless of the issuer's credit risk. If market
conditions do not perform consistent with expectations, the performance of each
Fund would be less favorable than it would have been if these products were not
used. In addition, losses may occur if counterparties involved in transactions
do not perform as promised. These products may expose the Fund to potentially
greater return as well as potentially greater risk of loss than more traditional
fixed income investments.
PERCS*
The Equity Funds may invest in Preferred Equity Redemption Cumulative Stock
("PERCS") which is a form of convertible preferred stock that actually has more
of an equity component than it does fixed income characteristics. These
instruments permit companies to raise capital via a surrogate for common equity.
PERCS are preferred stock which convert to common stock after a specified period
of time, usually three years, and are considered the equivalent of equity by the
ratings agencies. Issuers pay holders a substantially higher dividend yield than
that on the underlying common, and in exchange, the holder's appreciation is
capped, usually at about 30 percent. PERCS are callable at any time. The PERC is
mandatorily convertible into common stock, but is callable at any time at an
initial call price that reflects a substantial premium to the stock's issue
price. PERCS offer a higher dividend than that available on the common stock,
but in exchange the investors agree to the company placing a cap on the
potential price appreciation. The call price declines daily in an amount that
reflects the incremental dividend that holders enjoy. PERCS are listed on an
exchange where the common stock is listed.
*PERCS is a registered trademark of Morgan Stanley, which does not sponsor
and is in no way affiliated with One Group.
Preferred Stock
Preferred stock is a class of stock that generally pays dividends at a
specified rate and has preference over common stock in the payment of dividends
and liquidation. Preferred stock generally does not carry voting rights. As with
all equity securities, the price of preferred stock fluctuates based on changes
in a company's financial condition and on overall market and economic
conditions.
Real Estate Investment Trusts ("REITS")
Certain of the Funds may invest in equity interests or debt obligations
issued by REITs. REITs are pooled investment vehicles which invest primarily in
income producing real estate or real estate related loans or interest. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling property that has appreciated in
value. Mortgage REITs invest the majority of their assets in real estate
mortgages
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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. These risks include:
. limited financial resources;
. infrequent or limited trading;
. more abrupt or erratic price movements than larger company securities.
In addition, small capitalization stocks, such as REITs, historically 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 would suffer a loss to the extent that the proceeds from a
sale of the underlying portfolio securities were less than the repurchase price
under the agreement, or to the extent that the disposition of such securities by
the Fund were delayed pending court action. Additionally, there is no
controlling legal precedent under U.S. law and there may be no controlling legal
precedents under the laws of certain foreign jurisdictions confirming that a
Fund would be entitled, as against a claim by such seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, although (with
respect to repurchase agreements subject to U.S. law) the Board of Trustees of
the Trust believes that, under the regular procedures normally in effect for
custody of a Fund's securities subject to repurchase agreements and under
federal laws, a court of competent jurisdiction would rule in favor of the Trust
if presented with the question. Securities subject to repurchase agreements will
be held by the Trust's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are considered
by the SEC to be loans by a Fund under the 1940 Act.
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 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 deems creditworthy under guidelines approved by the Board of Trustees.
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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. The Institutional Prime Money Market
Fund, the Government Money Market Fund, and the Treasury Only Money Market Fund
are not permitted to borrow money for temporary purposes by entering into
reverse repurchase agreements.
Restricted Securities
Some of the Funds may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 and other restricted securities. Section 4(2) commercial paper is
restricted as to disposition under federal securities law and is generally sold
to institutional investors, such as the Funds, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Funds through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Funds believe that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat restricted securities that meet the liquidity criteria
established by the Board of Trustees, including Section 4(2) commercial paper
and Rule 144A Securities, as determined by Banc One Investment Advisors, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a SEC Staff position set forth in the
adopting release for Rule 144A under the Securities Act of 1933 ("RULE 144A").
Rule 144A is a nonexclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for resale. The Funds believe that the Staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Trustees. The Trustees have directed Banc One Investment Advisors to
consider the following criteria in determining the liquidity of certain
restricted securities:
. the frequency of trades and quotes for the security;
. the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
. dealer undertakings to make a market in the security; and
. the nature of the security and the nature of the marketplace trades.
Certain Section 4(2) commercial paper programs cannot rely on Rule 144A
because, among other things, they were established before the adoption of the
rule. However, the Trustees may determine for purposes of the Trust's liquidity
requirements that an issue of 4(2) commercial paper is liquid if the following
conditions, which are set forth in a 1994 SEC no-action letter, are met:
. The 4(2) paper must not be traded flat or in default as to principal
or interest;
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. 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 to be of equivalent quality; and
. Banc One Investment Advisors must consider the trading market for the
specific security, taking into account all relevant factors, including
but not limited, to whether the paper is the subject of a commercial
paper program that is administered by an issuing and paying agent bank
and for which there exists a dealer willing to make a market in that
paper, or is administered by a direct issuer pursuant to a direct
placement program; and
. Banc One Investment Advisors 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 and Institutional 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 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 and Institutional Money Market Funds) of its net assets;
and
. Banc One Investment Advisors 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
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 Municipal Bond Funds, 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 such Fund's total assets 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 receive
payments from the Borrowers equivalent to the dividends and interest which would
have been earned 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 plus accrued interest of
the securities lent. There may be risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans will only be made to borrowers deemed by Banc
One Investment Advisors to be of good standing under guidelines established by
the Trust's Board of Trustees and when, in the judgment of Banc One Investment
Advisors, the consideration which can be earned currently from such securities
loans justifies the attendant risk. Loans are subject to termination by the
Funds or the borrower at any time, and are therefore, not considered to be
illiquid investments.
Short-Term Funding Agreements
To enhance yield, some Funds may 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
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acquired by the Funds only if, at the time of purchase, no more than 15% of the
Fund's net assets (10% of a Money Market Fund's or Institutional 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,
principal and/or interest payments on the structured instrument may be
substantially less than expected. In addition, although structured instruments
may be sold in the form of a corporate debt obligation, they may not have some
of the protection against counterparty default that may be available with
respect to publicly traded debt securities (i.e., the existence of a trust
indenture). In that respect, the risks of default associated with structured
instruments may be similar to those associated with swap contracts. See "Swaps,
Caps and Floors."
The Funds will invest only in structured securities that are consistent
with each Fund's investment objective, policies and restrictions and Banc One
Investment Advisors' 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% (10%
with respect to a Money Market Fund and Institutional Money Market Funds) 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 (collectively,
"Swap Contracts") 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. Some
transactions may reduce each Fund's exposure to market fluctuations while others
may tend to increase market exposure. The Funds may enter into these
transactions to manage their exposure to changing interest rates or other market
factors or for non-hedging purposes. Although different from options, futures,
and options on futures , Swap Contracts are used by the Funds for similar
purposes (i.e., risk management, hedging, and as a substitute for direct
investments in underlying securities) and therefore, expose the Funds to
generally the same risks and opportunities as those investments..."
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.
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Currency swaps involve the exchange of respective rights to make or receive
payments in specified currencies. Mortgage swaps are similar to interest rate
swaps in that they represent commitments to pay and receive interest. The
notional principal amount, however, is tied to a reference pool or pools of
mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles the
purchaser to receive a principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the
obligation of the respective counterparties, and there is a risk that a
counterparty will be unable to meet its obligations under a particular swap
contract. If a counterparty defaults on a swap contract with a Fund, the Fund
may suffer a loss. To address this risk, each Fund will usually enter into
interest rate swaps on a net basis, which means that the two payment streams
(one from the Fund to the counterparty, one to the Fund from the counterparty)
are netted out, with the Fund receiving or paying, as the case may be, only the
net amount of the two payments.
Interest rate swaps do not involve the delivery of securities, other
underlying assets, or principal, except for the purposes of collateralization as
discussed below. Accordingly, the risk of loss with respect to interest rate
swaps entered into on a net basis would be limited to the net amount of the
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that a Fund is contractually entitled to
receive. In addition, the Fund may incur a market value adjustment on securities
held upon the early termination of the swap. To protect against losses related
to counterparty default, the Funds may enter into swaps that require transfers
of collateral for changes in market value.
In contrast, currency swaps and other types of swaps may involve the
delivery of the entire principal value of one designated currency or financial
instrument in exchange for the other designated currency or financial
instrument. Therefore, the entire principal value of such swaps may be subject
to the risk that the other party will default on its contractual delivery
obligations.
In addition, because swap contracts are individually negotiated and
ordinarily non-transferable, there also may be circumstances in which it would
be impossible for a Fund to close out its obligations under the swap contract
prior to its maturity. Under such circumstances, the Fund might be able to
negotiate another swap contract with a different counterparty to offset the risk
associated with the first swap contract. Unless 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 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
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debt securities, the Funds and Banc One Investment Advisors believe that swaps
do not constitute senior securities under the Investment Company Act of 1940
and, accordingly, will not treat them as being subject to each Fund's borrowing
restrictions. The net amount of the excess, if any, of each Fund's obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis and an amount of cash or liquid securities having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Funds' Custodian. Each of the Bond Funds generally
will limit their investments in swaps, caps and floors to 25% of its total
assets.
Treasury Receipts
Certain of the Funds may purchase interests in separately traded interest
and principal component parts of U.S. Treasury obligations that are issued by
banks or brokerage firms and are created by depositing U.S. Treasury notes and
U.S. Treasury bonds into a special account at a custodian bank. Receipts include
Treasury Receipts ("TRS"), Treasury Investment Growth Receipts ("TIGRS"), and
Certificates of Accrual on Treasury Securities ("CATS").
U.S. Treasury Obligations
The Funds may invest in bills, notes and bonds issued by the U.S. Treasury
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under
Book Entry Safekeeping ("CUBES"). The Funds may also invest in Inflation Indexed
Treasury Obligations.
Variable and Floating Rate Instruments
Certain obligations purchased by some of the Funds may carry variable or
floating rates of interest, may involve a conditional or unconditional demand
feature and may include variable amount master demand notes.
VARIABLE AMOUNT MASTER DEMAND NOTES are demand notes that permit the
indebtedness 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 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
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the instrument defaulted on its payment obligations, and the Fund could, for
this or other reasons, suffer a loss to the extent of the default. Variable or
floating rate instruments may be secured by bank letters of credit or other
assets. A Fund will purchase a variable or floating rate instrument to
facilitate portfolio liquidity or to permit investment of the Fund's assets at a
favorable rate of return.
With respect to the Money Market Funds and the Institutional Money Market
Funds, variable or floating rate instruments with stated maturities of more than
397 days may, under the Securities and Exchange Commission's amortized cost
rule, Rule 2a-7 under the 1940 Act, be deemed to have shorter maturities as
follows:
(1) Adjustable Rate Government Securities. A Government Security which is a
Variable Rate Security where the variable rate of interest is readjusted no less
frequently than every 762 days shall be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate. A Government
Security which is a Floating Rate Security shall be deemed to have a remaining
maturity of one day.
(2) Short-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have
maturity equal to the earlier of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand.
(3) Long-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a Demand Feature shall be deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand.
(4) Short-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have a
maturity of one day.
(5) Long-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a demand feature, shall be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund is
entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding 397
calendar days and upon no more than 30 days notice.
Limitations on the Use of Variable and Floating Rate Notes. Variable and
floating rate instruments for which no readily available market exists will be
purchased in 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 Funds and
Institutional Money Market Funds) or 15% (with respect to all Funds, other than
the Money Market Funds 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 "Appendix A --Description of Ratings".
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.
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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 on this basis, 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 to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. The Funds generally will not pay for such
securities or earn interest on them until received. Although the purchase of
securities on a when-issued basis is not considered to be leveraging, it has the
effect of leveraging. When Banc One Investment Advisors 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 to manage the Fund might be affected in the event
its commitments to purchase when-issued securities ever exceeded 40% of the
value of its assets. Commitments to purchase when-issued securities will not,
under normal market conditions, exceed 25% of a Fund's total assets, and a
commitment will not exceed 90 days. A Fund may dispose of a when-issued security
or forward commitment prior to settlement if Banc One Investment Advisors or the
applicable Sub- Advisor deems it appropriate to do so.
Investment Restrictions
The following investment restrictions are FUNDAMENTAL and may be changed
with respect to a particular Fund only by a vote of a majority of the
outstanding Shares of that Fund. See "ADDITIONAL INFORMATION--Miscellaneous" in
this Statement of Additional Information.
FUNDAMENTAL POLICIES
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% (25% with
respect to the Technology Fund) of the total assets of a Fund would be invested
in the securities of such issuer or a Fund (with the exception of the Technology
Fund) would own more than 10% of the outstanding voting securities of such
issuer. This restriction applies to 75% (50% with respect to the Technology
Fund) 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. Repurchase agreements held in margin deposits and segregated accounts
for futures contracts are not considered securities issued or guaranteed by the
United States, its agencies or instrumentalities ("Government Securities") for
purposes of the Equity Index Fund's 10% limitation on investments in Government
Securities.
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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: (i) with respect to the
Mortgage-Backed Securities Fund, mortgage-backed securities; or (ii) with
respect to the all of the Bond Funds, the obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii) enter
into repurchase agreements; and (iii) engage in securities lending as described
in the Prospectus and in this Statement of Additional Information.
Each of the 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
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.
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3. Make loans, except that a Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending 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 the
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
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. With
respect to the Prime Money Market Fund and the Institutional Prime Money Market
Fund, (i) this limitation does not apply to investments in the obligations
issued or guaranteed by the U.S. government or its agencies and
instrumentalities, domestic bank certificates of deposit or bankers' acceptances
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 U.S. Treasury Securities 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, and repurchase agreements
collateralized by such obligations.
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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.
With respect to the Municipal Bond Funds:
The Tax-Free Bond Fund, the Short-Term Municipal Bond Fund, 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 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
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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 obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities; and (ii) this limitation does
not apply to Municipal Securities or Ohio Municipal Securities, Kentucky
Municipal Securities, Arizona Municipal Securities, West Virginia Municipal
Securities, Louisiana Municipal Securities, and Michigan Municipal Securities.
For purposes of this limitation (i) utilities will be divided according to their
services (for example, gas, gas transmission, electric and telephone will each
be considered a separate industry); and (ii) wholly-owned finance companies will
be considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents. In addition,
with respect to the Arizona Municipal Bond Fund and the West Virginia Municipal
Bond Fund, for purposes of this limitation only, private activity bonds that are
backed only by the assets and revenues of a non-governmental issued shall not be
deemed to be Municipal Securities or Arizona Municipal Securities (for the
Arizona Municipal Bond Fund) or West Virginia Securities (for the West Virginia
Municipal Bond Fund).
None of the Municipal Bond Funds may:
1. Make loans, except that a Fund may (i) purchase or hold debt instruments
in accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
None of the Funds may:
1. Purchase securities on margin 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
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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 and the
Government Money Market Fund may not:
1. Buy state, municipal, or private activity bonds.
NON-FUNDAMENTAL POLICIES
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, and the Investor
Balanced 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 Fund's total assets; (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.
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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. 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, money market mutual funds, 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, 2000 and are expected to remain zero.
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The portfolio turnover rates of the Funds for the fiscal years ended June 30,
2000 and 1999 were as follows:
ONE GROUP MUTUAL FUNDS PORTFOLIO TURNOVER
Fiscal Year Ended
June 30,
--------
Fund 2000 1999
---- ---- ----
Equity Income.............................. 15.82% 16.22%
Mid Cap Value.............................. 110.43% 115.65%
Mid Cap Growth............................. 181.78% 141.46%
Equity Index............................... 7.89% 5.37%
Large Cap Value............................ 131.95% 40.69%
Balanced................................... 57.08% 85.81%
International Equity Index................. 13.85% 33.99%
Large Cap Growth........................... 123.21% 86.34%
Short-Term Bond............................ 25.93% 37.22%
Intermediate Tax-Free Bond................. 86.32% 108.41%
Municipal Income........................... 100.61% 55.03%
Ohio Municipal Bond........................ 35.46% 13.69%
Government Bond............................ 25.30% 80.86%
Ultra Short-Term Bond...................... 32.68% 38.70%
Kentucky Municipal Bond.................... 21.82% 6.30%
Arizona Municipal Bond..................... 19.28% 16.29%
W. Virginia Municipal Bond................. 24.67% 15.24%
Louisiana Municipal Bond................... 17.27% 19.67%
Diversified Equity......................... 37.98% 50.82%
Small Cap Growth........................... 163.03% 127.83%
Investor Growth............................ 28.66% 14.62%
Investor Growth & Income................... 21.50% 17.87%
Investor Conservative Growth............... 23.76% 9.73%
Investor Balanced.......................... 20.99% 13.51%
High Yield Bond............................ 35.14% 28.02%
Treasury & Agency.......................... 30.02% 76.73%
Small Cap Value ........................... 146.46% 50.90%##**
Diversified Mid Cap........................ 70.01% 23.53%##**
Diversified International.................. 17.05% 2.96%##**
Market Expansion Index..................... 64.29% 36.50%##**
Bond....................................... 16.19% 10.89%##**
Income Bond................................ 25.10% 20.55%##**
Intermediate Bond.......................... 6.08% 9.24%##**
Short-Term Municipal Bond.................. 113.70% 74.84%##**
Tax-Free Bond.............................. 44.41% 37.90%##**
Michigan Municipal Bond.................... 33.34% 10.60%##**
Technology ................................ NA* NA#
Real Estate ............................... NA* NA#
Mortgage-Backed Securities ................ NA* NA#
* As of June 30, 2000, 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 year ending December 31, 1998.
# As of June 30, 1999, the Fund had not commenced operations
## In March, 1999, the Predecessor Fund changed its fiscal year end from
December 31st to June 30th. The Portfolio Turnover Rate is for the period
beginning January 1, 1999 and ending June 30, 1999.
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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 Equity Funds resulted
from various factors, including profit-taking and disposition by the Small Cap
Growth, Small Cap Value, Mid Cap Growth and Mid Cap Value Funds of securities of
small- and mid-cap companies, respectively, whose capitalizations had moved into
the mid- and large-cap range, and thus, were no longer eligible holdings for the
Funds. The high portfolio turnover rates for the Municipal Income Fund and the
Short-Term Municipal Bond Fund resulted from various factors including market
volatility and responses to changes in the liquidity and risk profile of the
municipal bond market. 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 year ended December 31, 1998 was as follows:
Fiscal Year Ended
December 31,
Fund 1998
---- ----
Small Cap Value ...................................... 42.39%
Diversified Mid Cap................................... 26.89%
Diversified International............................. 8.50%
Market Expansion Index................................ 20.18%*
Bond.................................................. 34.69%
Income Bond........................................... 41.69%
Intermediate Bond..................................... 50.32%
Short-Term Municipal Bond............................. 32.23%**
Tax-Free Bond......................................... 22.05%
Michigan Municipal Bond............................... 23.33%
* Portfolio turnover rate for the period July 31, 1998 through December 31,
1998.
** Portfolio turnover rate for the period May 4, 1998 through December 31,
1998.
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 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
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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. For taxable years beginning after
December 31, 2000, the maximum capital gain tax rates for capital assets
(including Fund shares) held by a non-corporate shareholder for more than five
years will be 8% and 18% (rather than 10% and 20%). The 18% rate applies only to
assets the holding period for which begins after December 31, 2000 (including by
way of an election to mark the asset to the market, and to pay the tax on any
gain thereon, as of January 2, 2001). The mark-to-market election may be
disadvantageous from a federal tax perspective, and shareholders should consult
their tax advisors before making such an election. 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 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
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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 federal 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.
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
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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
federal alternative minimum tax applicable to individuals and the federal
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 federal alternative
minimum tax imposed on corporations.
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.
All or a portion of interest on indebtedness incurred or continued by a
Shareholder to purchase or carry Fund shares may not be deductible by the
Shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of the Fund's total distributions (not including distributions of net capital
gain) paid to the Shareholder that are exempt-interest dividends. Under rules
used by the Internal Revenue Service for determining when borrowed funds are
considered to have been used for the purpose of purchasing or carrying
particular assets, the purchase of Fund shares may be considered to have been
made with borrowed funds even though such funds are not directly traceable to
the purchase of shares.
Each Tax-Advantaged Fund may at times purchase Municipal Securities (or
other securities the interest on which is exempt from the regular federal income
tax) at a discount from the price at which they were originally issued. For
federal income tax purposes, some or all of the market discount will be included
in the Fund's ordinary income and will be taxable to shareholders as such when
it is distributed to them.
Each Tax-Advantaged Fund may acquire rights regarding specified portfolio
securities under puts. See "Futures and Options Trading." The policy of each
Tax-Free Fund is to limit its acquisition of puts to those under which the Fund
will be treated for federal income tax purposes as the owner of the Municipal
Securities acquired subject to the put and the interest on the Municipal
Securities will be tax-exempt to the Fund. Although the Internal Revenue Service
has issued a published ruling that provides some guidance regarding the tax
consequences of the purchase of puts, there is currently no guidance available
from the Internal Revenue Service that definitively establishes the tax
consequences of many of the types of puts that the Funds could acquire under the
1940 Act. Therefore, although a Tax-Advantaged Fund will only acquire a put
after concluding that it will have the tax consequences described above, the
Internal Revenue Service could reach a different conclusion from that of the
Fund.
Following is a brief discussion of treatment of exempt-interest dividends
by certain states.
Arizona Taxes. Shareholders of the Arizona Municipal Bond Fund will not be
subject to Arizona income tax on exempt-interest dividends received from the
Fund to the extent that such dividends are attributable to interest on
tax-exempt obligations of the state of Arizona and its political subdivisions
("LOCAL OBLIGATIONS"). Interest from Local Obligations however, may be
includable in Federal gross income.
Kentucky Taxes. Fund shares are currently exempt from the Kentucky tax on
intangible property. The Kentucky Supreme Court recently held that corporate
shares are not subject to the Kentucky intangible property tax because of an
exemption for shares of certain corporations with in-state activities which the
Court held to violate the Commerce Clause of the U.S. Constitution. The Kentucky
Revenue Cabinet has announced that, in light of the ruling, it will not, as a
matter of policy, require that the Kentucky intangible property tax be paid on
any portion of the value of shares of any mutual fund. Previously the Cabinet
had required owners of shares of mutual funds to pay tax on the portion of their
share value representing underlying fund assets not
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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.
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.
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Foreign Tax Credit
If more than 50% of an International Fund's total assets at year end
consist of the debt and equity securities of foreign corporations, the Fund may
elect to permit its Shareholders who are U.S. citizens to claim a foreign tax
credit or deduction on their U.S. income tax returns for their pro rata share of
foreign taxes paid by the Fund. In that case, Shareholders will be required to
include in gross income their pro rata share of foreign taxes paid by the Fund.
Each Shareholder may then claim a foreign tax credit or a tax deduction that
would offset some or all of the increased tax liability. Generally, a credit for
foreign taxes is subject to the limitation that it may not exceed the
Shareholder's U.S. tax attributable to his or her total foreign source taxable
income. For this purpose, the source of the income to an International Fund
flows through to the Fund's Shareholders. In addition, no credit will be allowed
for foreign taxes paid in respect of any dividend on stock paid or accrued after
September 4, 1997 unless the stock was held (without protection from risk of
loss) for at least 16 days during the 30-day period beginning 15 days before the
ex-dividend date. For certain preferred stock the holding period is 46 days
during the 90-day period beginning 45 days before the ex-dividend date. This
means that (i) Shareholders not satisfying this holding period requirement may
not claim foreign tax credits in respect of their shares, and (ii) the Fund may
not "flow through" tax credits to Shareholders in respect of dividends on stock
that the Fund has not held for the requisite period. If the Fund makes this
election with respect to foreign tax credits it will notify Shareholders of
their proportionate share of foreign taxes paid, the portion of the distribution
that represents foreign source income, and any amount of such foreign taxes paid
which are not creditable because the Fund did not meet the holding period
requirement. Gains to the International Funds from the sale of securities
generally will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as ordinary income
derived from U.S. sources. With limited exceptions, the foreign tax credit is
allowed to offset only up to 90% of the federal 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 an International Fund.
The foregoing is only a general description of the treatment of foreign
source income or foreign taxes under the United States federal income tax laws.
Because the availability of a credit or deduction depends on the particular
circumstances of each Shareholder, Shareholders are advised to consult their own
tax advisors.
Additional Tax Information Concerning The Funds of Funds
A Fund of Funds will not be able to offset gains realized by one Fund in
which such Fund of Funds invests against losses realized by another Fund in
which such Fund of Funds invests. The use of a fund-of-funds structure could
therefore affect the amount, timing and character of distributions to
shareholders.
Depending on a Fund of Fund's percentage ownership in an underlying Fund,
both before and after a redemption, a redemption of shares of an underlying Fund
by a Fund of Funds may cause the Fund of Funds to be treated as not receiving
capital gain income on the amount by which the distribution exceeds the tax
basis of the Fund of Funds in the shares of the underlying Fund, but instead to
be treated as receiving a dividend taxable as ordinary income on the full amount
of the distribution. This could cause shareholders of the Fund of Funds to
recognize higher amounts of ordinary income than if the shareholders had held
the shares of the underlying Funds directly.
Although each Fund of Funds may itself be entitled to a deduction for
foreign taxes paid by a Fund in which such Fund of Funds invests (see
"Additional Tax Information Concerning the International Funds"), the Fund of
Funds will not be able to pass any such credit or deduction through to its own
shareholders.
The foregoing is only a general description of the federal tax consequences
of a fund-of-funds structure. Accordingly, prospective purchasers of Shares of a
Fund of Funds are urged to consult their tax advisors with specific reference to
their own tax situation, including the potential application of state, local and
foreign taxes.
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VALUATION
Valuation of the Money Market Funds and Institutional Money Market Funds
The Money Market Funds 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 Funds 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 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) are
determined by Banc One Investment Advisors or the applicable Sub-Advisor to not
accurately reflect their value are valued at their fair value as determined in
good faith under consistently applied procedures established by and under the
general supervision of the Trustees of the Trust. Short-term securities are
valued at either amortized cost or original cost plus accrued interest, which
approximates current value. Mutual fund investments of the Funds of Funds will
be valued at the most recently calculated net asset value.
The value of a foreign security is determined in its national currency as
of the close of trading on 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
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<PAGE>
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 approved by the Board. Securities for which market
quotations are not readily available and other assets will be valued at fair
value using methods approved by the Board.
Security Valuation Specifics
- Securities for which the primary market is an exchange shall be valued at
the last available quoted sale price on said exchange for the current day.
In lieu of current trade activity, the security shall be valued at the last
available quoted sale.
- Securities, which are traded in the over-the-counter market or on a primary
exchange, shall be valued at the last available quoted sale price for the
current day. In lieu of current trade activity, the security will be valued
at the mean of the latest quoted bid and ask prices.
- Options, Futures Contracts, and Options on Futures shall be valued at the
last available sale on the exchange on which they are primarily traded. In
lieu of a current day last available sale, the valuation shall be the mean
of the latest bid and ask prices.
- U.S. Government Securities, Mortgage Pools, Collateralized Mortgage
Obligations, Asset Backed Securities, Corporate Bonds, and Municipal
Securities shall be valued by an independent pricing vendor. A mean of the
latest bid and ask quotations or the last quote available during normal
trading hours in the case of a listed bond shall be used to evaluate the
security. Fixed income securities with less than 61 days to maturity shall
be valued at amortized cost.
- Securities for which the primary market is a foreign exchange shall be
valued at the last available quoted sale price on said exchange for the
curent day or, if traded on the London Exchange and are not part of the
FTSE 100, the securities will receive the mid market close. Quotations of
foreign securities shall be converted into the U.S. dollar equivalent using
a spot currency value provided by an independent pricing vendor.
- Securities for which readily available market quotations are not available
or for which the pricing agent provides a valuation that in the judgment of
the Trust's Pricing Committee does not represent a fair value, shall be
valued in accordance with the Trust's "Securities Valuation Procedures."
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
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<PAGE>
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.
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<PAGE>
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).
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 Shares. Class A Shareholders may exchange their Shares for Class I
Shares of a Fund or for Class I or Class A Shares of another Fund or the Trust,
if the Shareholder is eligible to purchase such Shares. If a 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
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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.
Redemptions
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when:
(a) trading on the New York Stock Exchange (the "EXCHANGE") is restricted
by applicable rules and regulations of the Securities and Exchange
Commission,
(b) the Exchange is closed for other than customary weekend and holiday
closings,
(c) the SEC has by order permitted such suspension, or
(d) an emergency exists as determined by the SEC.
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MANAGEMENT OF THE TRUST
Trustees & Officers
Overall responsibility for management of the Trust rests with the Board of
Trustees of the Trust 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 57 Trustee Since March 2000, Senior Vice President
DCI Marketing, Inc. W.D. Hoard, Inc. (Corporate parent
2727 W. Good Hope Road of DCI Marketing, Inc.), from November
Milwaukee, WI 53209 1993 to March 2000, President,
DCI Marketing, Inc.
Charles I. Post 72 Trustee Since July 1986, self employed as
7615 4th Avenue West a consultant.
Bradenton, FL 34209
Frederick W. Ruebeck 61 Trustee Since April 2000, advisor, Jerome P.
10954 Windjammer North Green & Associates, LLP. From January
Indianapolis, IN 46256 2000 to April 2000, self-employed
as a consultant. From June 1988 to
December 1999, Director of Investments,
Eli Lilly and Company.
Robert A. Oden, Jr. 54 Trustee Since 1995, President, Kenyon
Office of the President College. ,
Ransom Hall
Kenyon College
Gambier, OH 43022
*John F. Finn 52 Trustee Since 1975, President of Gardner,
President Inc. (wholesale distributor to the
Gardner, Inc. outdoor power equipment industry).
1150 Chesapeake Avenue
Columbus, OH 43212
Marilyn McCoy 52 Trustee Since 1985, Vice President of
Northwestern University Administration and Planning, Northwestern
Office of the Vice President University.
Administration Planning
633 Clark St. Crown 2-112
Evanston, IL 60208
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Position Held Principal Occupation
Name and Address Age with the Trust During the Past Five Years
---------------- --- -------------- --------------------------
<S> <C> <C> <C>
Julius L. Pallone 70 Trustee Since 1994, President, J.L.
J.L. Pallone Associates Pallone Associates.
3000 Town Center
Suite 732
Southfield, MI 48075
Donald L. Tuttle 66 Trustee Since 1995, Vice President
Association for Investment Association for Investment
Management and Research Management and Research.
PO Box 3668
560 Ray C. Hunt Drive .
Charlottesville, VA 22903
</TABLE>
* 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, 2000.
<TABLE>
<CAPTION>
COMPENSATION TABLE(1)
Pension or Estimated Total
Aggregate Retirement Benefits Annual 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, ............ $102,750/4/ $ 0 NA $106,000
Chairman
Charles I. Post, .............. $ 96,750 $ 0 NA $100,000
Trustee
Frederick W. Ruebeck, ......... $ 96,750/5/ $ 0 NA $100,000
Trustee
Robert A. Oden, Jr., .......... $ 96,750/6/ $ 0 NA $100,000
Trustee
John F. Finn, ................. $ 96,750/7/ $ 0 NA $100,000
Trustee
Marilyn McCoy, ................ $ 96,750/8/ $ 0 NA $100,000
Trustee
Julius L. Pallone, ............ $ 96,750/9/ $ 0 NA $100.000
Trustee
Donald L. Tuttle, ............. $ 96,750/10/ $ 0 NA $100,000
Trustee
</TABLE>
(1) Figures are for the Trust's fiscal year ended June 30, 2000. For the fiscal
year ending June 30, 2001, each Trustee will receive one fee for services
to both One Group Mutual Funds and One Group Investment Trust
(collectively, the "Trusts"). The fee will be allocated to each Trust on
the basis of relative net assets.
(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
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<PAGE>
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, 2000.
(4) Includes $25,250 of deferred compensation.
(5) Includes $49,250 of deferred compensation.
(6) Includes $15,000 of deferred compensation.
(7) Includes $96,750 of deferred compensation.
(8) Includes $96,750 of deferred compensation.
(9) Includes $77,750 of deferred compensation.
(10) Includes $48,375 of deferred compensation.
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 A. Beeson 42 President From October, 1999 to present, Chief
One Group Administrative Executive Officer and President, One
Services, Inc. Group Administrative Services, Inc. and
1111 Polaris Parkway Chief Executive Officer and President,
Columbus, Ohio 43271-1235 One Group Dealer Services, Inc.; August,
1994 to October, 1999, Senior Managing
Director, Banc One Investment
Advisors Corporation.
Robert L. Young 37 Vice President and Treasurer From October, 1999 to present, Vice
One Group Administrative President and Treasurer, One Group
Services, Inc. Administrative Services, Inc., and Vice
1111 Polaris Parkway President and Treasurer, One Group
Columbus, Ohio 43271-1235 Dealer Services, Inc; December,
1996 to October, 1999, Managing
Director of Mutual Fund Administration,
Banc One Investment Advisors
Corporation; June, 1985 to December,
1996, Senior Audit Manager, Deloitte
& Touche.
Michael V. Wible 38 Secretary From January, 2000 to present, First
Bank One Corporation Vice President and Counsel, Bank One
100 E. Broad Street Corporation; September, 1994 to January,
Columbus, Ohio 43271-0152 2000, Counsel to Bank One Corporation.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Gary R. Young 31 Assistant Treasurer and From October, 1999 to present, Director
One Group Administrative Assistant Secretary Mutual Fund Financial Administration,
Services, Inc. One Group Administrative Services, Inc.;
1111 Polaris Parkway December, 1998 to October, 1999,
Columbus, Ohio 43271-1235 Director, Mutual Fund Financial
Administration, Banc One Investment
Advisors Corporation; January, 1995 to
December, 1998, Vice President and
Manager of Mutual Fund Accounting,
Custody and Financial Administration,
First Chicago, NBD Corporation.
Jessica K. Ditullio 38 Assistant Secretary From January, 2000 to present, First
Bank One Corporation Vice President and Counsel, Bank One
100 E. Broad Street Corporation; August, 1990 to January,
Columbus, Ohio 43271-0152 2000, Counsel, Bank One Corporation.
Mark S. Redman 46 Assistant Secretary From November, 1997 to present, President,
The One Group Services Company The One Group Services Company. From June,
3435 Stelzer Road 1995 to November, 1997, Officer, The One Group
Columbus, Ohio 43219 Services Company; From February, 1989 to present,
employee of BISYS Fund Services, Inc. (FKA
Winsbury Company)
Nancy E. Fields 51 Assistant Secretary From October, 1999 to present, Director,
One Group Administrative Mutual Fund Administration, One Group
Services, Inc. Administrative Services, Inc. and Senior
1111 Polaris Parkway Project Manager, Mutual Funds, One
Columbus, Ohio 43271-0211 Group Dealer Services, Inc.; July, 1999
to October, 1999, Project Manager, One
Group, Banc One Investment Advisors
Corporation; January, 1998 to July,
1999, Vice President, Ohio Bankers
Association; July, 1990 to January,
1997, Vice President, Client Services,
BISYS Fund Services, Inc.
Alaina V. Metz 33 Assistant Secretary From June, 1995, to
BISYS Fund Services, Inc. present, Chief 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>
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<PAGE>
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 and
the Income Bond Fund which are sub-advised by Banc One High Yield Partners, LLC,
the 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, 2000, 1999, and 1998, 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:
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ONE GROUP MUTUAL FUND ADVISORY FEES--NET
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
2000 (in 000's) 1999 1998
----------------- ---- ----
Fund Net Waived Net Waived Net Waived
---- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market ................. $ 22,310 $ 2,092 $18,197,198 $ 1,705,060 $ 9,337,795 $ 2,237,340
Prime Money Market ............. $ 28,184 $ 2,784 $15,422,198 $ 1,501,456 $ 9,806,764 $ 1,675,435
Municipal Money Market ......... $ 3,972 $ 1,178 $ 2,530,968 $ 827,569 $ 1,491,141 $ 596,454
Ohio Municipal Money Market .... $ 256 $ 44 $ 271,920 $ 68,725 $ 252,818 $ 60,211
Equity Income .................. $ 7,404 $ 807 $ 7,397,328 $ 542,041 $ 6,571,128 -0-
Mid Cap Value .................. $ 7,632 $ 289 $ 6,439,398 $ 30,016 $ 4,758,742 -0-
Mid Cap Growth ................. $ 13,265 $ 0 $ 8,646,067 $ -0- $ 6,492,467 -0-
Equity Index ................... $ 5,029 $ 5,305 $ 2,540,532 $ 2,882,298 $ 992,672 $ 1,985,360
Large Cap Value ................ $ 9,360 $ 0 $ 6,649,570 $ -0- $ 5,638,325 -0-
Balanced ....................... $ 3,155 $ 641 $ 2,481,299 $ 411,428 $ 1,178,256 $ 191,626
International Equity Index ..... $ 4,645 $ 0 $ 3,009,675 $ -0- $ 2,373,749 -0-
Large Cap Growth ............... $ 30,443 $ 0 $19,303,039 $ -0- $12,023,999 -0-
Short-Term Bond ................ $ 2,476 $ 2,166 $ 2,214,444 $ 1,937,618 $ 1,879,523 $ 1,700,459
Intermediate Tax-Free Bond ..... $ 3,602 $ 1,909 $ 2,673,135 $ 1,481,010 $ 1,904,783 $ 1,025,646
Municipal Income ............... $ 3,816 $ 1,076 $ 3,275,777 $ 877,859 $ 2,184,870 $ 624,243
Ohio Municipal Bond ............ $ 800 $ 504 $ 722,143 $ 606,278 $ 544,952 $ 517,943
Government Bond ................ $ 4,365 $ 172 $ 4,744,608 $ -0- $ 3,714,960 $ 80,216
Ultra Short-Term Bond .......... $ 900 $ 719 $ 577,502 $ 789,477 $ 424,770 $ 699,133
Treasury Only Money Market ..... $ 745 $ 0 $ 677,936 $ -0- $ 518,513 -0-
Government Money Market ........ $ 2,670 $ 0 $ 2,782,098 $ -0- $ 1,735,256 -0-
Kentucky Municipal Bond ........ $ 538 $ 108 $ 523,045 $ 130,764 $ 469,392 $ 117,349
Institutional Prime Money Market $ 2,009 $ 502 $ -0- $ 1,671 NA# NA#
Tax-Exempt Money Market ........ NA*** NA*** $ NA## $ NA## NA# NA#
Arizona Municipal Bond ......... $ 877 $ 110 $ 999,215 $ 104,016 $ 1,007,240 $ 154,639
W. Virginia Municipal Bond ..... $ 398 $ 70 $ 419,312 $ 90,662 $ 365,585 $ 103,485
Louisiana Municipal Bond ....... $ 662 $ 366 $ 746,009 $ 423,067 $ 572,161 $ 355,668
Diversified Equity ............. $ 16,499 $ 0 $ 8,977,465 $ -0- $ 4,485,408 -0-
Small Cap Growth ............... $ 1,787 $ 11 $ 986,900 $ 4,830 $ 902,099 -0-
High Yield Bond ................ $ 1,213 $ 298 $ 228,845 $ 134,906 NA# NA#
Investor Growth ................ $ 69 $ 151 $ 68,885 $ 47,015 $ 35,565 $ 21,362
Investor Growth & Income ....... $ 150 $ 234 $ 190,454 $ -0- $ 49,435 $ 17,732
Investor Conservative Growth ... $ 48 $ 56 $ 37,255 $ 28,268 $ 4,622 $ 18,489
Investor Balanced .............. $ 108 $ 170 $ 153,645 $ -0- $ 53,241 $ 11,387
Treasury & Agency .............. $ 389 $ 389 $ 404,427 $ 404,433 $ 232,442 $ 232,443
Small Cap Value ................ $ 1,320 $ 255 $ 443,867** $ 87,675** NA NA
Diversified Mid Cap ............ $ 6,601 $ 1,540 $ 1,978,567** $ 417,680** NA NA
Diversified International ...... $ 5,814 $ 227 $ 1,352,519** $ 54,445** NA NA
Market Expansion Index ......... $ 24 $ 77 $ -0-** $ 7,979** NA NA
Bond ........................... $ 6,320 $ 3,454 $ 1,664,679** $ 648,205** NA NA
Income Bond .................... $ 5,690 $ 2,574 $ 1,284,532** $ 678,174** NA NA
Intermediate Bond .............. $ 5,466 $ 3,398 $ 1,154,030** $ 890,093** NA NA
Short-Term Municipal Bond ...... $ 379 $ 389 $ 103,108** $ 86,282** NA NA
Tax-Free Bond .................. $ 2,941 $ 368 $ 939,456** $ 129,437** NA NA
Michigan Municipal Bond ........ $ 1,191 $ 149 $ 359,864** $ 49,808**
Michigan Municipal Money Market $ 421 $ 135 $ 103,442** $ 51,994** NA NA
Cash Management Money Market ... $ 4,218 $ 743 $ 993,338** $ 317,402** NA NA
Treasury Cash Management
Money Market ................. $ 611 $ 136 $ 151,668** $ 96,510** NA NA
Treasury Prime Cash
Management Money Market ...... $ 993 $ 249 $ 199,693** $ 104,284** NA NA
U.S. Government Securities
Cash Management Money Market . $ 3,162 $ 440 $ 667,615** $ 118,000** NA NA
Municipal Cash Management
Money Market ................. $ 820 $ 148 $ 200,734** $ 117,899** NA NA
Technology ..................... 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, 2000, the Fund had not commenced operations.
## As of June 30, 1999, the Fund had not commenced operations.
# As of June 30, 1998, 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.
-70-
<PAGE>
For the period beginning November 1, 2000 and ending October 31, 2001, Banc
One Investment Advisors and One Group Administrative Services, Inc. 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% NA NA NA
2. Small Cap Value ............................ 1.22% 1.97% 1.97% .97%
3. Mid Cap Growth ............................. 1.24% NA NA NA
4. Mid Cap Value .............................. 1.21% 1.96% 1.96% .96%
5. Diversified Mid Cap ........................ 1.24% 1.99% 1.99% .99%
6. Large Cap Growth ........................... 1.18% NA NA .NA
7. Large Cap Value ............................ 1.22% NA NA NA
8. Equity Income .............................. 1.23% NA NA .NA
9. Diversified Equity ......................... 1.20% NA NA NA
10. Balanced .................................. 1.14% 1.89% 1.89% .89%
11. Equity Index .............................. .60% 1.35% 1.35% .35%
12. Market Expansion Index .................... .82% 1.57% 1.57% .57%
13. International Equity Index ................ 1.18% NA NA NA
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 ..................... .70% 1.20% 1.20% .45%
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% .65%
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% 1.30% 1.30% .55%
26. Intermediate Tax-Free ..................... .85% 1.50% 1.50% .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% NA
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% NA
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>
-71-
<PAGE>
MONEY MARKET AND INSTITUTIONAL MONEY MARKET
<TABLE>
<CAPTION>
Service
Fund Class A Class B Class C 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 .74% NA 1.49% 1.04% NA .49%
48. Ohio Municipal Money Market .71% NA 1.46% 1.01% NA .46%
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% NA
52. Treasury Only Money Market NA NA NA NA .35% NA
53. Government Money Market NA NA NA NA .35% NA
54. Tax-Exempt Money Market NA NA NA NA .35% .18%
55. Mortgage-Backed Securities .65% NA NA NA NA .40%
</TABLE>
-72-
<PAGE>
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 Sub-Investment Advisory Agreements 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 17, 2000. 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.
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 and 1997, these Funds of the Trust paid the following investment advisory
fees to FCNIMCO and FCNIMCO voluntarily waived investment advisory fees as
follows.
-73-
<PAGE>
PREDECESSOR FUNDS' ADVISORY FEES--NET
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
1999(1) 1998 1997
------- ---- ----
Fund Net Waived Net Waived Net Waived
---- --- ------ --- ------ --- ------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Value .................... $ 425,933 $ 17,325 $2,003,921 0 $1,283,658 0
Diversified Mid Cap ................ $ 930,900 $ 0 $6,832,757 0 $5,355,678 0
Diversified International .......... $ 919,346 $ 11,441 $4,577,670 0 $3,752,409 0
Market Expansion Index ............. $ 0.00 $ 19,020 0 $ 45,584 NA* NA*
Bond ............................... $1,221,570 $ 101,107 $5,674,695 0 $4,089,788 0
Income Bond ........................ $ 329,113 $ 26,702 $ 827,079 0 $ 562,165 0
Intermediate Bond .................. $ 575,602 $ 9,954 $2,349,025 0 $1,890,923 0
Short-Term Municipal Bond .......... $ 87,893 $ 18,717 $ 144,978 $ 41,317 NA* NA*
Tax-Free Bond ...................... $ 783,772 $ 0 $2,358,313 0 $1,524,196 0
Michigan Municipal Bond ............ $ 286,916 $ 0 $ 686,184 $ 13,410 $ 228,576 $ 43,158
Michigan Municipal
Money Market ..................... $ 93,711 $ 22,005 $ 327,693 $ 36,792 $ 335,355 $ 44,602
Cash Management
Money Market ..................... $ 940,792 $ 313,597 $3,402,847 $ 907,915 $1,642,225 $ 279,533
Treasury Cash Management
Money Market ..................... $ 117,909 $ 63,489 $ 498,263 $ 136,100 $ 99,821 $ 33,327
Treasury Prime Cash Management
Money Market ..................... $ 176,745 $ 87,716 $ 592,066 $ 207,054 $ 404,248 $ 105,789
U.S. Government Securities Cash
Management Money Market .......... $ 645,999 $ 113,999 $2,465,211 $ 295,457 $1,369,324 $ 88,360
Municipal Cash Management
Money Market ..................... $ 236,376 $ 57,101 $ 804,693 $ 179,890 $ 107,285 $ 40,982
</TABLE>
* As of the end of the fiscal year ended December 31, 1997, the Funds had not
commenced operations.
(1) For the period beginning January 1, 1999 to consolidation with the Pegasus
Funds.
-74-
<PAGE>
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. Independence International received $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. For the period from July 1,
1999 to October 31, 1999 (the date the International Sub-Investment Advisory
Agreement terminated), Independence International received $191,864.14 in
sub-advisory fees from Banc One Investment Advisors.
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 High Yield Bond Fund's average daily net assets. For the fiscal year
ended June 30, 2000, Banc One Investment Advisors paid the Sub-Advisor
$1,213,064 in sub-advisory fees with respect to the High Yield Bond Fund.
Banc One High Yield Partners, LLC also serves as investment Sub-Advisor to
the Income Bond Fund pursuant to an agreement with Banc One Investment Advisors
(the "INCOME BOND FUND ADVISORY AGREEMENT"). Under the Income Bond Fund Advisory
Agreement, the Sub-Advisor provides a continuous investment program with respect
to those assets of the Income Bond Fund that are designated by Banc One
Investment Advisors for investment in high yield assets (the "Portfolio"). For
its services, the Sub-Advisor is entitled to a fee, which is calculated daily
and paid monthly, equal to .60% of the Portfolio's average daily net assets. The
Sub-Advisor has agreed to waive a portion of the sub-advisory fee equal to the
percentage of the investment advisory fee waived by Banc One Investment Advisors
under the Investment Advisory Agreement between the Trust and Banc One
Investment Advisors. For the period from November 19, 1999 (i.e., the
commencement of the Income Bond Fund Advisory Agreement) through June 30, 2000,
Banc One Investment Advisors paid the Sub-Advisor $168,122 in sub-advisory fees
with respect to the Income Bond Fund.
Code of Ethics
The Trust, Banc One Investment Advisors, Banc One High Yield Partners, LLC,
and The One Group Services Company have adopted codes of ethics under Rule 17j-1
of the Investment Company Act of 1940. The Trust's code of ethics includes
policies which require "access persons" (as defined in Rule 17j-1) to: (i) place
the interest of Trust Shareholders first; (ii) conduct personal securities
transactions in a manner that avoids any actual or potential conflict of
interest or any abuse of a position of trust and responsibility; and (iii)
refrain from taking inappropriate advantage of his or her position with the
Trust or with a Fund. The Trust's code of ethics prohibits any access person
from: (i) employing any device, scheme or artifice to defraud the Trust or a
Fund; (ii) making to the Trust any untrue statement of a material fact or omit
to state to the Trust or a Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are made, not
misleading; (iii) engaging in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Trust or a Fund; or (iv)
engaging in any manipulative practice with respect to the Trust or a Fund. The
Trust's code of ethics permits personnel subject to the code to invest in
securities, including securities that may be purchased or held by a Fund so long
as such investment transactions are not in contravention of the above noted
policies and prohibitions.
Banc One Investment Advisors' code of ethics requires that all employees
must: (i) place the interest of the accounts which are managed by Banc One
Investment Advisors first; (ii) conduct all personal securities transactions in
a manner that is consistent with the code of ethics and the individual
employee's position of trust and responsibility; and (iii) refrain from taking
inappropriate advantage of their position. Banc One Investment Advisors' code of
ethics permits personnel subject to the code to
-75-
<PAGE>
invest in securities including securities that may be purchased or held by a
Fund subject to certain restrictions. However, all employees are required to
preclear securities trades (except for certain types of securities such as
mutual fund shares and U.S. government securities).
Banc One High Yield Partners, LLC's code of ethics ( the "BOHYP Code")
requires that all employees must: (i) at all times, place the interests of
clients before their personal interests; (ii) conduct all personal securities
transactions in a manner consistent with the BOHYP Code, so as to avoid any
actual or potential conflicts of interest, or an abuse of position of trust and
responsibility; and (iii) not take any inappropriate advantage of their position
with or on behalf of clients. The BOHYP Code permits personnel subject to the
code to invest in securities including securities that may be purchased or held
by a Fund subject to certain restrictions. However, all employees are required
to preclear securities trades (except for certain types of securities such as
mutual fund shares and U.S. government securities).
The One Group Services Company is subject to BISYS Fund Services Code of
Ethics (the "Principal Underwriter's Code of Ethics"). Under the Principal
Underwriter's Code of Ethics, directors, officers, and associates of The One
Group Services Company must: (i) place the interest of Fund shareholders first;
(ii) conduct all personal securities transactions in a manner that is consistent
with the Principal Underwriter's Code of Ethics to avoid any actual or potential
conflict of interest; and (iii) refrain from taking inappropriate advantage of
their position. The Principal Underwriter's Code of Ethics permits personnel
subject to the code to invest in securities including securities that may be
purchased or held by the Funds subject to the policies and restrictions in the
Principal Underwriter's Code of Ethics.
Portfolio Transactions
Pursuant to the Advisory and Sub-Advisory Agreements, Banc One Investment
Advisors and the Sub-Advisor determine, subject to the general supervision of
the Board of Trustees of the Trust and in accordance with each Fund's investment
objective and restrictions, which securities are to be purchased and sold by
each such Fund and which brokers are to be eligible to execute its portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Money Market Funds, the Bond Funds, the Funds of Funds and (to a varying degree)
the Balanced Fund usually are principal transactions in which portfolio
securities are purchased directly from the issuer or from an underwriter or
market maker for the securities. Purchases from underwriters of portfolio
securities generally include (but not in the case of mutual fund shares
purchased by the Funds of Funds) a commission or concession paid by the issuer
to the underwriter and purchases from dealers serving as market makers may
include the spread between the bid and asked price. Transactions on stock
exchanges (other than certain foreign stock exchanges) involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Trust, where possible, will deal directly with the
dealers who make a market in the securities involved except in those
circumstances where better price and execution are available elsewhere. While
Banc One Investment Advisors or the 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 Sub-Advisor and does not
reduce the advisory fees payable to Banc One Investment Advisors or the
Sub-Advisor. Such information may be useful to Banc One Investment Advisors or
the 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 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. For the fiscal year ended June 30,
2000, total compensation paid to such brokers amounted to $12,680,694.
-76-
<PAGE>
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.
In the fiscal years ended June 30, 2000, 1999, and 1998, 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:
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------
Fund 2000 1999 1998
---- ---------------------------- ----
<S> <C> <C> <C>
Equity Income.................................... $ 1,110,983 $ 604,451 $ 331,556
Mid Cap Value.................................... $ 3,108,434 $ 71,046 $ 1,541,217
Mid Cap Growth................................... $ 3,622,063 $ 765,709 $ 2,455,346
Equity Index..................................... $ 285,253 $ 2,669,089 $ 72,702
Large Cap Value.................................. $ 4,020,076 $ 336,443 $ 722,191
Balanced......................................... $ 342,858 $ 1,864,690 $ 154,837
International Equity Index....................... $ 525,259 $ 69,165 $ 514,660
Large Cap Growth................................. $ 6,554,848 $ 4,726,209 $ 2,935,851
Small Cap Growth................................. $ 513,090 $ 88,796 $ 180,460
Diversified Equity............................... $ 2,264,677 $ 297,245 $ 763,394
Small Cap Value.................................. $ 1,237,394 $ 30,415** NA*
Diversified Mid Cap.............................. $ 1,823,274 $ 74,794** NA*
Diversified International........................ $ 559,585 $ 10,432** NA*
Market Expansion Index........................... $ 24,257 $ 1,959** NA*
Intermediate Tax-Fee Bond........................ $ 10,000 NA NA
Ohio Municipal Bond.............................. $ 1,827 NA NA
Ultra Short Term Bond............................ $ 4,202 NA NA
Government Bond.................................. $ 5,481 NA NA
High Yield Bond.................................. $ 153 NA NA
Michigan Municipal Bond.......................... $ 2,741 NA NA
</TABLE>
* Prior to the consolidation in March, 1999, the Fund had a fiscal year
ending December 31st.
** Information is from the consolidation in March, 1999 through June 30, 1999
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
Fiscal Year Ended December 30,
------------------------------
Fund 1999 1998
---- ---- ----
<S> <C> <C>
Small Cap Value ................................. $ 379,752 $ 280,426
Diversified Mid Cap ............................. $ 803,740 $ 698,038
Diversified International ....................... $ 288,664 $ 225,448
Market Expansion Index .......................... $ 5,850 NA*
</TABLE>
* As December 31, 1998, the Fund had not commenced operations.
-77-
<PAGE>
As of June 30, 2000, 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 Fund Goldman Sachs & Co. $ 72,053
U.S. Treasury Securities Money Market Fund Donaldson, Lufkin & Jenrette $ 320,000
Goldman Sachs & Co. $ 320,000
Equity Income Fund Goldman Sachs & Co. $ 1,843
Lehman Brothers $ 354
Income Bond Fund Goldman Sachs & Co. $ 56,572
Lehman Brothers $ 38,506
Societe Generale $ 7,344
ABN AMRO Securities, Inc. $ 4,758
Donaldson, Lufkin & Jenrette $ 1,746
Mid Cap Value Fund Goldman Sachs & Co. $ 3,421
Lehman Brothers $ 2,135
Mid Cap Growth Fund Goldman Sachs & Co. $ 83,619
Lehman Brothers $ 16, 087
Short-Term Bond Fund Goldman Sachs & Co. $ 50,400
Lehman Brothers $ 18,681
Equity Index Fund Goldman Sachs & Co. $ 59,604
Lehman Brothers $ 15,165
Lehman Brothers $ 3,341
Large Cap Value Fund Goldman Sachs & Co. $ 28,410
Lehman Brothers $ 13,256
International Equity Index Fund Goldman Sachs & Co. $ 150,714
Deutsche Bank Securities, Corp. $ 6,978
Government Money Market Fund Goldman Sachs & Co. $ 715,276
ABN AMRO Securities, Inc. $ 651,473
Barclays De Zoette Wedd Securities $ 180,000
Westdeutche Landesbank $ 182,000
State Street Bank and Trust $ 155,000
Balanced Fund Goldman Sachs & Co. $ 4,679
Lehman Brothers $ 1,331
State Street Bank and Trust $ 236
Intermediate Bond Fund State Street Bank and Trust $ 67,191
Goldman Sachs & Co. $ 55,758
Lehman Brothers $ 34,588
ABN AMRO Securities, Inc. $ 198
Large Cap Growth Fund Goldman Sachs & Co. $ 70,041
Lehman Brothers $ 15,826
Small Cap Growth Fund Goldman Sachs & Co. $ 10,609
Lehman Brothers $ 4,162
Diversity Equity Fund Goldman Sachs & Co. $ 24,224
Lehman Brothers $ 15,074
Institutional Prime Money Market Fund Goldman Sachs & Co. $ 207,806
Westdeutsche Landesbank $ 142,000
Societe Generale $ 100,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Fund Name of Broker-Dealer Value of Securities Owned
(Amounts in Thousands)
<S> <C> <C>
High Yield Bond Fund Lehman Brothers $ 1,024
U.S. Government Securities Cash Management
Money Market Fund Westdeutsche Landesbank $ 492,275
ABN AMRO Securities, Inc. $ 98,527
Goldman Sachs & Co. $ 95,000
State Street Bank and Trust $ 95,000
Societe Generale $ 90,000
Prudential Securities, Inc. $ 85,000
Small Cap Value Fund Goldman Sachs & Co. $ 1,563
Lehman Brothers $ 300
Diversified Mid Cap Fund Goldman Sachs & Co. $ 25,445
Lehman Brothers $ 4,843
State Street Bank and Trust $ 2,205
Market Expansion Index Fund Goldman Sachs & Co. $ 449
Lehman Brothers $ 88
Bond Fund State Street Bank and Trust $ 96,126
Goldman Sachs & Co. $ 29,108
Lehman Brothers $ 28,424
ABN AMRO Securities, Inc. $ 1,983
Cash Management Money Market Fund Barclays De Zoette Wedd Securities $ 262,000
Goldman Sachs Co. $ 74,742
Westdeutsche Landesbank $ 19,845
Treasury Cash Management Money
Market Fund Westdeutsche Landesbank $ 61,702
Goldman Sachs & Co. $ 20,000
Prudential Securities, Inc. $ 20,000
State Street Bank and Trust $ 20,000
Diversified International Fund Lehman Brothers $ 111,055
State Street Bank and Trust $ 16,627
Deutsche Bank Securities, Corp. $ 3,174
</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. 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, 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 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 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 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
Sub-Advisor or their parents or subsidiaries or affiliates and, in dealing with
its commercial customers, Banc One Investment Advisors and the 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.
-79-
<PAGE>
Administrator, Predecessor Administrators and Sub-Administrators
Effective November 1, 2000, One Group Administrative Services, Inc.,
1111 Polaris Parkway, Columbus, Ohio 43240 began serving as administrator for
the Trust ("One Group Administrative Services" or the "Administrator"). One
Group Administrative Services is an affiliate of Banc One Investment Advisors,
the advisor of the Trust, and an indirect wholly-owned subsidiary of Bank One
Corporation.
The Administrator assists in supervising all operations of each Fund to
which it serves (other than those performed under the Advisory Agreement, the
Custodian Agreement and the Transfer Agency Agreement for that Fund). Under the
Administration Agreement, the Administrator has agreed to maintain the necessary
office space for the Funds, to price the Fund securities of each Fund it serves
and compute the net asset value and net income of the Funds on a daily basis, to
maintain each Fund's financial accounts and records, and to furnish certain
other services required by the Funds with respect to each Fund. The
Administrator prepares annual and semi-annual reports to the Securities and
Exchange Commission, prepares federal and state tax returns, and generally
assists in all aspects of the Trust's operations other than those performed
under the Advisory Agreement, the Custodian Agreement and the Transfer Agency
Agreement. Under the Administration Agreement, the Administrator may, at its
expense, subcontract with any entity or person concerning the provision of
services under the Administration Agreement.
Unless sooner terminated, the Administration Agreement between the
Trust and One Group Administrative Services will continue in effect through
October 31, 2001. 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 may be
terminated with respect to the Trust only upon mutual agreement of the parties
to the Administration Agreement and for cause (as defined in the Administration
Agreement) by the party alleging cause.
The Administrator is entitled to a fee for its services, which is
calculated daily and paid monthly, at the annual rates specified below for the
Funds specified below:
Name of the Multiple Class Funds
Prime Money Market Fund
U.S. Treasury Securities Money Market Fund
Municipal Money Market Fund
Michigan Municipal Money Market Fund
Ohio Municipal Money Market Fund
Treasury Prime Money Market Fund
U.S. Government Securities Money Market Fund
Cash Management Money Market Fund
Treasury Cash Management Money Market Fund
Treasury Prime Cash Management Money Market Fund
U.S. Government Cash Management Money Market Fund
Municipal Cash Management Money Market Fund
Small Cap Growth Fund
Small Cap Value Fund
Mid Cap Growth Fund
Mid Cap Value Fund
Diversified Mid Cap Fund
Large Cap Growth Fund
Large Cap Value Fund
Equity Income Fund
Diversified Equity Fund
Balanced Fund
Equity Index Fund
Market Expansion Index Fund
Technology Fund
-80-
<PAGE>
International Equity Index Fund
Diversified International Fund
Real Estate Fund
Ultra Short-Term Bond Fund
Short-Term Bond Fund
Intermediate Bond Fund
Bond Fund
Income Bond Fund
Government Bond Fund
Treasury & Agency Fund
High Yield Bond Fund
Mortgage-Backed Securities Fund
Short-Term Municipal Bond Fund
Intermediate Tax-Free Bond Fund
Tax-Free Bond Fund
Municipal Income Fund
Arizona Municipal Bond Fund
Kentucky Municipal Bond Fund
Louisiana Municipal Bond Fund
Michigan Municipal Bond Fund
Ohio Municipal Bond Fund
West Virginia Municipal Bond Fund
Compensation Regarding Multiple Class Funds
Compensation for each of the above Funds (the "Multiple Class Funds")
shall be at annual rates of the Fund's average daily net assets as
follows: twenty one-hundredths of one percent (.20%) of amounts
included in that portion of the aggregate daily net assets of all
Multiple Class Funds subject to the Administration Agreement equal to
or less than $1,500,000,000; eighteen one-hundredths of one percent
(.18%) of amounts included in the portion of the aggregate daily net
assets of all Multiple Class Funds subject to the Administration
Agreement between $1,500,000,000 and $2,000,000,000; and sixteen one-
hundredths of one percent (.16%) of amounts included in that portion of
the aggregate daily net assets of all Multiple Class Funds subject to
the Administration Agreement in excess of $2,000,000,000. The fees
pertaining to each Multiple Class Fund shall be computed daily in
amounts strictly proportionate to the amount of the Fund's average
daily net assets as a percentage of the aggregate daily net assets of
all Multiple Class Funds subject to this Agreement, and shall be paid
periodically.
Name of Institutional Money Market Funds
Institutional Prime Money Market Fund
Treasury Only Money Market Fund
Government Money Market Fund
Tax Exempt Money Market Fund
Compensation Regarding Institutional Money Market Funds
Compensation for each of the Funds listed immediately above (the
"Institutional Money Market Funds") shall be at the following annual
rates: five one-hundredths of one percent (.05%) of the Fund's average
daily net assets. The fees pertaining to each Single Class Fund shall
be computed daily and paid periodically.
Name of Fund of Funds
Investor Growth Fund
Investor Growth and Income Fund
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<PAGE>
Investor Balanced Fund
Investor Conservative Growth Fund
Compensation Regarding Fund of Funds
Compensation for each of the above Funds (the "Fund of Funds") shall be
at annual rates as follows: ten one-hundredths of one percent (.10%) of
the Fund's average daily net assets on the first $500,000,000 in Fund
assets; seven and one-half one-hundredths of one percent (.075%) of the
Fund's average daily net assets between $500,000,000 and $1,000,000,000
and five one-hundredths of one percent (.05%) of the Fund's average
daily net assets in excess of $1,000,000,000.
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 Funds 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.
Prior to November 1, 2000, The One Group Services Company served as
Administrator to each Fund of the Trust pursuant to a Management and
Administration Agreement with the Trust. 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 assisted 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).
Prior to March 1, 2000, Banc One Investment Advisors served as
sub-administrator to the Funds pursuant to a contract with The One Group
Services Company. Under this contract, Banc One Investment Advisors was entitled
to a fee from The One Group Services Company. The contract terminated on March
1, 2000 with the appointment of One Group Administrative Services as
sub-administrator. The contract terminated on October 31, 2000 with the
termination of the administration agreement between The One Group Services
Company and the Trust and the appointment of One Group Administrative Services,
Inc. as administrator.
The Trust paid fees for administrative services to The One Group
Services Company as Administrator for the fiscal years ended June 30, 2000,
1999, and 1998 as follows:
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<PAGE>
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES -- NET
<TABLE>
<CAPTION>
Fiscal Year Ended One Group
June 30, 2000 Administrative
The One Group Banc One Services,
Services Company Investment Advisors** Inc.***
---------------- --------------------- ------------------
Net Waived Net Waived Net Waived
(000's) (000's) (000's) (000's) (000's) (000's)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market................ $ 7,064 $ 0 $ 2,870 $ 0 $ 1,314 $ 0
Prime Money Market ............................ $ 8,638 $ 47 $ 3,655 $ 0 $ 1,914 $ 0
Municipal Money Market ............................ $ 1,470 $ 23 $ 601 $ 0 $ 283 $ 0
Ohio Municipal Money Market.......................... $ 73 $ 29 $ 41 $ 0 $ 19 $ 0
Equity Income ............................ $ 924 $ 200 $ 487 $ 0 $ 179 $ 0
Mid Cap Value ............................ $ 1,085 $ 0 $ 432 $ 0 $ 210 $ 0
Mid Cap Growth ............................ $ 1,839 $ 0 $ 650 $ 0 $ 439 $ 0
Equity Index ............................ $ 1,378 $ 2,112 $ 1,326 $ 0 $ 741 $ 0
Large Cap Value ............................ $ 1,282 $ 0 $ 469 $ 0 $ 291 $ 0
Balanced ............................ $ 592 $ 0 $ 233 $ 0 $ 118 $ 0
International Equity Index .......................... $ 856 $ 0 $ 325 $ 0 $ 182 $ 0
Large Cap Growth ............................ $ 4,496 $ 0 $ 1,722 $ 0 $ 941 $ 0
Short-Term Bond ............................ $ 784 $ 0 $ 311 $ 0 $ 153 $ 0
Intermediate Tax-Free Bond........................... $ 896 $ 34 $ 389 $ 0 $ 162 $ 0
Municipal Income ............................ $ 1,101 $ 0 $ 433 $ 0 $ 219 $ 0
Ohio Municipal Bond ............................ $ 220 $ 0 $ 89 $ 0 $ 41 $ 0
Government Bond ............................ $ 831 $ 191 $ 414 $ 0 $ 191 $ 0
Ultra Short-Term Bond ............................ $ 19 $ 283 $ 88 $ 27 $ 58 $ 0
Treasury Only Money Market........................... $ 0 $ 0 $ 303 $ 1 $ 162 $ 0
Government Money Market ............................ $ 0 $ 0 $ 1,087 $ 0 $ 583 $ 0
Tax-Exempt Money Market ............................ $ NA $ NA NA $ NA $ NA $ NA
Arizona Municipal Bond ............................ $ 211 $ 11 $ 91 $ 0 $ 41 $ 0
Kentucky Municipal Bond ............................ $ 141 $ 4 $ 57 $ 0 $ 29 $ 0
W. Virginia Municipal Bond........................... $ 100 $ 5 $ 42 $ 0 $ 20 $ 0
Louisiana Municipal Bond ............................ $ 157 $ 17 $ 72 $ 0 $ 31 $ 0
Diversified Equity ............................ $ 2,322 $ 0 $ 925 $ 0 $ 451 $ 0
Small Cap Growth ............................ $ 223 $ 24 $ 82 $ 0 $ 64 $ 0
High Yield Bond ............................ $ 204 $ 0 $ 76 $ 0 $ 45 $ 0
Investor Growth ............................ $ 55 $ 386 $ 0 $ 0 $ 0 $ 0
Investor Growth & Income ............................ $ 307 $ 394 $ 0 $ 0 $ 0 $ 0
Investor Conservative Growth......................... $ 58 $ 151 $ 0 $ 0 $ 0 $ 0
Investor Balanced ............................ $ 330 $ 212 $ 0 $ 0 $ 0 $ 0
Treasury & Agency ............................ $ 84 $ 114 $ 83 $ 0 $ 34 $ 0
Small Cap Value ............................ $ 206 $ 9 $ 91 $ 0 $ 37 $ 0
Diversified Mid Cap ............................ $ 1,115 $ 0 $ 443 $ 0 $ 217 $ 0
Diversified International............................ $ 755 $ 10 $ 280 $ 0 $ 173 $ 0
Market Expansion Index ............................ $ 0 $ 29 $ 9 $ 3 $ 6 $ 0
Bond ............................ $ 1,466 $ 184 $ 627 $ 0 $ 351 $ 0
Income Bond ............................ $ 1,396 $ 0 $ 556 $ 0 $ 271 $ 0
Intermediate Bond ............................ $ 1,497 $ 0 $ 604 $ 0 $ 283 $ 0
Short-Term Municipal Bond............................ $ 115 $ 14 $ 53 $ 0 $ 24 $ 0
Tax-Free Bond ............................ $ 662 $ 83 $ 306 $ 0 $ 135 $ 0
Michigan Municipal Bond ............................ $ 268 $ 34 $ 125 $ 0 $ 54 $ 0
Michigan Municipal Money Market...................... $ 141 $ 22 $ 60 $ 0 $ 36 $ 0
Cash Management Money Market......................... $ 2,233 $ 281 $ 994 $ 0 $ 495 $ 0
Treasury Cash Management Money Market................ $ 336 $ 42 $ 146 $ 0 $ 78 $ 0
Treasury Prime Cash Management Money Market.......... $ 559 $ 70 $ 246 $ 0 $ 127 $ 0
U.S. Government Securities Cash Management Money Market$ 1,621 $ 203 $ 700 $ 0 $ 381 $ 0
Municipal Cash Management Money Market............... $ 431 $ 60 $ 200 $ 0 $ 91 $ 0
Institutional Prime Money Market..................... $ 0 $ 0 $ 382 $ 0 $ 873 $ 0
Mortgage-Backed-Securities .......................... NA* NA* NA* NA* NA* NA*
Technology ............................ NA* NA* NA* NA* NA* NA*
Real Estate ............................ NA* NA* NA* NA* NA* NA*
</TABLE>
* As of June 30, 2000, 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 July 1, 1999 through February 29, 2000.
*** These fees were paid by The One Group Services Company to One Group
Administrative Services, Inc. for the period of March 1, 2000 through June
30, 2000.
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<PAGE>
ONE GROUP MUTUAL FUNDS ADMINISTRATION FEES -- NET
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, 1999
The One Group Banc One Bisys
Services Company Investment Advisors** Fund Services***
---------------- --------------------- ----------------
Net Waived Net Waived Net Waived
(000's) (000's) (000's) (000's) (000's) (000's)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market ............................ $ 5,816 $ 0 $ 3,412 $ 0 $ 7 $ 0
Prime Money Market ............................ $ 4,477 $ 361 $ 3,007 $ 0 $ 23 $ 0
Municipal Money Market ............................ $ 836 $ 142 $ 578 $ 0 $ 5 $ 0
Ohio Municipal Money
Market ............................ $ 33 $ 83 $ 69 $ 0 $ 0 $ 0
Equity Income ............................ $ 890 $ 207 $ 644 $ 0 $ 3 $ 0
Mid Cap Value ............................ $ 894 $ 0 $ 525 $ 0 $ 3 $ 0
Mid Cap Growth ............................ $ 1,195 $ 0 $ 701 $ 0 $ 0 $ 0
Equity Index ............................ $ 822 $ 1,026 $ 1,085 $ 0 $ 7 $ 0
Large Cap Value ............................ $ 919 $ 0 $ 539 $ 0 $ 0 $ 0
Balanced ............................ $ 432 $ 23 $ 267 $ 0 $ 0 $ 0
International Equity
Index ............................ $ 652 $ 0 $ 382 $ 0 $ 0 $ 0
Large Cap Growth ............................ $ 2,732 $ 0 $ 1,605 $ 0 $ 7 $ 0
Short-Term Bond ............................ $ 708 $ 0 $ 415 $ 0 $ 2 $ 0
Intermediate Tax-Free
Bond ............................ $ 680 $ 27 $ 415 $ 0 $ 3 $ 0
Municipal Income ............................ $ 944 $ 0 $ 554 $ 0 $ 0 $ 0
Ohio Municipal Bond ............................ $ 227 $ 0 $ 133 $ 0 $ 0 $ 0
Government Bond ............................ $ 738 $ 342 $ 633 $ 0 $ 0 $ 0
Ultra Short-Term Bond ............................ $ 0 $ 254 $ 5 $ 144 $ 0 $ 0
Treasury Only Money
Market ............................ $ 0 $ 0 $ 424 $ 0 $ 0 $ 0
Government Money Market ............................ $ 0 $ 0 $ 1,739 $ 0 $ 0 $ 0
Tax-Exempt Money Market ............................ $ NA* $ NA* $ NA* $ NA* $ NA* $ NA*
Arizona Municipal Bond ............................ $ 208 $ 43 $ 147 $ 0 $ 0 $ 0
Kentucky Municipal Bond ............................ $ 131 $ 18 $ 87 $ 0 $ 0 $ 0
W. Virginia Municipal
Bond ............................ $ 91 $ 25 $ 68 $ 0 $ 0 $ 0
Louisiana Municipal Bond ............................ $ 156 $ 44 $ 117 $ 0 $ 0 $ 0
Diversified Equity ............................ $ 1,258 $ 0 $ 740 $ 0 $ 10 $ 0
Small Cap Growth ............................ $ 101 $ 36 $ 80 $ 0 $ 0 $ 0
High Yield Bond ............................ $ 32 $ 0 $ 46 $ 0 $ 1 $ 0
Investor Growth ............................ $ 12 $ 265 $ 0 $ 0 $ 0 $ 0
Investor Growth & Income ............................ $ 93 $ 276 $ 0 $ 0 $ 2 $ 0
Investor Conservative
Growth ............................ $ 0 $ 136 $ 0 $ 0 $ 0 $ 0
Investor Balanced ............................ $ 125 $ 182 $ 0 $ 0 $ 1 $ 0
Treasury & Agency ............................ $ 20 $ 187 $ 121 $ 0 $ 0 $ 0
Small Cap Value ............................ $ 58# $ 8# $ 130 $ 0 $ 7 $ 0
Diversified Mid Cap ............................ $ 279# $ 0# $ 565 $ 0 $ 31 $ 0
Diversified
International ............................ $ 143# $ 18# $ 279 $ 0 $ 16 $ 0
Market Expansion Index ............................ $ 2# $ 4# $ 12 $ 0 $ 1 $ 0
Bond ............................ $ 351# $ 43# $ 663 $ 0 $ 39 $ 0
Income Bond ............................ $ 264# $ 0# $ 353 $ 0 $ 10 $ 0
Intermediate Bond ............................ $ 232# $ 0# $ 464 $ 0 $ 17 $ 0
Short-Term Municipal
Bond ............................ $ 25# $ 4# $ 59 $ 0 $ 3 $ 0
Tax-Free Bond ............................ $ 171# $ 25# $ 421 $ 0 $ 23 $ 0
Michigan Municipal Bond ............................ $ 66# $ 8# $ 157 $ 0 $ 8 $ 0
Michigan Municipal Money
Market ............................ $ 49## $ 6# $ 90 $ 0 $ 5 $ 0
Cash Management Money
Market ............................ $ 424## $ 72## $ 1,238 $ 0 $ 43 $ 0
Treasury Cash Management
Money Market ............................ $ 88## $ 14## $ 198 $ 0 $ 6 $ 0
Treasury Prime Cash
Management Money Market ............................ $ 102## $ 17## $ 270 $ 0 $ 9 $ 0
U.S. Government Secur-
ities Cash Management
Money Market ............................ $ 251## $ 43## $ 748 $ 0 $ 11 $ 0
Municipal Cash Management
Money Market ............................ $ 81## $ 25## $ 298 $ 0 $ 11 $ 0
Institutional Prime
Money Market ............................ $ NA* $ NA* $ NA* $ NA* $ NA* $ NA*
</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.
-84-
<PAGE>
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.
-85-
<PAGE>
Prior to the consolidation with the Funds, administrative services were provided
to the Predecessor Funds by FCNIMCO and BISYS. These Funds paid fees for
administrative services to FCNIMCO and BISYS for the fiscal year ended December
31, 1998 as follows:
PREDECESSOR FUND -- ADMINISTRATION FEES*
Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Fund BISYS FCNIMCO
---- ----- -------
<S> <C> <C>
Small Cap Value $ 39,395 $ 390,017
Diversified Mid Cap $ 156,709 $ 1,551,480
Diversified International $ 78,747 $ 779,566
Market Expansion Index $ 1,366 $ 13,704
Bond $ 194,675 $ 1,933,336
Income Bond $ 28,474 $ 281,681
Intermediate Bond $ 81,371 $ 799,513
Short-Term Municipal Bond $ 6,375 $ 63,485
Tax-Free Bon $ 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:
-86-
<PAGE>
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.
-87-
<PAGE>
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, 2001 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.
During the fiscal year ending June 30, 2000, 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:
-88-
<PAGE>
<TABLE>
<CAPTION>
Service
Class A Class B Class C Class Class S
Fund Distributor (000's) (000's) (000's) (000's) (000's)
---- ----------- ------- ------- ------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market One Group Ser. $4,700 $ 14 $ 7 $ 1 $ 0
Prime Money Market One Group Ser. $8,310 $ 162 $ 0 (a) $ 20 $ 0
Municipal Money Market One Group Ser. $1,091 $ 0 $ 0 $ 1 $ 0
Ohio Municipal Money Market One Group Ser. $ 93 $ 0 $ 0 $ 0 $ 0
Equity Income One Group Ser. $ 294 $ 1,703 $ 9 $ 0 $ 0
Mid Cap Value One Group Ser. $ 250 $ 360 $ 1 $ 0 $ 0
Mid Cap Growth One Group Ser. $ 574 $ 2,081 $ 389 $ 0 $ 0
Equity Index One Group Ser. $2,041 $ 6,120 $ 989 $ 0 $ 0
Large Cap Value One Group Ser. $ 108 $ 265 $ 11 $ 0 $ 0
Balanced One Group Ser. $ 290 $ 2,734 $ 0 (a) $ 0 $ 0
International Equity Index One Group Ser. $ 164 $ 245 $ 71 $ 0 $ 0
Large Cap Growth One Group Ser. $1,393 $ 7,838 $ 304 $ 0 $ 0
Short-Term Bond One Group Ser. $ 53 $ 39 $ 0 $ 0 $ 0
Intermediate Tax-Free Bond One Group Ser. $ 84 $ 74 $ 0 $ 0 $ 0
Municipal Income One Group Ser. $ 431 $ 860 $ 145 $ 0 $ 0
Ohio Municipal Bond One Group Ser. $ 72 $ 412 $ 0 $ 0 $ 0
Government Bond One Group Ser. $ 107 $ 438 $ 20 $ 0 $ 0
Ultra Short-Term Bond One Group Ser. $ 65 $ 49 $ 0 $ 0 $ 0
Treasury Only Money Market One Group Ser. $ 0 $ 0 $ 0 $ 0 $ 57
Government Money Market One Group Ser. $ 0 $ 0 $ 0 $ 0 $ 102
Institutional Prime Money Market One Group Ser. $ 0 $ 0 $ 0 $ 0 $ 2
Kentucky Municipal Bond One Group Ser. $ 21 $ 124 $ 0 $ 0 $ 0
Tax-Exempt Money Market* One Group Ser. NA NA NA NA NA
Arizona Municipal Bond One Group Ser. $ 5 $ 6 $ 0 $ 0 $ 0
W. Virginia Municipal Bond One Group Ser. $ 9 $ 64 $ 0 $ 0 $ 0
Louisiana Municipal Bond One Group Ser. $ 165 $ 92 $ 0 $ 0 $ 0
Diversified Equity One Group Ser. $ 772 $ 527 $ 135 $ 0 $ 0
Small Cap Growth One Group Ser. $ 119 $ 179 $ 4 $ 0 $ 0
High Yield Bond One Group Ser. $ 27 $ 48 $ 11 $ 0 $ 0
Investor Growth One Group Ser. $ 289 $ 2,211 $ 170 $ 0 $ 0
Investor Growth & Income One Group Ser. $ 660 $ 2,819 $ 149 $ 0 $ 0
Investor Conservative Growth One Group Ser. $ 80 $ 1,242 $ 86 $ 0 $ 0
Investor Balanced One Group Ser. $ 499 $ 2,686 $ 166 $ 0 $ 0
Treasury & Agency One Group Ser. $ 147 $ 474 $ 0 $ 0 $ 0
Small Cap Value One Group Ser. $ 51 $ 28 $ 0 (a) $ 0 $ 0
Diversified Mid Cap One Group Ser. $ 554 $ 60 $ 1 $ 0 $ 0
Diversified International One Group Ser. $ 91 $ 45 $ 2 $ 0 $ 0
Market Expansion Index One Group Ser. $ 3 $ 14 $ 1 $ 0 $ 0
Bond One Group Ser. $ 401 $ 160 $ 14 $ 0 $ 0
Income Bond One Group Ser. $ 75 $ 132 $ 0 (a) $ 0 $ 0
Intermediate Bond One Group Ser. $ 347 $ 345 $ 243 $ 0 $ 0
Short-Term Municipal Bond One Group Ser. $ 7 $ 5 $ 0 $ 0 $ 0
Tax-Free Bond One Group Ser. $ 89 $ 27 $ 0 $ 0 $ 0
Michigan Municipal Bond One Group Ser. $ 73 $ 80 $ 0 $ 0 $ 0
Michigan Municipal Money Market One Group Ser. $ 178 $ 0 $ 0 $ 0 $ 0
Cash Management Money Market One Group Ser. $3,737 $ 0 $ 0 $ 0 $ 0
Treasury Cash Management
Money Market One Group Ser. $ 490 $ 0 $ 0 $ 0 $ 0
Treasury Prime Cash Management
Money Market One Group Ser. $1,240 $ 0 $ 0 $ 0 $ 0
U.S. Government Securities
Cash Management Money Market One Group Ser. $2,137 $ 0 $ 0 $ 0 $ 0
Municipal Cash Management
Money Market One Group Ser. $ 32 $ 0 $ 0 $ 0 $ 0
</TABLE>
(a) Amount is less than $1,000.
* This Fund had not commenced operations as of June 30, 2000.
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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.
Cash Compensation to Shareholder Servicing Agents
The One Group Services Company and Banc One Investment Advisors Corporation
compensate 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 and Banc One Investment Advisors Corporation from their own
resources. The One Group Services Company may, on occasion, pay select
Shareholder Servicing Agents, the entire front-end sales charge applicable to
Fund shares sold by such Shareholder Servicing Agents.
Occasionally, The One Group Services Company and Banc One Investment Advisors
Corporation, at their own expense, will provide cash incentives to select
Shareholder Servicing Agents. These cash payments may take of the form of, but
are not limited to, finders' fees and an additional commission on the sale of
Fund shares subject to a contingent deferred sales charge.
One Group Mutual Funds is included as an investment option in wrap accounts,
asset allocation accounts, "fund supermarkets" and other similar arrangements.
Brokers operating such arrangement are compensated under the Trust's 12b-1
Plans. On occasion, the fees charged by such brokers exceed the amount of the
12b-1 fee approved under the Plans. As a result, Banc One Investment Advisors
Corporation pays the difference out of its bona fide profits. In the most recent
fiscal year, Charles Schwab & Company, National Financial Services, and Bear
Stearns & Co. received such compensation.
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
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reputation of the institution in its national market; the political and economic
stability of the country in which the institution is located; and the risks of
potential nationalization or expropriation of Trust assets. In addition, the
1940 Act requires that foreign bank sub-custodians, among other things have
Shareholder equity in excess of $200 million, have no lien on the Trust's assets
and maintain adequate and accessible records.
State Street serves as Transfer Agent and Dividend Disbursing Agent for each
Fund pursuant to Transfer Agency Agreements with the Trust (the "TRANSFER AGENCY
AGREEMENT"). Under the Transfer Agency Agreements, State Street has agreed
(i) to issue and redeem Shares of the Trust;
(ii) to address and mail all communications by the Trust to its
Shareholders, including reports to Shareholders, dividend and
distribution notices, and proxy material for its meetings of
Shareholders;
(iii) to respond to correspondence or inquiries by Shareholders and others
relating to its duties;
(iv) to maintain Shareholder accounts and certain sub-accounts; and
(v) to make periodic reports to the Trust's Board of Trustees concerning
the Trust's operations.
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, 2000 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.
The financial statements for the Predecessor Funds for the period ended December
31, 1998, were audited by the predecessor auditors for such Funds.
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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.
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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 55 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;
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<PAGE>
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;
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;
55. The Mortgage-Backed Securities 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 each 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
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<PAGE>
judgment thereon. Thus, the risk of a Shareholder incurring financial loss on
account of Shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or agent of
the Trust shall be personally liable in connection with the administration or
preservation of the assets of the Trust or the conduct of the Trust's business;
nor shall any Trustee, officer, or agent be personally liable to any person for
any action or failure to act except for his own bad faith, willful misfeasance,
gross negligence, or reckless disregard of his duties. The Declaration of Trust
also provides that all persons having any claim against the Trustees or the
Trust shall look solely to the assets of the Trust for payment.
Performance
From time to time, the Funds may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of a Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of a Fund. This figure is then
"annualized" (multiplied by 365 days and divided by the applicable number of
days in the period).
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 7-Day yield for the 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. The 30 Day yield for the Money Market Funds and
the Institutional Money Market Funds was computed with respect to each class of
Shares by taking the sum of the last 30 days factors divided by 30 days times
365 days times 100. 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, 2000.
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<PAGE>
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Class I Shares Date of Class 6/30/00 6/30/00
-------------- ------------- ---------------------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market.......................................... 08/01/85 5.91% 5.90%
Prime Money Market............................................................. 08/01/85 6.10% 6.06%
Municipal Money Market......................................................... 06/04/87 4.20% 3.88%
Ohio Municipal Money Market(1)................................................. 06/09/93 4.10% 3.79%
Michigan Municipal Money Market................................................ 03/30/96 4.13% 3.84%
Treasury Only Money Market..................................................... 04/16/93 5.74% 5.74%
Government Money Market........................................................ 06/14/93 6.45% 6.38%
Cash Management Money Market................................................... 07/30/92 6.28% 6.24%
U.S Government Securities Cash Management Money Market......................... 06/02/92 6.28% 6.23%
Treasury Cash Management Money Market.......................................... 09/12/97 6.10% 6.07%
Treasury Prime Cash Management Money Market.................................... 03/22/95 5.53% 5.49%
Municipal Cash Management Money Market(1)...................................... 08/18/97 4.29% 3.99%
Institutional Prime Money Market............................................... 04/19/99 6.47% 6.40%
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Class A Shares Date of Class 6/30/00 6/30/00
-------------- ------------- --------- ----------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market.......................................... 02/18/92 5.66% 5.65
Prime Money Market............................................................. 02/18/92 5.85% 5.81
Municipal Money Market......................................................... 02/18/92 3.96% 3.63
Ohio Municipal Money Market(1)................................................. 01/26/93 3.85% 3.54
Michigan Municipal Money Market(1)............................................. 01/31/91 3.88% 3.59
Cash Management Money Market................................................... 01/17/95 6.03% 5.99
U.S Government Securities Cash Management Money Market......................... 01/17/95 6.03% 5.98
Treasury Cash Management Money Market.......................................... 09/12/97 5.85% 5.82
Treasury Prime Cash Management Money Market.................................... 03/22/95 5.28% 5.24
Municipal Cash Management Money Market(1)...................................... 08/18/97 4.04% 3.74
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Class B Shares Date of Class 6/30/00 6/30/00
-------------- ------------- --------- ----------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market.......................................... 11/21/96 4.91% 4.90
Prime Money Market............................................................. 11/12/96 5.10% 5.07
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Class C Shares Date of Class 6/30/00 6/30/00
-------------- ------------- --------- ----------
<S> <C> <C> <C>
U.S. Treasury Securities Money Market.......................................... 02/18/98 4.91% 4.90
Prime Money Market Fund........................................................ 5/31/00 5.10% 5.05
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Class S Shares Date of Class 6/30/00 6/30/00
-------------- ------------- --------- ----------
<S> <C> <C> <C>
Institutional Prime Money Market............................................... 4/10/00 6.28% 6.19
Treasury Only Money Market..................................................... 4/10/00 5.55% 5.55
Government Money Market........................................................ 4/10/00 6.25% 6.19
</TABLE>
(1) A portion of the income may be subject to alternative minimum tax.
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<PAGE>
<TABLE>
<CAPTION>
Inception 7-Day Yield 30-Day Yield
Service Class Shares Date of Class 6/30/00 6/30/00
-------------------- ------------- ------- -------
<S> <C> <C> <C>
Prime Money Market............................................................. 04/16/99 5.55 5.52
U.S. Treasury Securities Money Market.......................................... 04/16/99 5.36 5.35
Municipal Money Market......................................................... 04/16/99 3.66 3.33
</TABLE>
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.
TAX-EQUIVALENT YIELD
<TABLE>
<CAPTION>
7 Day
Yield
Class I Shares 06/30/00 28% Tax 39.6% Tax
-------------- -------- ------- ---------
<S> <C> <C> <C>
Municipal Money Market ...................................... 4.20% 5.83% 6.95%
Ohio Municipal Money Market.................................. 4.10% 5.69% 6.79%
Michigan Municipal Money Market*............................. 4.13% 5.74% 6.84%
Municipal Cash Management Money Market*...................... 4.29% 5.96% 7.10%
7 Day
Class A Shares Yield 28% Tax 39.6% Tax
-------------- ----- ------- ---------
Municipal Money Market....................................... 3.96% 5.50% 6.56%
Ohio Municipal Money Market.................................. 3.85% 5.35% 6.37%
Michigan Municipal Money Market*............................. 3.88% 5.39% 6.42%
Municipal Cash Management Money Market*...................... 4.04% 5.61% 6.69%
</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]
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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 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, 2000 (calculated as described
above) is as follows:
CLASS I SHARES
Fixed Income Funds
Average Annual Total Return as of 6/30/00
<TABLE>
<CAPTION>
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond..................... 09/04/90 09/04/90 6.56% 4.81% 5.35% 5.59% NA 6.41%
Intermediate Tax-Free(2)............ 09/04/90 09/04/90 5.91% 2.19% 3.84% 4.92% NA 4.71%
Ohio Municipal Bond(2).............. 07/02/91 07/02/91 5.75% 2.20% 3.70% 4.79% NA 4.83%
Municipal Income(2)................. 02/09/93 02/09/93 4.76% 0.32% 3.77% 4.86% NA 5.22%
Government Bond..................... 02/08/93 02/08/93 5.57% 4.33% 5.63% 5.75% NA 6.36%
Ultra Short-Term Bond............... 02/02/93 02/02/93 5.18% 5.66% 5.44% 5.81% NA 6.61%
Kentucky Municipal Bond(2)(32)...... 03/12/93 03/12/93 4.67% 2.83% 3.97% 4.99% NA 4.61%
Louisiana Municipal Bond(33)........ 03/26/96 12/29/89 5.95% 2.81% 3.76% 4.69% 5.91% 4.69%
West Virginia Municipal Bond(1),(2). 01/20/97 12/31/83 6.75% 2.76% 3.92% 4.73% 5.67% 4.83%
</TABLE>
-98-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona Municipal Bond(2)........... 01/20/97 11/30/79 6.84% 2.66% 3.71% 4.48% 5.92% 4.63%
Treasury & Agency(1)................ 01/20/97 04/30/88 6.83% 4.42% 5.27% 5.35% 6.56% 6.49%
Income Bond(4)(25).................. 03/05/93 03/05/93 5.68% 4.19% 5.48% 5.69% NA 6.86%
Intermediate Bond(5)(23)............ 06/01/91 12/31/83 8.24% 4.12% 5.50% 6.41% 7.20% 6.56%
Bond(5)............................. 06/01/91 12/31/83 9.24% 3.94% 5.87% 6.78% 8.00% 6.74%
Short-Term Municipal Bond(5)(28).... 05/04/98 05/04/98 3.42% 2.93% NA NA NA 4.64%
Tax-Free Bond(6)(30)................ 02/01/95 03/01/88 7.28% 2.64% 4.27% 5.24% 7.12% 4.93%
Michigan Municipal Bond(2)(34)...... 02/01/93 02/01/93 5.21% 1.28% 3.87% 5.02% NA 4.86%
Mortgage-Backed Securities(40)...... 08/18/00 12/31/83 10.39 3.35% 6.10% 8.27% 8.92% NA
High Yield Bond..................... 11/13/98 11/13/98 1.85% (0.75)% NA NA NA 11.25%
<CAPTION>
Equity Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value....................... 03/02/89 03/02/89 11.89% 0.38% 10.16% 14.12% 12.12% NA
Equity Income....................... 07/02/87 07/02/87 11.89% (8.34)% 7.91% 15.42% 13.18% NA
Equity Index........................ 07/02/91 07/02/91 18.46% 6.86% 19.32% 23.41% NA NA
Large Cap Value..................... 03/01/91 03/01/91 12.58% (5.64)% 10.36% 14.00% NA NA
Mid Cap Growth...................... 03/02/89 03/02/89 20.73% 36.65% 32.01% 28.61% 20.51% NA
International Equity Index(3)....... 10/28/92 10/28/92 13.31% 18.09% 12.91% 12.91% NA NA
Balanced............................ 04/02/93 04/02/93 12.44% 5.74% 13.34% 14.96% NA 2.61%
Large Cap Growth.................... 02/28/92 02/28/92 20.35% 15.30% 26.32% 25.79% NA NA
Small Cap Growth(15)................ 07/01/91 07/01/91 16.54% 32.26% 17.51% 17.43% NA NA
Diversified Equity(16).............. 03/26/96 12/29/89 16.95% 5.23% 18.88% 21.84% 17.10% NA
Small Cap Value(4),(5),(17)......... 01/27/95 06/30/72 9.29% (2.78)% 0.31% 11.39% 12.74% NA
Diversified Mid Cap(5).............. 06/01/91 12/31/83 14.65% 14.03% 13.11% 16.96% 16.03% NA
Diversified International(3)(5)(19). 12/03/94 04/30/86 10.45% 20.97% 13.05% 12.68% 7.31% NA
Market Expansion Index(5)(20)....... 07/31/98 07/31/98 15.30% 14.30% NA NA NA NA
<CAPTION>
Funds of Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth........ 12/10/96 12/10/96 8.51% 4.52% 8.03% NA NA NA
Investor Balanced................... 12/10/96 12/10/96 12.20% 6.69% 11.54% NA NA NA
Investor Growth & Income............ 12/10/96 12/10/96 15.05% 8.10% 14.08% NA NA NA
Investor Growth..................... 12/10/96 12/10/96 18.15% 10.17% 16.81% NA NA NA
<CAPTION>
CLASS A SHARES
Fixed Income Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond(22)................. 02/18/92 09/04/90 6.28% 4.55% 5.09% 5.32% NA 5.97%
With Sales Charge................... 5.96% 1.43% 4.04% 4.67% NA NA
Intermediate Tax-Free(2)(29)........ 02/18/92 08/04/90 5.65% 2.03% 3.63% 4.70% NA 4.26%
With Sales Charge................... 5.15% (2.53)% 2.06% 3.74% NA NA
Ohio Municipal Bond(2)(35).......... 02/18/92 07/02/91 5.52% 1.94% 3.44% 4.53% NA 4.36%
With Sales Charge................... 4.98% (2.66)% 1.87% 3.58% NA NA
</TABLE>
-99-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Income(2)(31)............. 02/23/93 02/09/93 4.60% 0.06% 3.52% 4.62% NA 4.72%
With Sales Charge................... 3.95% (4.45)% 1.93% 3.65% NA NA
Government Bond(26)................. 03/05/93 02/08/93 5.33% 4.17% 5.40% 5.51% NA 5.85%
With Sales Charge................... 4.68% (0.53)% 3.78% 4.55% NA NA
Ultra Short-Term Bond(21)........... 03/10/93 02/02/93 4.94% 5.40% 5.18% 5.59% NA 6.16%
With Sales Charge................... 4.51% 2.26% 4.10% 4.96% NA NA
Kentucky Municipal Bond(2)(32)...... 01/20/95 03/12/93 4.42% 2.47% 3.68% 4.64% NA 4.15%
With Sales Charge................... 3.77% (2.16)% 2.11% 3.67% NA NA
Louisiana Municipal Bond(2)......... 12/29/89 12/29/89 5.87% 2.55% 3.50% 4.53% 5.83% 4.23%
With Sales Charge................... 5.41% (2.07)% 1.91% 3.59% 5.34% NA
West Virginia Municipal Bond(1)(2).. 01/20/97 12/31/83 6.51% 2.59% 3.62% 4.53% 5.43% 4.33%
With Sales Charge................... 6.22% (2.00)% 2.04% 3.58% 4.94% NA
Arizona Municipal Bond(1)(2)........ 01/20/97 11/30/79 6.50% 2.43% 3.45% 3.95% 5.52% 4.22%
With Sales Charge................... 6.27% (2.22)% 1.88% 2.99% 5.03% NA
Treasury & Agency(1)................ 01/20/97 04/30/88 6.61% 4.27% 5.20% 5.24% 6.36% 6.10%
With Sales Charge................... 6.35% 1.18% 4.14% 4.59% 6.04% NA
Bond(5)(24)......................... 05/01/92 12/31/83 8.98% 3.68% 5.64% 6.58% 7.82% 6.20%
With Sales Charge................... 8.69% (1.01)% 4.04% 5.60% 7.32% NA
Income Bond(4)(25).................. 03/05/93 03/05/93 5.44% 3.80% 5.18% 5.38% NA 6.32%
With Sales Charge................... 4.78% (0.85)% 3.56% 4.42% NA NA
Intermediate Bond(5)(23)............ 05/01/92 12/31/83 7.98% 3.86% 5.27% 6.19% 7.03% 6.02%
With Sales Charge................... 7.69% (0.78)% 3.68% 5.23% 6.54% NA
Short-Term Municipal Bond(28)....... 05/04/98 05/04/98 3.02% 2.47% NA NA NA 4.26%
With Sales Charge................... 1.58% (0.60)% NA NA NA NA
Tax-Free Bond(6)(30)................ 03/01/88 03/01/88 7.16% 2.47% 4.00% 4.94% 6.97% 4.45%
With Sales Charge................... 6.76% (2.17)% 2.41% 3.99% 6.48% NA
Michigan Municipal Bond(2)(34)...... 02/01/93 02/01/93 5.07% 0.93% 3.56% 4.81% NA 4.39%
With Sales Charge................... 4.42% (3.60)% 1.98% 3.85% NA NA
High Yield Bond..................... 11/13/98 11/13/98 1.52% (1.00)% NA NA NA 10.45%
With Sales Charge................... (1.30) % (5.42)% NA NA NA NA
Mortgage-Backed Securities (40)..... 08/18/00 12/31/83 10.01% 2.99% 5.73% 7.89% 8.54% NA
With Sales Charge................... NA NA NA NA NA NA
<CAPTION>
Equity Funds
Average Annual Total Return as of 6/30/00
Inception Performance 30-Day
Date of Inception SEC
Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
----- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value(7).................... 02/18/92 03/02/89 11.60% 0.05% 9.89% 13.83% 11.85% NA
With Sales Charge................... 11.07% (5.22)% 7.93% 12.61% 11.24% NA
Equity Income(8).................... 02/18/92 07/02/87 11.55% (8.61)% 7.61% 15.09% 12.87% NA
With Sales Charge................... 11.09% (13.39)% 5.70% 13.86% 12.27% NA
Equity Index(9)..................... 02/18/92 07/02/91 18.17% 6.61% 19.00% 23.09% NA NA
With Sales Charge................... 17.46% 1.01% 16.88% 21.76% NA NA
Large Cap Value(10)................. 02/18/92 03/01/91 12.36% (6.06)% 10.14% 13.77% NA NA
With Sales Charge................... 11.72% (10.99)% 8.19% 12.55% NA NA
Mid Cap Growth(11).................. 02/18/92 03/02/89 20.41% 36.25% 31.64% 28.29% 20.20% NA
With Sales Charge................... 19.84% 29.08% 29.31% 26.91% 19.56% NA
International Equity Index(3)(12)... 04/23/93 10/28/92 13.05% 17.58% 12.66% 12.69% NA NA
With Sales Charge................... 12.27% 11.38% 10.64% 11.48% NA NA
Balanced............................ 04/02/93 04/02/93 12.14% 5.48% 13.02% 14.65% NA 2.22%
With Sales Charge................... 11.31% (0.04)% 11.01% 13.41% NA NA
Large Cap Growth(14)................ 02/22/94 02/28/92 20.07% 14.99% 25.98% 25.37% NA NA
With Sales Charge................... 19.30% 8.94% 23.75% 24.02% NA NA
Small Cap Growth(15)................ 07/01/91 07/01/91 16.45% 31.79% 17.35% 17.26% NA NA
With Sales Charge................... 15.76% 24.85% 15.25% 15.99% NA NA
Diversified Equity(16).............. 12/29/89 12/29/89 16.82% 4.97% 18.58% 21.55% 16.96% NA
With Sales Charge................... 16.22% (0.54)% 16.45% 20.24% 16.34% NA
Small Cap Value(4)(5)(17)........... 01/27/95 06/30/72 8.92% (2.94)% 0.07% 10.98% 12.34% NA
With Sales Charge................... 8.71% (8.05)% (1.71)% 9.79% 11.74% NA
Diversified Mid Cap(5)(18).......... 05/01/92 12/31/83 14.38% 13.74% 12.82% 16.72% 15.84% NA
With Sales Charge................... 14.00% 7.76% 10.82% 15.47% 15.22% NA
</TABLE>
-100-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified International(3)(5)(19). 12/03/94 04/30/86 10.13% 20.66% 12.79% 12.43% 7.03% NA
With Sales Charge................... 9.71% 14.30% 10.79% 11.23% 6.45% NA
Market Expansion Index(20).......... 07/31/98 07/31/98 14.98% 13.93% NA NA NA NA
With Sales Charge................... 11.81% 7.94% NA NA NA NA
<CAPTION>
Funds of Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth........ 12/10/96 12/10/96 8.11% 4.27% 7.75% NA NA NA
With Sales Charge................... 6.50% (1.21)% 5.84% NA NA NA
Investor Balanced................... 12/10/96 12/10/96 11.87% 6.43% 11.17% NA NA NA
With Sales Charge................... 10.19% 0.83% 9.19% NA NA NA
Investor Growth & Income............ 12/10/96 12/10/96 14.98% 7.85% 13.78% NA NA NA
With Sales Charge................... 13.26% 2.21% 11.75% NA NA NA
Investor Growth..................... 12/10/96 12/10/96 17.69% 10.04% 16.50% NA NA NA
With Sales Charge................... 15.93% 4.28% 14.43% NA NA
<CAPTION>
Class B Shares
Fixed Income
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Bond(22)................. 01/14/94 09/04/90 5.77% 4.00% 4.66% 4.80% NA 5.61%
With Sales Charge................... 5.77% 1.03% 4.06% 4.80% NA NA
Intermediate Tax-Free(2)(29)........ 01/14/94 09/04/90 4.95% 1.46% 2.99% 4.04% NA 3.81%
With Sales Charge................... 4.95% (3.42)% 2.08% 3.70% NA NA
Ohio Municipal Bond(2)(35).......... 01/14/94 07/02/91 4.86% 1.17% 2.77% 3.86% NA 3.90%
With Sales Charge................... 4.86% (3.68)% 1.85% 3.52% NA NA
Municipal Income(2)(31)............. 01/14/94 02/09/93 3.87% (0.58)% 2.82% 3.92% NA 4.31%
With Sales Charge................... 3.87% (5.35)% 1.90% 3.58% NA NA
Government Bond(26)................. 01/14/94 02/08/93 4.62% 3.39% 4.73% 4.85% NA 5.46%
With Sales Charge................... 4.62% (1.51)% 3.83% 4.52% NA NA
Ultra Short-Term Bond(21)........... 01/14/94 02/02/93 4.38% 4.91% 4.74% 5.01% NA 5.88%
With Sales Charge................... 4.38% 1.92% 4.14% 5.01% NA NA
Kentucky Municipal Bond(2)(32)...... 03/16/95 03/12/93 3.69% 1.93% 3.04% 4.01% NA 3.72%
With Sales Charge................... 3.69% 2.96% 2.12% 3.66% NA NA
Louisiana Municipal Bond(2)(33)..... 09/16/94 12/29/89 5.10% 1.89% 2.88% 3.82% 5.05% 3.77%
With Sales Charge................... 5.10% (3.00)% 1.96% 3.47% 5.05% NA
West Virginia Municipal Bond(1)(2).. 01/20/97 12/31/83 5.83% 1.82% 3.04% 3.88% 4.76% 3.90%
With Sales Charge................... 5.83% (3.06)% 2.12% 3.54% 4.76% NA
Arizona Municipal Bond(1)(2)........ 01/20/97 11/30/79 5.65% 1.64% 1.78% 2.62% 4.52% 3.73%
With Sales Charge................... 5.65% (3.21)% 0.87% 2.25% 4.52% NA
Treasury & Agency(1)................ 01/20/97 04/30/88 6.07% 3.65% 4.60% 4.66% 5.82% 5.76%
With Sales Charge................... 6.07% 0.70% 4.01% 4.66% 5.82% NA
Income Bond(4)(25).................. 05/31/95 03/05/93 4.93% 3.11% 4.44% 4.63% NA 5.94%
With Sales Charge................... 4.93% (1.77)% 3.55% 4.32% NA NA
Intermediate Bond(5)(23)............ 09/23/96 12/31/83 7.17% 3.23% 4.50% 5.38% 6.16% 5.71%
With Sales Charge................... 7.17% (1.67)% 3.60% 5.06% 6.16% NA
Bond(5)(24)......................... 08/26/96 12/31/83 8.19% 3.01% 4.87% 5.82% 6.97% 5.84%
With Sales Charge................... 8.19% (1.87)% 3.97% 5.50% 6.97% NA
Short-Term Municipal Bond(28)....... 05/04/98 05/04/98 2.53% 2.08% NA NA NA 3.72%
With Sales Charge................... 1.63% (0.89)% NA NA NA NA
Tax-Free Bond(6)(30)................ 04/04/95 03/01/88 6.37% 1.80% 3.29% 4.17% 6.18% 4.01%
With Sales Charge................... 6.37% (3.09)% 2.37% 3.84% 6.18% NA
Michigan Municipal Bond(34)......... 09/23/96 02/01/93 4.21% 0.51% 2.97% 4.03% NA 4.11%
With Sales Charge................... 4.21% (4.30)% 2.05% 3.69% NA NA
High Yield Bond..................... 11/13/98 11/13/98 0.97% (1.64)% NA NA NA 10.27%
With Sales Charge................... (1.22)% (6.15)% NA NA NA NA
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Equity Funds
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value(7).................... 01/14/94 03/02/89 10.80% (0.61)% 9.05% 12.97% 11.03% NA
With Sales Charge................... 10.80% (5.12)% 8.33% 12.72% 11.03% NA
Equity Income(8).................... 01/14/94 07/02/87 10.81% (9.22)% 6.85% 14.29% 12.10% NA
With Sales Charge................... 10.81% (13.55)% 6.00% 14.05% 12.10% NA
Equity Index(9)..................... 01/14/94 07/02/91 17.35% 5.80% 18.15% 22.15% NA NA
With Sales Charge................... 17.35% 0.80% 17.42% 21.97% NA NA
Large Cap Value(10)................. 01/14/94 03/01/91 11.69% (6.56)% 9.31% 12.97% NA NA
With Sales Charge................... 11.69% (10.83)% 8.47% 12.73% NA NA
Mid Cap Growth(11).................. 01/14/94 03/02/89 19.50% 35.23% 30.62% 27.31% 19.29% NA
With Sales Charge................... 19.50% 30.23% 30.03% 27.16% 19.29% NA
International Equity Index(3)(12)... 01/14/94 10/28/92 12.15% 16.99% 11.81% 11.75% NA NA
With Sales Charge................... 12.15% 11.99% 11.01% 11.49% NA NA
Balanced(13)........................ 01/14/94 04/02/93 11.33% 4.67% 12.21% 13.83% NA 1.60%
With Sales Charge................... 11.33% (0.28)% 11.41% 13.59% NA NA
Large Cap Growth(14)................ 01/14/94 02/28/92 19.20% 14.16% 25.08% 24.58% NA NA
With Sales Charge................... 19.20% 9.16% 24.44% 24.41% NA NA
Small Cap Growth(15)................ 09/12/94 07/01/91 15.55% 30.89% 16.30% 16.29% NA NA
With Sales Charge................... 15.55% 25.89% 15.55% 16.07% NA NA
Diversified Equity(16).............. 09/09/94 12/29/89 15.98% 4.23% 17.70% 20.63% 16.13% NA
With Sales Charge................... 15.98% (0.68)% 16.98% 20.44% 16.13% NA
Small Cap Value(4)(5)(17)........... 01/27/95 06/30/72 8.21% (3.67)% 0.63% 10.31% 11.61% NA
With Sales Charge................... 8.21% (8.47)% (1.49)% 10.03% 11.61% NA
Diversified Mid Cap(5)(18).......... 09/23/96 12/31/83 13.55% 13.01% 12.21% 15.99% 14.96% NA
With Sales Charge................... 13.55% 9.05% 11.61% 15.77% 14.96% NA
Diversified International(3)(5)(19). 08/26/96 04/30/86 9.43% 19.77% 12.08% 11.70% 6.34% NA
With Sales Charge................... 9.43% 14.77% 11.28% 11.44% 6.34% NA
Market Expansion Index(20).......... 07/31/98 07/31/98 15.00% 13.06% NA NA NA NA
With Sales Charge................... 13.30% 8.80% NA NA NA NA
<CAPTION>
Fund of Funds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth........ 12/10/96 12/10/96 7.42% 3.48% 6.99% NA NA NA
With Sales Charge................... 6.71% (1.46)% 6.11% NA NA NA
Investor Balanced................... 12/10/96 12/10/96 11.16% 5.58% 10.40% NA NA NA
With Sales Charge................... 10.51% 0.58% 9.58% NA NA NA
Investor Growth & Income............ 12/10/96 12/10/96 14.12% 7.04% 12.93% NA NA NA
With Sales Charge................... 13.52% 2.06% 12.14% NA NA NA
Investor Growth..................... 12/10/96 12/10/96 17.24% 9.14% 15.61% NA NA NA
With Sales Charge................... 16.67% 4.14% 14.86% NA NA NA
<CAPTION>
Class C Shares
Fixed Income Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Income(2))(31)............ 11/04/97 02/09/93 4.37% (0.59)% 4.16% 4.68% NA 4.30%
With Sales Charge................... 4.37% (1.54)% 4.16% 4.68% NA NA
Intermediate Bond(5)(23)............ 03/22/99 12/31/83 7.18% 3.33% 4.50% 5.36% 6.14% 5.71%
With Sales Charge................... 7.18% 2.35% 4.50% 5.36% 6.14% NA
Government Bond(26)................. 03/22/99 02/08/93 4.55% 3.39% 4.68% 4.79% NA 5.45%
With Sales Charge................... 4.55% 2.41% 4.68% 4.79% NA NA
High Yield Bond(27)................. 03/22/99 11/13/98 0.92% (1.66)% NA NA NA 10.23%
With Sales Charge................... 0.92% (2.56)% NA NA NA NA
Income Bond(25)..................... 05/30/00 03/05/93 4.84% 3.15% 4.39% 4.56% NA 6.02%
With Sales Charge................... 4.84% 2.15% 4.39% 4.56% NA NA
Bond(5)(24)......................... 03/22/99 12/13/83 8.22% 3.19% 5.02% 5.76% 6.93% 5.83%
With Sales Charge................... 8.22% 2.21% 5.02% 5.76% 6.93% NA
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Equity Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid Cap Value(7).................... 03/22/99 03/02/89 10.81% (0.40)% 9.12% 13.01% 11.05% NA
With Sales Charge................... 10.81% (1.30)% 9.12% 13.01% 11.05% NA
Equity Income(8).................... 11/04/97 07/02/87 10.84% (9.10)% 6.96% 14.36% 12.14% NA
With Sales Charge................... 10.84% (9.96)% 6.96% 14.36% 12.14% NA
Equity Index(9)..................... 11/04/97 07/02/91 17.38% 5.84% 18.25% 22.23% NA NA
With Sales Charge................... 17.38% 4.84% 18.25% 22.23% NA NA
Large Cap Value (10)................ 03/22/99 03/01/91 11.69% (6.63)% 9.32% 12.98% NA NA
With Sales Charge................... 11.69% (7.48)% 9.32% 12.98% NA NA
Mid Cap Growth(11).................. 11/04/97 03/02/89 19.61% 35.50% 31.01% 27.53% 19.39% NA
With Sales Charge................... 19.61% 34.50% 31.01% 27.53% 19.39% NA
International Equity Index(3)(12)... 11/04/97 10/28/92 12.25% 16.92% 12.07% 11.89% NA NA
With Sales Charge................... 12.25% 15.92% 12.07% 11.89% NA NA
Balanced (13)....................... 05/30/00 04/02/93 11.31% 4.64% 12.21% 13.83% NA 1.33%
With Sales Charge................... 11.31% 3.64% 12.21% 13.83% NA NA
Large Cap Growth(14)................ 11/04/97 02/28/92 19.20% 14.20% 25.10% 24.59% NA NA
With Sales Charge................... 19.20% 13.20% 25.10% 24.59% NA NA
Small Cap Growth(15)................ 11/04/97 07/01/91 15.60% 31.27% 16.41% 16.36% NA NA
With Sales Charge................... 15.60% 30.27% 16.41% 16.36% NA NA
Diversified Equity(16).............. 11/04/97 12/29/89 16.00% 4.27% 17.80% 20.69% 16.17% NA
With Sales Charge................... 16.00% 3.29% 17.80% 20.69% 16.17% NA
Small Cap Value(5)(17).............. 03/22/99 06/30/72 8.21% (3.57)% (.69)% 10.25% 11.59% NA
With Sales Charge................... 8.21% (4.53)% (.69)% 10.25% 11.59% NA
Diversified Mid Cap(18)............. 03/22/99 12/31/83 13.54% 12.83% 12.16% 15.94% 14.93% NA
With Sales Charge................... 13.54% 12.04% 12.16% 15.94% 14.93% NA
Diversified International (3)(5)(19) 03/22/99 04/30/86 9.42% 19.76% 12.07% 11.69% 6.34% NA
With Sales Charge................... 9.42% 18.76% 12.07% 11.69% 6.34% NA
Market Expansion Index(20).......... 03/22/99 07/31/98 14.01% 13.11% NA NA NA NA
With Sales Charge................... 14.01% 12.26% NA NA NA NA
<CAPTION>
Funds of Funds
Average Annual Total Return as of 6/30/00
Performance 30-Day
Inception Inception SEC
Date of Class Date Life 1 Year 3 Year 5 Year 10 Year Yield
------------- ---- ---- ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth(36).... 07/01/97 12/10/96 7.38% 3.48% 6.94% NA NA NA
With Sales Charge................... 7.38% 2.49% 6.94% NA NA NA
Investor Balanced(37)............... 07/01/97 12/10/96 11.09% 5.59% 10.36% NA NA NA
With Sales Charge................... 11.09% 4.59% 10.36% NA NA NA
Investor Growth & Income(38)........ 07/01/97 12/10/96 14.15% 7.10% 12.94% NA NA NA
With Sales Charge................... 14.15% 6.10% 12.94% NA NA NA
Investor Growth(39)................. 07/01/97 12/10/96 17.22% 9.08% 15.59% NA NA NA
With Sales Charge................... 17.22% 8.08% 15.59% NA NA NA
</TABLE>
PERFORMANCE FOOTNOTES
(1) The quoted performance of these funds ("MUTUAL FUNDS") advised by Banc One
Investment AdvisorsCorporation includes performance of certain (8)
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
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Commingled accounts were adjusted to reflect the expenses associated with
the Mutual Funds. The Commingled accounts were not registered with the
Securities and Exchange Commission and, therefore, were not subject to the
investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been registered, the Commingled accounts'
performance may have been adversely affected.
(2) A portion of the income may be subject to the federal alternative minimum
tax.
(3) Foreign investing involves a greater degree of risk and volatility.
(4) Prior to September 21, 1996, the predecessor of the Small Cap Value Fund
and the Income Bond Fund had no operating history. Except as noted below,
performance for periods prior to such date is represented by the
performance of Prairie Special Opportunity and Prairie Intermediate Bond
Funds, respectively. On September 21, 1996, the assets and liabilities of
these Prairie Funds were transferred to the predecessors of the Small Cap
Value Fund and the Income Bond Fund.
(5) Performance of the predecessor to the Small Cap Value Fund for periods
prior to January 27, 1995 is represented by performance of a common trust
fund managed by First National Bank of Chicago before the effective date of
the registration statement of the Fund. Performance of the predecessor to
the Diversified Mid Cap Fund (6/1/91), the Diversified International Fund
(12/3/94), the Intermediate Bond Fund (6/1/91), and the Bond Fund (6/1/91)
or 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.
(7) Mid Cap Value Fund. For periods prior to the commencement of operations of
Class A shares on February 18, 1992, Class A performance is based on Class
I performance from March 2, 1989 to February 17, 1992. For periods prior to
the commencement of operations of Class B shares on January 14, 1994, Class
B performance is based on Class A from March 2, 1989 to January 13, 1994.
For periods prior to the commencement of operations of Class C on March 22,
1999, Class C performance is based on Class B from March 2, 1989 to March
21, 1999. All prior class performance has been adjusted to reflect the
differences in expenses and sales charges between classes.
(8) Equity Income Fund. For periods prior to the commencement of operations of
Class A shares on February 18, 1992, Class A performance is based on Class
I performance from July 2, 1987 to February 17, 1992. For periods prior to
the commencement of operations of Class B shares on January 14, 1994, Class
B performance is based on Class A from July 2, 1987 to January 13, 1994.
For periods prior to the commencement of operations of Class C shares on
November 4, 1997, Class C performance is based on Class B from July 2, 1987
to November 3, 1997. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(9) Equity Index Fund. For periods prior to the commencement of operations of
Class A shares on February 18, 1992, Class A performance is based on Class
I performance from July 2, 1991 to February 17, 1992. For periods prior to
the commencement of operations of Class B shares on January 14, 1994, Class
B performance is based on Class A from July 2, 1991 to January 13, 1994.
For periods prior to the commencement of operations of Class C shares on
November 4, 1997, Class C performance is based on Class B from July 2, 1991
to November 3, 1997. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
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(10) Large Cap Value Fund. For periods prior to the commencement of operations
of Class A shares on February 18, 1992, Class A performance is based on
Class I performance from March 1, 1991 to February 17, 1992. For periods
prior to the commencement of operations of Class B shares on January 14,
1994, Class B performance is based on Class A from March 1, 1991 to January
13, 1994. For periods prior to the commencement of operations of Class C
shares on March 22, 1999, Class C performance is based on Class B from
March 1, 1991 to March 21, 1999. All prior class performance has been
adjusted to reflect the differences in expenses and sales charges between
classes.
(11) Mid Cap Growth Fund. For periods prior to the commencement of operations of
Class A shares on February 18, 1992, Class A performance is based on Class
I performance from March 2, 1989 to February 17, 1992. For periods prior to
the commencement of operations of Class B shares on January 14, 1994, Class
B performance is based on Class A from March 2, 1989 to January 13, 1994.
For periods prior to the commencement of operations of Class C shares on
November 4, 1997, Class C performance is based on Class B from March 2,
1989 to November 3, 1997. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(12) International Equity Index Fund. For periods prior to the commencement of
operations of Class A shares on April 23, 1993, Class A performance is
based on Class I performance from October 28, 1992 to April 22, 1993. For
periods prior to the commencement of operations of Class B shares on
January 14, 1994, Class B performance is based on Class A from October 28,
1992 to January 13, 1994. For periods prior to the commencement of
operations of Class C shares on November 4, 1997, Class C performance is
based on Class B from October 28, 1992 to November 3, 1997. All prior class
performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
(13) Balanced Fund. For periods prior to the commencement of operations of Class
B shares on January 14, 1994, Class B performance is based on Class A
performance from April 2, 1993 to January 13, 1994. For periods prior to
the commencement of operations of Class C shares on May 30, 2000, Class C
performance is based on Class B from April 2, 1993 to May 29, 2000. Class B
and C performance has been adjusted to reflect the differences in expenses
and sales charges between classes.
(14) Large Cap Growth Fund. For periods prior to the commencement of operations
of Class A shares on February 22, 1994, Class A performance is based on
Class I performance from February 28, 1992 to February 21, 1994 For periods
prior to the commencement of operations of Class B shares on January 14,
1994, Class B performance is based on Class A from February 28, 1992 to
January 13, 1994. For periods prior to the commencement of operations of
Class C shares on November 4, 1997, Class C performance is based on Class B
from February 28, 1992 to November 3, 1997. All prior class performance has
been adjusted to reflect the differences in expenses and sales charges
between classes.
(15) Small Cap Growth Fund. The 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. For periods prior to
the commencement of operations of Class I shares on March 26, 1996, Class I
performance is based on Class A performance from July 1, 1991 to March 25,
1996, unadjusted for expenses and sales charges. For periods prior to the
commencement of operations of Class B shares on September 12, 1994, Class B
performance is based on Class A from July 1, 1991 to September 11, 1994.
For periods prior to the commencement of operations of Class C shares on
November 4, 1997, Class C performance is based on Class B from July 1, 1991
to November 3, 1997. Class B and C performance has been adjusted to reflect
the differences in expenses and sales charges between classes.
(16) Diversified Equity Fund. The 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.
For periods prior to the commencement of operations of Class I shares on
March 26, 1996, Class I performance is based on Class A performance from
December 29, 1989 to March 25, 1996, unadjusted for expenses and sales
charges. For periods prior to the commencement of operations of Class B
shares on September 9, 1994, Class B performance is based on Class A from
December 29, 1989 to September 8, 1994. For periods prior to the
commencement of operations of Class C shares on November 4, 1997, Class C
performance is based on Class B from December 29, 1989 to November 3, 1997.
Class B and C performance has been adjusted to reflect the differences in
expenses and sales charges between classes.
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(17) Small Cap Value Fund. The 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 prior to
the consolidation with the One Group Small Cap Value Fund on March 22,
1999. For periods prior to the commencement of operations of Class I, Class
A and Class B shares on January 27, 1995, performance is based on the
common trust fund performance from June 30, 1972 to January 26, 1995. For
periods prior to the commencement of operations of Class C shares on March
22, 1999, Class C performance is based on Class B performance from June 30,
1972 to March 21, 1999. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(18) Diversified Mid Cap Fund. The 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. For periods prior to the commencement of operations of Class A shares
on May 1, 1992, Class A performance is based on the common trust fund
performance from December 31, 1983 to May 31, 1991 and Class I performance
from June 1, 1991 to April 30, 1992. For periods prior to the commencement
of operations of Class B shares on September 23, 1996, Class B performance
is based on Class A from December 31, 1983 to September 22, 1996. For
periods prior to the commencement of operations of Class C shares on March
22, 1999, Class C performance is based on Class B from December 31, 1983 to
March 21, 1999. All prior class performance has been adjusted to reflect
the differences in expenses and sales charges between classes.
(19) Diversified International Fund. The 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 prioer to the consolidation with One Group Diversified
International Fund on March 22, 1999. For periods prior to the commencement
of operations of Class B shares on August 26, 1996, Class B performance is
based on the common trust fund performance from April 30, 1986 to December
2, 1994 and Class A performance from December 3, 1994 to August 25, 1996.
For periods prior to the commencement of operations of Class C shares on
March 22, 1999, Class C performance is based on Class B from April 30, 1986
to March 21, 1999. All prior class performance has been adjusted to reflect
the differences in expenses and sales charges between classes.
(20) Market Expansion Index Fund. One Group Market Expansion Index Fund
consolidated with the Pegasus Market Expansion Index Fund on March 22,
1999. For financial reporting purposes, the Pegasus Market Expansion Index
Fund was considered the accounting survivor. For periods prior to the
commencement of operations of Class C shares on March 22, 1999, Class C
performance is based on Class B performance from July 31, 1998 to March 21,
1999. All prior class performance has been adjusted to reflect the
differences in expenses and sales charges between classes.
(21) Ultra Short-Term Bond Fund. For periods prior to the commencement of
operations of Class A shares on March 10, 1993, Class A performance is
based on Class I performance from February 2, 1993 to March 9, 1993. For
periods prior to the commencement of operations of Class B shares on
January 14, 1994, Class B performance is based on Class A from February 2,
1993 to January 13, 1994. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(22) Short-Term Bond Fund. For periods prior to the commencement of operations
of Class A shares on February 18, 1992, Class A performance is based on
Class I performance from September 4, 1990 to February 17, 1992. For the
periods prior to the commencement of operations of Class B shares on
January 14, 1994, Class B performance is based on Class A from September 4,
1990 to January 13, 1994. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(23) Intermediate Bond Fund. 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. 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. For periods
prior to the commencement of operations of Class A shares on May 1, 1992,
Class A performance is based on common trust fund performance from December
31, 1983 to May 31, 1991 and Class I performance from June 1, 1991 to April
30, 1992. For periods prior to the commencement of operations of Class B
shares on September 23, 1996, Class B performance is based on Class A from
December 31, 1983 to September 22, 1996. For periods prior to the
commencement of operations of Class C shares on March 22, 199, Class C
performance is abased on Class B from December 31, 1983 to March 21, 1999.
All prior class performance has been adjusted to reflect the differences in
expenses and sales charges between classes.
(24) Bond Fund. The performance information for One Group Bond Fund includes the
performance of a common trust fund, to 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. For periods prior to the
commencement of operations of Class A shares on May 1, 1992, Class A
performance is based on common trust fund performance from December 31,
1983 to May 31, 1991 and Class I performance from June 1, 1991 to April 30,
1992. For periods prior to the commencement of operations of Class B shares
on August 26, 1996, Class B performance is based on Class A from December
31, 1983 to August 25, 1996. For periods prior to the commencement of
operations of Class C shares on March 22, 1999, Class C shares performance
is
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based on Class B from December 31, 1983 to March 21, 1999. All prior class
performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
(25) Income Bond Fund. 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. On December 2, 1994, the Fund terminated its offering of Class B
shares and such shares converted to Class A shares. The Fund re-offered
class B shares on May 31, 1995. For periods prior to the re-offering of
Class B shares on May 31, 1995, Class B performance is based on Class A
performance from March 5, 1993 to May 30, 1995. For periods prior to the
commencement of operations of Class C shares on May 30, 2000, Class C
performance is based on Class B from March 5, 1993 to May 29, 2000. All
prior class performance has been adjusted to reflect the differences in
expenses and sales charges between classes.
(26) Government Bond Fund. For periods prior to the commencement of operations
of Class A shares on March 5, 1993, Class A performance is based on Class I
performance from February 8, 1993 to March 4, 1993. For the periods prior
to the commencement of operations of Class B shares on January 14, 1994,
Class B performance is based on Class A from February 8, 1993 to January
13, 1994. For periods prior to the commencement of operations of Class C
shares on March 22, 1999, Class C performance is based on Class B from
February 8, 1993 to March 21, 1999. All prior class performance has been
adjusted to reflect the differences in expenses and sales charges between
classes.
(27) High Yield Bond Fund. Prior to the commencement of operations of Class C
shares on March 22, 1999, the performance of Class C is based on Class B
adjusted to reflect the differences in expenses and sales charges between
classes.
(28) Short-Term Municipal Bond Fund. The performance data includes the
performance of the Pegasus Short Municipal Bond Fund for the period before
it was consolidated with One Group Short-Term Municipal Bond Fund on March
22, 1999.
(29) Intermediate Tax-Free Bond Fund. For periods prior to the commencement of
operations of Class A shares on February 18, 1992, Class A performance is
based on Class I performance from September 4, 1990 to February 17, 1992.
For the periods prior to the commencement of operations of Class B shares
on January 14, 1994, Class B performance is based on Class A from September
4, 1990 to January 13, 1994. All prior class performance has been adjusted
to reflect the differences in expenses and sales charges between classes.
(30) Tax-Free Bond Fund. The performance data includes the performance of the
Pegasus Municipal Bond Fund for the period before it was consolidated with
One Group Tax-Free Bond Fund on March 22, 1999. For periods prior to the
commencement of operations of Class I shares on February 1, 1995, Class I
performance is based on Class A performance from March 1, 1988 to January
31, 1995 unadjusted for expenses and sales charges. For periods prior to
the commencement of operations of Class B shares on April 4, 1995, Class B
performance is based on Class A from March 1, 1988 to April 3, 1995. Class
B performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
(31) Municipal Income Fund. For periods prior to the commencement of operations
of Class A shares on February 23, 1993, Class A performance is based on
Class I performance from February 9, 1993 to February 22, 1993. For periods
prior to the commencement of operations of Class B shares on January 14,
1994, Class B performance is based on Class A from February 9, 1993 to
January 13, 1994. For periods prior to the commencement of operations of
Class C shares on November 4, 1997, Class C performance is based on Class B
from February 9, 1993 to November 3, 1997. All prior class performance has
been adjusted to reflect the differences in expenses and sales charges
between classes.
(32) Kentucky Municipal Bond Fund. The performance data includes the performance
of the Trademark Kentucky Municipal Bond Fund for the period before it was
consolidated with One Group Kentucky Municipal Bond Fund on January 20,
1995. For periods prior to the commencement of operations of Class A shares
on January 20, 1995. Class A performance is based on Class I performance
from March 12, 1993 to January 19, 1995. For periods prior to the
commencement of operations of Class B shares on March 16, 1995, Class B
performance is based on Class A from
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March 12, 1993 to March 15, 1995. All prior class performance has been
adjusted to reflect the differences in expenses and sales charges between
classes.
(33) Louisiana Municipal Bond Fund. The above-quoted performance data includes
the performance of the Paragon Louisiana Tax-Free Bond Fund for the period
before it was consolidated with One Group Louisiana Municipal Bond Fund on
March 26, 1996. For periods prior to the commencement of operations of
Class I shares on March 26, 1996, Class I performance is based on Class A
performance from December 29, 1989 to March 25, 1996 unadjusted for
expenses and sales charges. For periods prior to the commencement of
operations of Class B shares on September 16, 1994, Class B performance is
based on Class A from December 29, 1989 to September 15, 1994. Class B
performance has been adjusted to reflect the differences in expenses and
sales charges between classes.
(34) Michigan Municipal Bond Fund. The performance data includes the performance
of the Pegasus Michigan Municipal Bond Fund for the period before it was
consolidated with One Group Michigan Municipal Bond Fund on March 22, 1999.
Prior to the commencement of operations of Class B shares on September 23,
1996, the performance for Class B shares is based on Class A share
performance adjusted to reflect the expenses and sales charges.
(35) Ohio Municipal Bond Fund. For periods prior to the commencement of
operations of Class A shares on February 18, 1992, Class A performance is
based on Class I performance from July 2, 1991 to February 17, 1992. For
periods prior to the commencement of operations of Class B shares on
January 14, 1994, Class B performance is based on Class A from July 2, 1991
to January 13, 1994. All prior class performance has been adjusted to
reflect the differences in expenses and sales charges between classes.
(36) Investor Conservative Growth Fund. For periods prior to the commencement of
operations of Class C on July 1, 1997, the performance of Class C shares is
based on Class B performance adjusted to reflect the differences in
expenses and sales charges between classes.
(37) Investor Balanced Fund. For periods prior to the commencement of operations
of Class C on July 1, 1997, the performance of Class C shares is based on
Class B share performance adjusted to reflect the differences in expenses
and sales charges between classes.
(38) Investor Growth & Income Fund. For periods prior to the commencement of
operations of Class C on July 1, 1997, the performance of Class C shares is
based on Class B performance adjusted to reflect the differences in
expenses and sales charges between classes.
(39) Investor Growth Fund. For periods prior to the commencement of operations
of Class C on July 1, 1997, the performance of Class C shares is based on
Class B performance adjusted to reflect the differences in expenses and
sales charges between classes.
(40) Mortgage-Backed Securities Fund. The quoted performance of the Fund for
periods prior to August 18, 2000 is represented by performance of a common
trust fund managed by Banc One Investment Advisors or its predecessors (the
"Common Trust Fund") before the effective date of the registration
statement of the Fund. The quoted performance is adjusted to reflect the
estimated current fees of the Fund on a class by class basis absent any
waivers. The Common Trust Fund was not registered under the 1940 Act and
therefore was not subject to certain investment restrictions, limitations,
and diversification requirements that are imposed by the 1940 Act and the
Code. If the Common Trust Fund had been so registered, its performance
might have been adversely affected.
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
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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.
ADDITIONAL INFORMATION REGARDING PERFORMANCE
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 FUNDS and INSTITUTIONAL MONEY MARKET FUNDS may quote
actual total return performance in advertising and other types of
literature compared to indices or averages of alternative financial
products available to prospective investors. The performance comparisons
may include the average return of various bank instruments, some of which
may carry certain return guarantees offered by leading banks and thrifts,
as monitored by the BANK RATE MONITOR, and those of corporate and
government security price indices of various durations prepared by Shearson
Lehman Brothers, Solomon Brothers, Inc. and the IBC/Donoghue organization.
These indices are not managed for any investment goals.
The Money Market Funds 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. and i Money Net, 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.
Finally, the Money Market Funds and the Institutional Money Market Funds
may include ratings of rating organizations (like Moody's Investors
Services, Standard & Poor's Corporation, and Fitch IBCA) in advertising and
other types of literature. The ratings of the Money Market Funds and the
Institutional Money Market Funds as of October 17, 2000 were as follows:
Moody's
Aaa - U.S. Government Securities Cash Management Money Market Fund
Aaa - Cash Management Money Market Fund
Aaa - Treasury Cash Management Money Market Fund
Aaa - Treasury Prime Cash Management Money Market Fund
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<PAGE>
Aaa - U.S. Treasury Securities Money Market Fund
Aaa - Treasury Only Money Market Fund
Aaa - Institutional Prime Money Market Fund
Aaa - Government Money Market Fund
Standard & Poors
AAAm - Cash Management Money Market Fund
AAAm - Treasury Cash Management Money Market Fun
AAAm - Treasury Prime Cash Management Money Market Fund
AAAm - U.S. Government Securities Cash Management Money Market Fund
AAAm - Treasury Only Money Market Fund
AAAm - U.S. Treasury Securities Money Market Fund
AAAm - Institutional Prime Money Market Fund
AAAm - Institutional Government Money Market Fund
Fitch IBCA
AAA/V1+ Institutional Prime Money Market Fund
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 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.
-110-
<PAGE>
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.
As of October 18, 2000, Bank One Corporation, One Bank One 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 Ownership
---------------------------------------------------------------------
<S> <C>
Arizona Municipal Bond Fund 96.38%
---------------------------------------------------------------------
Balanced Fund 55.66%
---------------------------------------------------------------------
Bond Fund 98.32%
---------------------------------------------------------------------
Cash Management Money Market Fund 43.16%
---------------------------------------------------------------------
</TABLE>
-111-
<PAGE>
<TABLE>
<S> <C>
---------------------------------------------------------------------
Diversified Equity Fund 96.64%
---------------------------------------------------------------------
Diversified International Fund 99.04%
---------------------------------------------------------------------
Diversified Mid Cap Fund 97.58%
---------------------------------------------------------------------
Equity Income Fund 96.74%
---------------------------------------------------------------------
Equity Index Fund 90.76%
---------------------------------------------------------------------
Government Bond Fund 98.70%
---------------------------------------------------------------------
Government Money Market Fund* 16.56%
---------------------------------------------------------------------
High Yield Bond Fund 99.72%
---------------------------------------------------------------------
Income Bond Fund 96.68%
---------------------------------------------------------------------
Institutional Prime Money Market Fund* 22.47%
---------------------------------------------------------------------
Intermediate Bond Fund 97.58%
---------------------------------------------------------------------
Intermediate Tax-Free Bond Fund 97.30%
---------------------------------------------------------------------
International Equity Index Fund 97.35%
---------------------------------------------------------------------
Investor Balanced Fund 83.40%
---------------------------------------------------------------------
Investor Conservative Growth Fund 60.10%
---------------------------------------------------------------------
Investor Growth Fund 56.28%
---------------------------------------------------------------------
Investor Growth and Income Fund 59.98%
---------------------------------------------------------------------
Kentucky Municipal Bond Fund 99.67%
---------------------------------------------------------------------
Large Cap Growth Fund 94.69%
---------------------------------------------------------------------
Large Cap Value Fund 98.04%
---------------------------------------------------------------------
Louisiana Municipal Bond Fund 96.66%
---------------------------------------------------------------------
Market Expansion Index Fund 96.00%
---------------------------------------------------------------------
Michigan Municipal Bond Fund 98.82%
---------------------------------------------------------------------
Michigan Municipal Money Market Fund 76.56%
---------------------------------------------------------------------
Mid Cap Growth Fund 90.25%
---------------------------------------------------------------------
Mid Cap Value Fund 98.24%
---------------------------------------------------------------------
Mortgage-Backed Securities Fund 99.96%
---------------------------------------------------------------------
Municipal Cash Management Money Market Fund 74.98%
---------------------------------------------------------------------
Municipal Income Fund 98.66%
---------------------------------------------------------------------
Municipal Money Market Fund 77.42%
---------------------------------------------------------------------
Ohio Municipal Bond Fund 98.01%
---------------------------------------------------------------------
Ohio Municipal Money Market Fund 65.14%
---------------------------------------------------------------------
Prime Money Market Fund 50.38%
---------------------------------------------------------------------
Short-Term Municipal Bond Fund 92.30%
---------------------------------------------------------------------
Short-Term Bond Fund 96.30%
---------------------------------------------------------------------
Small Cap Growth Fund 97.01%
---------------------------------------------------------------------
Small Cap Value Fund 98.76%
---------------------------------------------------------------------
Tax-Free Bond Fund 98.54%
---------------------------------------------------------------------
Technology Fund 77.60%
---------------------------------------------------------------------
Treasury & Agency Fund 98.24%
---------------------------------------------------------------------
Treasury Cash Management Money Market Fund* 0.33%
---------------------------------------------------------------------
Treasury Only Money Market Fund* 13.53%
---------------------------------------------------------------------
Treasury Prime Cash Management Money Market Fund* 25.00%
---------------------------------------------------------------------
Ultra Short-Term Bond Fund 91.00%
---------------------------------------------------------------------
U.S. Government Securities Cash Management Money Market Fund* 0.80%
---------------------------------------------------------------------
U.S. Treasury Securities Money Market Fund* 9.22%
---------------------------------------------------------------------
West Virginia Municipal Bond Fund 99.65%
---------------------------------------------------------------------
</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 Funds marked
with an asterisk) under the Investment Company Act of 1940.
In addition, as of October 18, 2000 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:
-112-
<PAGE>
25% Shareholders as of October 18, 2000
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 31.00% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Arizona Municipal Bond Fund 99.63% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Balanced Fund 91.34% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Kemper Service Company. Bond Fund 51.96% Record
BOIA - One Group Operations Class C
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Bond Fund 82.52% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
NBD Bank NA Cash Management Money Market 41.12% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
----------------------------------------------------------------------------------------------------------------------
Bank One Cash Management Money Market 29.35% 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 50.84% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-113-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Trust Company. Cash Management Money Market 40.78% Record
BOIA -SEI Corporate Trust Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Bank One Securities Corp. Diversified Equity Fund 70.19% Record
The One Investment Solution Class C
733 Greencrest Drive
Westerville OH 43081-4903
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified Equity Fund 75.88% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Diversified International 55.74% Record &
Inc For The Sole Benefit Of Cust. Fund Beneficial
4800 Deer Lake Drive East Class C
Jacksonville FL 32246-6484
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified International 84.43% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Diversified Mid Cap Fund 36.60% Record
Inc For The Sole Benefit Of Cust. Class C
4800 Deer Lake Drive East
Jacksonville FL 32246-6484
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified Mid Cap Fund 79.58% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Mid Cap Value Fund 82.96% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Mid Cap Growth Fund 74.34% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-114-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co Mid Cap Growth Fund 78.20% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Income Bond Fund 84.39% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Institutional Prime Money 28.36% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway Inst
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Institutional Prime Money 41.47% Record
Attn: SEI Corporate Trust Market Fund
Database OH1-0211 Inst
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account Prime Money Market Fund 32.75% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
----------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations Prime Money Market Fund 27.47% Record
Attn: Terri McKibben Class A
PO Box 711214
Columbus OH 43271-0001
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Prime Money Market Fund 64.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.91% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
----------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations US Treasury Securities Money 30.18% Record
Attn: Terri McKibben Market Fund
PO Box 711214 Class A
Columbus OH 43271-0001
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-115-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Trust Company US Treasury Securities Money 61.50% Record
Attn: SEI Corporate Trust Market Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Pershing As Agent-Omnibus Account US Treasury Securities Money 95.54% 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 51.91% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Municipal Money Market Fund 93.35% 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 98.35% Record
For Exclusive Benefit of Service Class
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Equity Income Fund 93.51% 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 55.19% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Equity Index Fund 81.47% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Large Cap Growth Fund 52.69% Record
The One Investment Solution Class C
733 Greencrest Drive
Westerville OH 43081-4903
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-116-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co Large Cap Growth Fund 78.22% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Kemper Service Company Large Cap Value Fund 44.65% 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 Value Fund 70.52% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Ohio Municipal Bond Fund 98.05% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp Fbo International Equity Index 68.24% Record
The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Strafe & Co. International Equity Index 88.27% Record
----------------------------------------------------------------------------------------------------------------------
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Short-Term Bond Fund 90.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Louisiana Municipal Bond Fund 95.72% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-117-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co. Small Cap Growth Fund 87.64% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co Small Cap Value Fund 26.32% Record
Cust for the IRA of Class C
Randy J. Parker
258 Alligator Lane Box 5
Akers LA 70421
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Small Cap Value Fund 84.22% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Tax-Free Bond Fund 99.69% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Strafe & Co. Treasury & Agency Fund 99.82% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
NBD Bank NA Treasury Cash Management 27.78% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
----------------------------------------------------------------------------------------------------------------------
Bank One Treasury Cash Management 26.89% 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 25.74% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Suite MI1-8217
Belleville, MI 48111-1632
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Treasury Cash Management 93.23% Record
Attn: SEI Corporate Trust Money Market Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-118-
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Trust Company Treasury Only Money Market 64.80% Record
Attn: SEI Corporate Trust Fund
Database OH1-0211 Institutional
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Treasury Only Money Market 28.74% Record
BOIA-One Group Operations Fund
1111 Polaris Parkway Institutional
PO Box 710211
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Treasury Prime Cash 42.36% Record &
Attn: SEI Corporate Trust Management Money Market Fund Beneficial
Database OH1-0211 Class A
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Treasury Prime Cash 49.69% Record
Attn: SEI Corporate Trust Management Money Market Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Strafe & Co Treasury Prime Cash 28.51% Record
BOIA-One Group Operations Management Money
1111 Polaris Parkway Market Fund
PO Box 710211 Class I
Columbus OH 43271-0211
----------------------------------------------------------------------------------------------------------------------
Bank One US Government Securities Cash 28.02% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-1632
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company US Government Securities Cash 44.01% Record &
Attn: SEI Corporate Trust Management Money Market Fund Beneficial
Database OH1-0211 Class A
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Bank One Trust Company US Government Securities Cash 89.18% Record
Attn: SEI Corporate Trust Management Money Market Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus OH 43240-2050
----------------------------------------------------------------------------------------------------------------------
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 97.71% Record
For Exclusive Benefit of Fund
One Group Customer Accounts Class A
1 Pershing Plaza
Jersey City, NJ 07399-0001
----------------------------------------------------------------------------------------------------------------------
</TABLE>
-119-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co. Ohio Municipal Money Market 92.33% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Municipal Income Fund 37.73% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Municipal Income Fund 64.61% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Municipal Income Fund 99.18% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Kentucky Municipal Bond Fund 95.93% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. West Virginia Municipal Bond 94.11% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Bank One Securities Corp FBO Government Bond Fund 66.73% Record
The One Investment Solution Class C
733 Greencrest Drive
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Government Bond Fund 83.00% 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 83.81% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-120-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banc One Securities Corp FBO Intermediate Bond Fund 49.06% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Intermediate Bond Fund 91.26% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Intermediate Bond Fund 90.89% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Intermediate Tax Free Bond 99.35% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Growth Fund Class I 68.18% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Growth & Income Fund 45.26% 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 47.36% 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 87.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Conservative Growth 42.58% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-121-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Cor TTEE Investor Conservative Growth 51.16% Beneficial
FBO Bank One Corporation Fund
Savings and Investments Plan Class I
Attn: Trading Services E26
859 Williard Street
Quincy MA 02169-7428
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Government Money Market Fund 75.07% 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 65.20% Record &
The One Investment Solution Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. High Yield Bond Fund 50.45% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Market Expansion Index Fund 34.74% Record
Inc for the Sole Benefit of Customers Class C
4800 Deer Lake Drive East
Jacksonville FL 32246-6484
-------------------------------------------------------------------------------------------------------------------
Strafe & Co Market Expansion Index Fund 99.94% Record
BOIA-One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Michigan Municipal Bond Fund 99.56% 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 53.69% Record
For Exclusive Benefit of Market Fund
One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Michigan Municipal Money 92.56% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-122-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NBD Bank Municipal Cash Management 61.33% Record &
9000 Haggerty Road Money Market Fund Beneficial
Belleville, MI 48111-1632 Class A
-------------------------------------------------------------------------------------------------------------------
Bank One Municipal Cash 31.23% Record &
Attn: Mary Ellen Bradley Management Money Beneficial
9000 Haggerty Road STE MI1-8217 Market Fund
Belleville MI 48111-9787 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 34.04% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Short-Term Municipal Bond Fund 99.91% 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.
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 18, 2000
<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 14.15% Record
For Thomas A Brand & Rev Trust Class A
P.O. Box 92956
Chicago IL 60675
-------------------------------------------------------------------------------------------------------------------
Northern Trust Bank of AZ TTEE Arizona Municipal Bond Fund 9.11% 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
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-123-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 11.25% 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 7.26% 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 10.47% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 5.41% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 24.07% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund
Securities Corporation Inc. Class B 10.85% Record
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
-------------------------------------------------------------------------------------------------------------------
Carolyn S Ward Arizona Municipal Bond Fund 10.18% Record &
James D Ward JT TEN Class B Beneficial
825 W Annandale
Tucson, AZ 85737-6923
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 6.43% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
NFSC FEBO #APW-505048 Arizona Municipal Bond Fund 6.07% Record
Marian J Bensink TTEE Class B
3175 W. Roundup St.
Apache Junction AZ 85220
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-124-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Arizona Municipal Bond Fund 31.00% Record
Securities Corporation Inc. Class B
PO Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Strafe & Co Arizona Municipal Bond Fund 99.63% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Invesco Trust Co. TTEE Balanced Fund 17.47% Record
Scott Companies Profit Sharing Plan Class A
PO Box 77405
Atlanta, GA 30357
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Balanced Fund 91.34% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust Co. TTEE Bond Fund 6.63% Record
Elco Textron Inc. Class A
Attn: K. Barry
859 Willard St. MSE2C
Quincy, MA 02169-7428
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Bond Fund 7.81% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Kemper Service Co Bond Fund 51.96% Record
FBO Participating Kemflex Plans Class C
811 Main St
Kansas City, MO 64105-2005
-------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Bond Fund 6.09% Beneficial
FBO Customers Class C
4800 Deer Lake Dr. East
Jacksonville FL 32246
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Bond Fund 82.52% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-125-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Cor TTEE Bond Fund 5.53% Beneficial
Savings and Investment Plan Class I
859 Willard St.
Quincy MA 02169
-------------------------------------------------------------------------------------------------------------------
NBD Bank NA Cash Management Money Market 41.12% Record &
Attn: Mary Ellen Bradley Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
-------------------------------------------------------------------------------------------------------------------
Bank One Cash Management Money Market 29.35% 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 13.19% Record &
Attn: Commercial Products Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
-------------------------------------------------------------------------------------------------------------------
Bank One Cash Management Money Market 14.15% 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 50.84% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Cash Management Money Market 40.78% 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 Diversified Equity Fund 14.33% Record
FBO The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-126-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co. Diversified Equity Fund 5.80% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp Diversified Equity Fund 70.19% Record
FBO The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
-------------------------------------------------------------------------------------------------------------------
Kemper Service Company Diversified Equity Fund 18.57% Record
FBO Participating Kemplex Plans Class C
Attn: TA Accounting 7th Fl
811 Main St
Kansas City, MO 64105-2005
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified Equity Fund 75.88% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Bank One COR TTEE Diversified Equity Fund 6.24% Record
FBO Bank One Corporation Class I
Investment & Savings Plan
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
-------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth & Income Fund Diversified Equity Fund 6.59% Record &
c/o Mark S. Redman Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified International 8.65% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class A
PO Box 710211
Columbus OH 43271-0211
-------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Diversified International 55.74% Record &
FBO Customers Fund Beneficial
4800 Deer Lake Dr. East Class C
Jacksonville FL 32246
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-127-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Diversified International 9.69% Record &
Securities Corporation Inc. Fund Beneficial
PO Box 2052 Class C
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Diversified International 5.95% Record &
Securities Corporation Inc. Fund Beneficial
PO Box 2052 Class C
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Diversified International 5.11% Record &
Securities Corporation Inc. Fund Beneficial
PO Box 2052 Class C
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Strafe & Co. Diversified International 84.43% 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 7.20% Record &
C/O Mark Redman Fund Beneficial
The One Group Services Company Class I
3435 Stelzer Rd
Columbus, OH 43219-6004
-------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Diversified Mid Cap Fund 5.05% Record
FBO FANUC Robotics Class A
PO Box 4054
Concord CA 94524
-------------------------------------------------------------------------------------------------------------------
Consolidated Natural Gas Diversified Mid Cap Fund 11.05% Record
Attn: Ronda M. Spurr Class A
135 Santili Highway
Everett, MA 02149-1906
-------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co. Diversified Mid Cap Fund 17.86% Record
Cust for the IRA of Jim Ernest Class C
67108 Locke St.
Mandeville LA 70471
-------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co. Diversified Mid Cap Fund 15.66% Record
Cust for the IRA of Class C
Russell McGlinchey
3609 Miller Rd.
Flint MI 48503
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-128-
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith
FBO Customers Diversified Mid Cap Fund 36.60% Record &
4800 Deer Lake Dr. East Class C Beneficial
Jacksonville FL 32246
-------------------------------------------------------------------------------------------------------------------
NFSC FEBO # STL-386464 Diversified Mid Cap Fund 6.03% Record &
NFSC/FMTC Rollover IRA Class C Beneficial
FBO Barbara Scher
1420 Noble Ave Apt. 1P
Bronx, NY 10472-1420
-------------------------------------------------------------------------------------------------------------------
Strafe & Co Diversified Mid Cap Fund 79.58% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271
-------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth & Income Fund Diversified Mid Cap Fund 7.28% Record &
C/O Mark Redman Class I Beneficial
The One Group Services Company
3435 Stelzer RD
Columbus, OH 43219-6004
-------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth Fund Diversified Mid Cap Fund 6.64% Record &
C/O Mark Redman Class I Beneficial
The One Group Services Company
3435 Stelzer RD
Columbus, OH 43219-6004
-------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Mid Cap Value Fund 7.17% Record
FBO Rapistan Demag Class A
PO Box 5054
Concord, CA 94524-4054
-------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co. Mid Cap Value Fund 5.29% Record &
Cust for the IRA of Randy J Parker Class C Beneficial
258 Alligator Ln Box 5
Akers, LA 70421
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Mid Cap Value Fund 18.10% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Mid Cap Value Fund 8.13% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-129-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Mid Cap Value Fund 8.88% Record
FBO Premier Truck Parts, Inc. Class C
P.O. Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Mid Cap Value Fund 7.22% Record &
Securities Corporation Inc Class C Beneficial
P.O. Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Mid Cap Value Fund 8.85% Record
FBO Iddings Trucking, Inc. Class C
P.O. Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Mid Cap Value Fund 8.27% Record
FBO Methanex Management, Inc. Class C
P.O. Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Mid Cap Value Fund 7.22% Record
FBO Methanex Management, Inc. Class C
P.O. Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Mid Cap Value Fund 82.96% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Mid Cap Value Fund 6.48% Record &
Growth & Income Fund Class I Beneficial
c/o Mark S. Redman
The One Group Services Co.
3435 Stelzer Rd.
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth Fund Mid Cap Value Fund 5.82% 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 18.51% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville, OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-130-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Mid Cap Growth Fund 74.34% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
Kemper Service Company Mid Cap Growth Fund 9.16% Record
FBO Participating Kemplex Plans Class C
Attn: TA Accounting 7th Fl
811 Main St
Kansas City, MO 64105-2005
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Mid Cap Growth Fund 78.20% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Banc One Cor TTEE Mid Cap Growth Fund 7.42% Beneficial
FBO Savings and Investment Plan Class I
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Income Bond Fund 8.37% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Income Bond Fund 84.39% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Balanced FD Income Bond Fund 6.04% Record &
C/O Mark S. Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Rd
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth & Income Fund Income Bond Fund 5.02% Record &
C/O Mark S. Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Rd
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-131-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Strafe & Co. Institutional Prime Money 28.36% Record
BOIA-One Group Operations Market Fund
1111 Polaris Parkway Institutional
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Institutional Prime Money 41.47% Record
Attn: SEI Corporate Trust Market Fund
Database OH1-0211 Institutional
1111 Polaris Parkway
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
Bank One NA Institutional Prime Money 82.09% Record
Attn Cash Mgmt Operations Market Fund
1111 Polaris Pkwy Class S
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
Bisys Fund Services, Inc. Institutional Prime Money 17.91% Record
FBO Banc One Securities Market Fund
Attn Mike Bryan Class S
3435 Stelzer Rd Ste 1000
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
Pershing AS Agent-Omnibus Account Prime Money Market Fund 32.75% Record
FBO One Group Customer Accounts Class A
1 Pershing Plz
Jersey City, NJ 07399-0001
---------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations Prime Money Market Fund 27.47% Record
Attn: Terri McKibben Class A
PO Box 711214
Columbus, OH 43271-0001
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Prime Money Market Fund 64.50% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-132-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bank One Trust Company NA Prime Money Market Fund 8.54% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
---------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Prime Money Market Fund 8.71% Record
Attn SEI Corporate Trust Class I
Database OH1-0211
1111 Polaris Pkwy
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
Banc One Cor TTEE Prime Money Market Fund 5.19% Record
FBO Savings and Investment Plan Class I
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
---------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account Prime Money Market Fund 99.91% Record
For Exclusive Benefit of Class S
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
---------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account US Treasury Securities Money 19.91% 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 22.75% 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 12.75% Record
FBO Bank One Securities Market Fund
Attn: Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-133-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations US Treasury Securities Money 30.18% Record
Attn: Terri McKibben Market Fund
PO Box 711214 Class A
Columbus, OH 43271-0001
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 7.49% Record
Securities Corporation Inc. Market Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 10.27% Record
Securities Corporation Inc. Market Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 9.62% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 8.89% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 8.84% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette US Treasury Securities Money 6.25% Record
Securities Corporation Inc Market Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co US Treasury Securities Money 13.92% Record &
Cust for the IRA of Ralph Torrano Market Fund Beneficial
49 Terranova Dr Class C
Antioch, CA 94509-5527
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. US Treasury Securities Money 10.15% Record
FBO Chemguard, Inc. Market Fund
PO Box 4054 Class C
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. US Treasury Securities Money 9.22% Record
FBO Noe Corp. LLC Market Fund
PO Box 4054 Class C
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-134-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. US Treasury Securities Money 5.59% Record
FBO Iddings Trucking, Inc. Market Fund
PO Box 4054 Class C
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. US Treasury Securities Money 5.35% Record
FBO Agrivest, Inc. Market Fund
PO Box 4054 Class C
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. US Treasury Securities Money 6.74% Record
FBO Bruce Fox, Inc. Market Fund
PO Box 4054 Class C
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Strafe & Co (N) US Treasury Securities Money 22.41% 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 15.07% Record
Omnibus-Corporate Cash Sweep AC Market Fund
Attn Cash Management DB3 Class I
235 W Schrock Rd
Westerville OH 43081-2874
---------------------------------------------------------------------------------------------------------------------
Bank One Trust Company US Treasury Securities Money 61.50% Record
Attn SEI Corporate Trust Market Fund
Database OH1-0211 Class I
1111 Polaris Pkwy
Columbus, OH 43240-2050
---------------------------------------------------------------------------------------------------------------------
Pershing As Agent-Omnibus Account US Treasury Securities Money 95.54% Record
For Exclusive Benefit of Market Fund Class S
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
---------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account Municipal Money Market Fund 51.91% Record
For Exclusive Benefit of Class A
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
---------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations Municipal Money Market Fund 24.13% Record
Attn Terri McKibben Class A
PO Box 711214
Columbus, OH 43271-0001
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-135-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Municipal Money Market Fund 93.35% 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 98.35% Record
For Exclusive Benefit of Class S
One Group Customer Accounts
1 Pershing Plz
Jersey City, NJ 07399-0001
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Equity Income Fund 8.21% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Equity Income Fund 6.04% Record
FBO Ranger Excavating, Inc. Class C
PO Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Equity Income Fund 12.47% Record
FBO N G K Spark Plug MFG.(USA) Class C
PO Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Equity Income Fund 93.51% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp Equity Index Fund 22.00% Record
FBO The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp Equity Index Fund 55.19% Record
FBO The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
Strafe & Co. Equity Index Fund 81.47% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-136-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bank One COR TTEE Equity Index Fund 14.07% Record
FBO Bank One Corporation Class I
Savings and Investment Plan
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
---------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp. Large Cap Growth Fund 52.69% Record
FBO The One Investment Solution Class C
733 Greencrest Dr.
Westerville, OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
Kemper Service Company Large Cap Growth Fund 16.51% 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 78.22% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Bank One COR TTEE Large Cap Growth Fund 9.24% Record
FBO Bank One Corporation Class I
Saving and Investment Plan
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
---------------------------------------------------------------------------------------------------------------------
Invesco Trust Company TTEE Large Cap Value Fund 7.63% Record
Beazer Homes USA Inc. 401K Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
---------------------------------------------------------------------------------------------------------------------
Kemper Service Company Large Cap Value Fund 44.65% Record
Master Account Class C
FBO Participating Kemflex Plans
Attn: TA Accounting
7th Floor, 811 Main Street
Kansas City, MO 64105-2005
---------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith Large Cap Value Fund 18.77% Record
For the Sole Benefit of Customers Class C
4800 Deer Lake Dr East
Jacksonville, FL 32246-6484
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-137-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Large Cap Value Fund 6.10% Record
FBO Peabody's Interiors, Inc. Class C
PO Box 4054
Concord, CA 94524-4054
---------------------------------------------------------------------------------------------------------------------
Strafe & Co Large Cap Value Fund 70.52% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth & Income Fund Large Cap Value Fund 7.90% Record &
The One Group Services Company Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth Fund Large Cap Value Fund 6.13% Record &
c/o Mark S. Redman Class I Beneficial
3435 Stelzer Road
Columbus, OH 43219-6004
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 17.57% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 6.50% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ohio Municipal Bond Fund 6.01% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
---------------------------------------------------------------------------------------------------------------------
Strafe & Co. Ohio Municipal Bond Fund 98.05% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
---------------------------------------------------------------------------------------------------------------------
Firstar Trust Co TTEE International Equity Index 7.92% Record
FBO Milwaukee Foundation - Equity Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
---------------------------------------------------------------------------------------------------------------------
Banc One securities Corp International Equity Index 8.97% Record
FBO The One Investment Solution Fund
733 Greencrest Dr. Class A
Westerville, OH 43081-4903
---------------------------------------------------------------------------------------------------------------------
</TABLE>
-138-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banc One Securities Corp International Equity Index 68.24% Record
FBO The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Kemper Service Company International Equity Index 10.55% 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 88.27% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Short-Term Bond Fund 21.94% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Short-Term Bond Fund 90.79% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Louisiana Municipal Bond Fund 95.72% Record
BOIA - One Group Operations Class I.
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bisys BD Services, Inc. Small Cap Growth Fund 10.31% Record
FBO Rapistan Demag Class A
PO Box 4054
Concord, CA 94524-4054
------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co Small Cap Growth Fund 8.15% Record
Cust for the Rollover IRA of Class C
Hyppolete J Astugue
4437 Newlands
Matairie, LA 70006-4135
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Small Cap Growth Fund 5.41% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
</TABLE>
-139-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Small Cap Growth Fund 7.45% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Small Cap Growth Fund 6.80% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Small Cap Growth Fund 87.64% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Small Cap Value Fund 8.11% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Small Cap Value Fund 18.63% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Small Cap Value Fund 18.37% Record
Securities Corporation Inc Class C
Po Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
The One Group Services Co Small Cap Value Fund 9.46% Record &
3435 Stelzer Road Class C Beneficial
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co Small Cap Value Fund 26.32% Record &
Cust for the IRA of Randy J. Parker Class C Beneficial
258 Alligator Ln Box 5
Akers, LA 70421
------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co Small Cap Value Fund 8.18% Record &
Cust for the IRA of Rebecca S. Edwards Class C Beneficial
242 Trace Loop
Mandeville, LA 70448-7563
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Small Cap Value Fund 9.05% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
</TABLE>
-140-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strafe & Co. Small Cap Value Fund 84.22% 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 Value Fund 6.22% Record &
C/O Mark S. Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Rd
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Tax-Free Bond Fund 5.33% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Hannah Karbal Irrev Trust Tax-Free Bond Fund 5.23% Record &
Maynard C Kaler and Seymour Karbal Co-TTEE Class A Beneficial
A/C 60G107323
22530 W. 11 Mile Rd
Southfield, MI 48034-4734
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Tax-Free Bond Fund 99.69% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Treasury & Agency Fund 20.34% Record
Securities Corporation Inc. Class A
PO Box2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Treasury & Agency Fund 13.89% Record
Securities Corporation Inc. Class A
PO Box2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Treasury & Agency Fund 99.82% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
NBD Bank NA Treasury Cash Management 27.78% Record &
Attn: Mary Ellen Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
------------------------------------------------------------------------------------------------------------------
</TABLE>
-141-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Treasury Cash Management 26.89% 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 25.74% 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 19.59% Record
Attn: Commercial Products Money Market Fund
9000 Haggerty Rd. Class A
Belleville, MI 48111-8217
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Treasury Cash Management 93.23% Record
Attn: SEI Corporate Trust Money Market Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Treasury Only Money Market 28.74% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Banc One Trust Company Treasury Only Money Market 64.80% Record
Attn: SEI Corporate Trust Fund
Database OH1-0211 Class I
1111 Polaris Parkway
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations Treasury Only Money Market 60.14% Record
Attn Terri McKibben Fund
PO Box 711214 Class S
Columbus, OH 43271-0001
------------------------------------------------------------------------------------------------------------------
</TABLE>
-142-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bisys Fund Services, Inc. Treasury Only Money 36.56% Record
FBO Banc One Securities Market Fund
Attn Mike Bryan Class S
3435 Stelzer Rd Ste 1000
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
Bank One Treasury Prime Cash 20.10% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
First National Bank of Chicago Treasury Prime Cash 17.33% Record &
Attn: Commercial Products Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Belleville, MI 48111-8217
------------------------------------------------------------------------------------------------------------------
Bank One Treasury Prime Cash 13.99% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Suite MI1-8217
Belleville, MI 48111-1632
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Treasury Prime Cash 42.36% Record
Attn: Corporate Trust Management Money Market Fund
Database OH1-0211 Class A
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
NBD Bank NA Treasury Prime Cash 6.23% Record
Attn: Mary Ellen Bradley Management Money Market Fund
9000 Haggerty Road Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
Hella North America Holding Inc. Treasury Prime Cash 13.97% Record &
1101 Vincennes Avenue Management Money Market Fund Beneficial
P.O. Box 398 Class I
Flora, IL 62839-0398
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Treasury Prime Cash 28.51% 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 7.83% 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
------------------------------------------------------------------------------------------------------------------
</TABLE>
-143-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One Trust Company Treasury Prime Cash 49.69% Record
Attn: SEI Corporate Trust Management Money Market Fund
Database OH1-0211 Class I
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Bank One US Government Securities Cash 9.50% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Ste MI1-8217 Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
First National Bank of Chicago US Government Securities Cash 14.10% Record &
Attn: Commercial Products Management Money Market Fund Beneficial
9000 Haggerty Rd. Class A
Belleville, MI 48111-1632
------------------------------------------------------------------------------------------------------------------
Bank One US Government Securities Cash 28.02% Record &
Attn: Mary Ellen Bradley Management Money Market Fund Beneficial
9000 Haggerty Rd., Suite MI1-8217 Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company US Government Securities Cash 44.01% Record
Attn Corporate Trust Management Money Market Fund
Database OH1-0211 Class A
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Strafe & Co. US Government Securities Cash 7.81% Record
BOIA - One Group Operations Management Money Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company US Government Securities Cash 89.18% Record
Attn Corporate Trust Management Money Market Fund
Database OH1-0211 Class I
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
</TABLE>
-144-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pershing As Agent-Omnibus Account Ohio Municipal Money Market 97.71% 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 92.33% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Ohio Municipal Money Market 7.67% Record
Attn Corporate Trust Fund
Database OH1-0211 Class I
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO Municipal Income Fund 37.73% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
------------------------------------------------------------------------------------------------------------------
</TABLE>
-145-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banc One Securities Corp FBO Municipal Income Fund 64.61% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Municipal Income Fund 99.18% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Kentucky Municipal Bond Fund 12.04% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Kentucky Municipal Bond Fund 6.34% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Kentucky Municipal Bond Fund 95.93% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 13.53% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 11.19% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 9.70% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 8.70% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 7.30% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
</TABLE>
-146-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette West Virginia Municipal Bond 6.19% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 5.90% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette West Virginia Municipal Bond 5.43% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Aladdin Food Mart Services West Virginia Municipal Bond 6.26% Beneficial
Attn: Mutual Fund Processing DP Fund
PO Box 509046 Class A
San Diego, CA 92150-9046
------------------------------------------------------------------------------------------------------------------
Strafe & Co. West Virginia Municipal Bond 94.11% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Government Bond Fund 19.26% Record
Securities Corporation Inc. Class C
P.O. Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp. FBO Government Bond Fund 66.73% Record
The One Investment Solution Class C
733 Greencrest Drive
Westerville, OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Government Bond Fund 83.00% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
------------------------------------------------------------------------------------------------------------------
One Group Investor Balanced FD Government Bond Fund 6.49% Record &
C/O Mark S Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Rd
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
</TABLE>
-147-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The One Group Investor Growth & Income Fund Government Bond Fund 5.59% Record &
C/O Mark S Redman Class I Beneficial
The One Group Services Company
3435 Stelzer Rd
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
Investment Company Institute Ultra Short Term Bond Fund 8.23% Record
Attn: Mark Delcoco Class A
1401 H St NW
Washington, DC 20005-2110
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 6.02% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 5.78% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Ultra Short Term Bond Fund 5.11% Record
Securities Corporation Inc Class A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Ultra Short Term Bond Fund 5.15% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus, OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Ultra Short Term Bond Fund 83.81% 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 49.06% Record
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Intermediate Bond Fund 5.06% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
</TABLE>
-148-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banc One Securities Corp FBO Intermediate Bond Fund 91.26% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Intermediate Bond Fund 90.89% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Kemper Service Company Investor Growth Fund Class 7.53% Record
Master Account C
FBO Participating Kemplex Plans
Attn: TA Accounting 7th Fl
811 Main St
Kansas City MO 64105-2005
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Growth Fund Class I 68.18% Record
BOIA - One Group Operations
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bisys Brokerage Services, Inc. Investor Growth Fund 19.33% Record
Bank One TTEE Class I
FBO Brillion Iron Works P/S
PO Box 4054
Concord CA 94524-4054
------------------------------------------------------------------------------------------------------------------
Bisys Brokerage Services, Inc. Investor Growth Fund 6.19% Record
Bank One TTEE Class I
FBO Kearfott Guidance & Navigation
Corp Deferred Savings
PO Box 4054
Concord CA 94524-4054
------------------------------------------------------------------------------------------------------------------
Bank One Trust Co. NA TTEE Investor Growth & Income Fund 8.95% Record
Clarian Health Partners Inc. Class A
Defined Contirbution Plan
900 Tower Drive
MI1-8380
Troy, MI 48098-2810
------------------------------------------------------------------------------------------------------------------
BISYS BD Services Inc Investor Growth & Income Fund 6.04% Record
FBO Kelly Retirement Plus Class A
PO Box 4054
Concord, CA 94524-4054
------------------------------------------------------------------------------------------------------------------
</TABLE>
-149-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Investor Growth & Income 6.32% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Kemper Service Company Investor Growth & Income 13.82% 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. Investor Growth & Income 45.26% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Cor TTEE Investor Growth & Income 47.36% Record
FBO Bank One Corporation Fund
Savings and Investments Plan Class I
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Balanced Fund 7.57% Record
BOIA - One Group Operations Class A
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Kemper Service Company Investor Balanced Fund 17.74% 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 Investor Balanced Fund 5.43% Record
Securities Corporation Inc. Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Balanced Fund 87.62% Record
BOIA - One Group Operations Class I
1111 Polaris Parkway
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
</TABLE>
-150-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Investor Conservative 8.72% Record
Securities Corporation Inc. Growth Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Kemper Services Company Investor Conservative 10.32% Record
Master Account Growth Fund
FBO Participating Kemplex Plans Class C
Attn: TA Accounting 7th Fl
811 Main St
Kansas City, MO 64105-2005
------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co Investor Conservative 5.75% Record &
Cust for the IRA Rollover of Growth Fund Beneficial
George L Allison Class C
768 E Indiana Ave.
Spencer IN 74760-1538
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Investor Conservative 42.58% Record
BOIA - One Group Operations Growth Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Cor TTEE Investor Conservative Growth 51.16% Beneficial
FBO Bank One Corporation Fund
Savings and Investments Plan Class I
Attn: Trading Services E26
859 Willard St
Quincy, MA 02169-7428
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Government Money Market 75.07% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Trust Company Government Money Market 6.02% Record
Attn SEI Corporate Trust Fund
Database OH1-0211 Class I
1111 Polaris Pkwy
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Bank One NA Government Money Market 6.00% Record
Attn Cash Management Operations Fund
1111 Polaris Pkwy Class I
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
</TABLE>
-151-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank One National Sweep Operations Government Money Market 77.63% Record
Attn Terri McKibben Fund
PO Box 711214 Class S
Columbus, OH 43271-0001
------------------------------------------------------------------------------------------------------------------
Bank One National Sweep Operations Government Money Market 10.35% Record
Attn Terri McKibben Fund
PO Box 711214 Class S
Columbus, OH 43271-0001
------------------------------------------------------------------------------------------------------------------
Bank One NA Government Money Market 6.13% Record
Attn Cash Mgmt Operations Fund
1111 Polaris Pkwy Class S
Columbus, OH 43240-2050
------------------------------------------------------------------------------------------------------------------
Bisys Fund Services, Inc. Government Money Market 5.90% Record
FBO Banc One Securities Fund
Attn Mike Bryan Class S
3435 Stelzer Rd Ste 1000
Columbus, OH 43219-6004
------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp High Yield Bond Fund Class 15.49% Record
FBO The One Investment Solution A
733 Greencrest Dr
Westerville, OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette High Yield Bond Fund Class 7.27% Record
Securities Corporation Inc. A
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Banc One Securities Corp FBO High Yield Bond Fund Class 65.20% Record &
The One Investment Solution C Beneficial
733 Greencrest Dr.
Westerville, OH 43081-4903
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette High Yield Bond Fund Class 6.94% Record &
Securities Corporation Inc. C Beneficial
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
</TABLE>
-152-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette High Yield Bond Fund Class 5.42% Record &
Securities Corporation Inc. C Beneficial
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co. High Yield Bond Fund 50.45% 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 20.93% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
------------------------------------------------------------------------------------------------------------------
The One Group Investor Balanced Fund High Yield Bond Fund 15.85% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
------------------------------------------------------------------------------------------------------------------
The One Group Investor Growth Fund High Yield Bond Fund 6.66% Record &
3435 Stelzer Road Class I Beneficial
Columbus OH 43219-6004
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Market Expansion Index 5.11% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
State Street Bank & Trust Co. Market Expansion Index 5.62% Record
Cust for the IRA of Fund
FBO Ronald James Hamm Class A
1500 S Pope Lick Rd
Louisville KY 40299-4620
------------------------------------------------------------------------------------------------------------------
Taylor, Porter, Brooks & Phillips Market Expansion Index 5.11% Beneficial
P/S Plan Fund
Putnam Fiduciary Trust Co Class A
Attn Trading Services
859 Willard St #E-2-C
Quincy, MA 02168-7428
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Market Expansion Index 14.16% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Market Expansion Index 5.99% Record
Securities Corporation Inc. Fund
PO Box 2052 Class C
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
</TABLE>
-153-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Merrrill Lynch Pierce Fenner & Smith Market Expansion Index 34.74% Record &
Inc. for the Sole Benefit of Customers Fund Beneficial
4800 Deer Lake DR East Class C
Jacksonville, FL 32246-6484
------------------------------------------------------------------------------------------------------------------
Dain Rausher Inc Market Expansion Index 6.20% Record
FBO Maggie L Arnold Fund
719 Lost Trail Road Class C
Castle Rock, CO 80104-8357
------------------------------------------------------------------------------------------------------------------
Dain Rausher Inc Market Expansion Index 6.20% Record
FBO Betsy J Arnold Fund
719 Lost Trail Road Class C
Castle Rock, CO 80104-8357
------------------------------------------------------------------------------------------------------------------
Strafe & Co Market Expansion Index 99.94% Record
BOIA-One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus, OH 43271-0211
------------------------------------------------------------------------------------------------------------------
James R Donahey Michigan Municipal Bond 13.89% Record &
Pat J Donahey JT Ten Fund Beneficial
421 Highland Class A
Ann Arbor, MI 48104-1729
------------------------------------------------------------------------------------------------------------------
Micron Manufacturing Michigan Municipal Bond 5.10% Record
1331 Northwest Derby Drive Fund
Grand Rapids, Mi 49504-2620 Class A
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Michigan Municipal Bond 99.56% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Pershing As Agent - Omnibus Account Michigan Municipal Money 53.69% 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 23.01% Record &
Attn: M.E. Bradley Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-1632
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Michigan Municipal Money 92.56% Record
BOIA - One Group Operations Market Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
</TABLE>
-154-
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NBD Bank Municipal Cash Management 61.33% Record &
Attn M E Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
Bank One Municipal Cash Management 31.23% Record &
Attn M E Bradley Money Market Fund Beneficial
9000 Haggerty Road Ste MI1-8217 Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
Bank One Municipal Cash Management 7.44% Record &
Attn M E Bradley Money Market Fund Beneficial
9000 Haggerty Road Class A
Belleville, MI 48111-9787
------------------------------------------------------------------------------------------------------------------
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 34.04% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 9.20% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 7.17% Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Inc. Short-Term Municipal Bond 16.58% Record
Wayne W. Webber Tr DTD 9/9/91 Fund
Acct 71b00312 Class A
388 Greenwich St
New York, NY 10013-2339
------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
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<S> <C> <C> <C>
Donaldson Lufkin Jenrette Short-Term Municipal Bond 16.48% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 10.82% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 10.47% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 7.99% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 6.88% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Short-Term Municipal Bond 5.26% Record
Securities Corporation Inc Fund
PO Box 2052 Class B
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Carlos C Cook Short-Term Municipal Bond 10.49% Record
Myra J Cook JT Ten Fund
35231 Davidson Class B
Sterling Heights, MI 48310-5151
------------------------------------------------------------------------------------------------------------------
Strafe & Co. Short-Term Municipal Bond 99.91% Record
BOIA - One Group Operations Fund
1111 Polaris Parkway Class I
PO Box 710211
Columbus OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Intermediate Tax Free Bond 5.63 Record
Securities Corporation Inc Fund
PO Box 2052 Class A
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co Intermediate Tax Free Bond 99.35% Record &
BOIA-One Group Operations Fund Beneficial
1111 Polaris Pkwy Class I
PO Box 710211
Columbus, OH 43271-0211
------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Technology Fund 18.66% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin Jenrette Technology Fund 8.91% Record
Securities Corporation Inc Class C
PO Box 2052
Jersey City, NJ 07303-2052
------------------------------------------------------------------------------------------------------------------
Strafe & Co Technology Fund 96.94% Record
BOIA-One Group Operations Class I
1111 Polaris Pkwy
PO Box 710211
Columbus, OH 43271-0211
------------------------------------------------------------------------------------------------------------------
Bank One Corp PP Fxd Inc. Sec Mortgage Backed Bond 94.65% Record &
1111 Polaris Pkwy Class I Beneficial
Columbus, OH 43240
------------------------------------------------------------------------------------------------------------------
</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, 2000 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.
APPENDIX A--DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
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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
funding, is outstanding and safety is just below risk-free U.S.
Treasury obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk
factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.
D-4 Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D-5 Issuer failed to meet scheduled principal and/or 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 ("Fitch")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess a
particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
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<PAGE>
F3 Adequate capacity for timely repayment, but more susceptible to adverse
changes in business, economic or financial conditions than for
obligations in higher categories.
B Capacity for timely repayment is susceptible to adverse changes in
business, economic or financial conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes
in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity
is maintained.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
Moody's
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
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<PAGE>
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
Moody's
Investment Grade
Aaa Best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large, or an exceptionally stable, margin and principal is secure.
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
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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.
C The lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
Fitch
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest
is adequate. However, adverse changes in business, economic or
financial conditions and circumstances are more likely to affect the
capacity for timely repayment than for obligations in higher rated
categories.
Non-Investment Grade
BB Obligations for which capacity for timely repayment of principal and
interest is uncertain. These obligations are speculative to some degree
and capacity for repayment remains susceptible over time to adverse
changes in business, financial or economic conditions.
B The obligor's capacity for timely repayment of principal and interest
is uncertain. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions and these obligations are far more speculative
than those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions and these
obligations are far more speculative than those in higher rated
categories.
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
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<PAGE>
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 category offer poor financial
security. Assurance of punctual payment of policyholder obligations
over any long period of time is small.
Caa Insurance companies rated in this category offer very poor financial
security. They may be in default on their policyholder obligations or
there may be present elements of danger with respect to punctual
payment of policyholder obligations and claims.
Ca Insurance companies rated in this category offer extremely poor
financial security. Such companies are often in default on their
policyholder obligations or have other marked shortcomings.
C Insurance companies rated in this category are the lowest rated class
of insurance company and can be regarded as having extremely poor
prospects of ever offering financial security.
S & P
An insurer rated "BBB" or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA Extremely Strong financial security characteristics. "AAA" is the
highest Insurer Financial Strength Rating assigned by Standard &
Poor's.
AA Very Strong financial security characteristics, differing only slightly
from those rated higher.
A Strong financial security characteristics, but is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB Good financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
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<PAGE>
An insurer rated "BB" or lower is regarded as having vulnerable characteristics
that may outweigh its strength. "BB" indicates the least degree of vulnerability
within the range; "CC" the highest.
BB Marginal financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B Weak financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC Very Weak financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC Extremely Weak financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated "R" has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR Not Rated, which implies no opinion about the insurer's financial
security.
Plus (+)
or
minus (-) Following ratings from "AA" to "CCC" show relative standing within the
major rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are of
the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These short-term municipal securities rated are of high
quality. Margins of protection are ample although not so
large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted for,
but the undeniable strength of the preceding grades is
lacking. Liquidity and cash flow protection may be narrow
and marketing access for refinancing is likely to be less
well established.
MIG4 & VMIG4 This denotes adequate quality protection commonly regarded
as required of an investment security is present and
although not distinctly or predominantly speculative, there
is a specific risk.
SG This denotes speculative quality.
S&P
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.
SP-1 Strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
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<PAGE>
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
aaa Top-quality preferred stock. This rating indicates good
asset protection and the least risk of dividend impairment
within the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
a Upper-medium grade preferred stock. While risks are judged
to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great
length of time.
ba Considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position
characterizes preferred stocks in this class.
b Lacks the characteristics of a desirable investment.
Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be
small.
caa Likely to be in arrears on dividend payments. This rating
designation does not purport to indicate the future status
of payments.
ca Speculative in a high degree and is likely to be in arrears
on dividends with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues
so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
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BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this
category than for issues in the "A" category.
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 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.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment is very
strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligation is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to meet its financial
commitment on the obligations.
Speculative Grade
BB Less vulnerable to non-payment than other speculative
issues. However, these bonds face major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity
to meet financial commitment on the obligations.
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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, not likely to have the capacity to meet its
financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has
been taken, but payments on this obligation are being
continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
Moody's
Investment Grade
Aaa Best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest
payments are protected by a large, or an exceptionally
stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking
or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics
as well.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot
be considered as well assured. The protection of interest
and principal payments may be very moderate and thereby not
well safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable
investment (i.e., potentially low assurance of timely
interest and principal payments or maintenance of other
contract terms over any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
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<PAGE>
DESCRIPTION OF SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree is not
as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely
fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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